FDI Proposal In Power Exchange Ignites Debate.

MUMBAI: A private equity fund, based in Mauritius and promoted by an Indian, has shown interest in investing in a power exchange in India, sparking off a debate on whether the government needs to clarify rules on foreign investment in such enterprises.

Multiples Private Equity, promoted by Renuka Ramnath, has sought government approval for acquiring a minority stake in Indian Energy Exchange (IEX), promoted by Financial Technologies (India).

"We have put in an application with IEX for acquiring a minority stake in the company through the FDI route, subject to government approval." She declined to divulge details.

Foreign investment in power exchanges is not banned but there are no specific rules or guidelines for promoters to follow unlike commodity exchanges where overseas investors are capped at 49%. It is also not clear whether an approval is required from the Foreign Investment Promotion Board.

Light speed Venture Partners and Bessemer Venture Partners did not seek permission when they bought a small stake in IEX in 2010. A person close to the deal said that Multiples Private Equity had approached the FIPB as a matter of "abundant caution".

Pramod Deo, chairman of Central Electricity Regulatory Commission, (CERC), said that the government is still discussing with people on the issue and no rules have been framed yet. "There is no stated policy on FDI in power exchanges. We have received a letter from the government today (Tuesday) asking us for our view on FDI in power exchanges," he added. CERC is the regulator for the country's two power exchanges.

CERC, the central regulatory body which regulates the power exchanges, plans to study the models adopted by Securities and Exchange Board of India and Forward Markets Commission, which allow a total of 26% FDI each in exchanges under their purview. They would also take into account that India allows up to 100% FDI in power generation projects.

India currently has two operational power exchanges which provide generators and buyers with a platform for short term trades, financial Technologies (India) promoted IEX and National Stock Exchange-promoted Power Exchange India (PXIL).

Both exchanges have power finance companies, generators and trading companies as co-promoters. "Power markets started operating in the mid-eighties all over the world and were launched domestically threeand-a-half years ago; support through strategic investments by overseas players would be welcome," said Jayant Deo, managing director and chief executive officer, Indian Energy Exchange (IEX).

Rupa Devi Singh, managing director and CEO of PXIL, said that a policy on FDI would give comfort and clarity to foreign investors and help existing bourses get investment. But she added, "The market has been frozen for the past 12 months and does not have room for more exchanges. The regulator should focus on deepening the market instead of increasing the number of players."

Loss-making power distributors have been opting for power cuts over buying expensive electricity from the short term market. Increasing uncertainties in the short term market and government's stance of allocating coal to power generators with long term power pacts has discouraged merchant power producers.

Source : economictimes.indiatimes.com