FDI in Power Trading

One of the significant and visionary decisions taken recently by the Indian Cabinet Committee on Economic Affairs (CCEA) regarding foreign direct investment, is to permit FDI up to 49% in the power exchanges or power trading in India. This decision of CCEA has been highly appreciated by the power exchanges of India, foreign investors of the world over, and the whole power sector of the country. Here, it may be mentioned that, FDI in the power sector of India has been permitted up to 100% (except the Atomic energy), but, there was no concrete and clear provision for FDI in the power trading in India. It is hoped that this decision of the Government of India will boost perfect and easy power exchanges, augment the availability of power, improve energy distribution, and introduce most efficient and best practices in power trading. In this article, we are providing necessary information about FDI in power trading in India, in the light of the latest governmental decision (September 2012), in the following paragraphs. Perfect and swift legal services for foreign direct investment in India in any desired sector, have been our specialty for a long time; now, we will also include to these services, the legal services for fdi in the power trading, in order to serve investors of the world over.

Power Trading involves purchasing and selling of electricity, with the help and guidance of the Power Exchanges. The power exchanges serve as a well-organized, unbiased, and open platform to the generators, suppliers, traders, shareholders, and consumers in the power sector of a country. At present, there are two main power exchanges functioning full-fledged in India, the Indian Energy Exchange (IEX) and the Power Exchange India (PXI). Collectively, these two major power exchanges handle just 2% of the total 800 billion units of power generated in the whole country. Hence, there was desperate need for fdi in the power trading in India, to make this power sector of the country better and most efficient.

This permission to FDI up to 49% in the power trading exchanges, comes under the categories of 26% Direct FDI, and 23% Institutional Investment by any Foreign Institutional Investor (FII). These investments will be made in proper and strict compliance with the rules and regulations of SEBI, and the Central Electricity Regulatory Commission (CERC). The FII will be made under the Automatic Route, and the Direct Investment will be performed under the Governmental Route.

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