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Railways to start power trading in the open market within next two months

According to reports, the resource-starved Indian Railways plans to start trading in power in the open market within the next two months. The Railways will sell its surplus power during the day when its demand is low while tariffs are high and buy it back at night when the demand peaks and tariffs are low. This move is expected to save the Railways about Rs 900-1,000 crore or 10% of its annual Rs 9,000-crore electricity bill.

The Railways spends about Rs 25,000 crore on fuels, including Rs 16,000 crore on diesel consumption. The project will be implemented under the Northern Railways through the newly formed Railways Energy Management Corporation (REMC) – an entity formed to look into Railways’ energy management and renewable energy portfolio, said a top railways official.

“Our electricity consumption is more during the night because that is when most of our trains are running whereas mostly repairing work is done during the day. We will trade the energy saved during the daytime with industries whose energy demand peaks during that period. We hope that this will take off in about 2 months,” said Kulbhushan, member (electrical), Railway Board told ET adding that REMC will soon engage a company who will work as a conduit or agent and trade power on behalf of the Railways.

Under the Centre’s open access policy, commercial and industrial consumers are allowed to trade power between states on the national grid. These units can sell surplus power that they are not using and buy back when their power demand peaks.

The Railways buys power from state distribution companies at an average of about Rs 5.8 a unit. In the open market, power sells at a rate of about Rs 8-10 per unit during the daytime when demand is high. In contrast, the rates are as low as Rs 1-2 per unit during night-time when demand is usually low. It is this difference which the Railways’ is hoping to utilise to rationalise its power bills.

Once the project takes off, Indian Railways will join the bandwagon of commercial open access consumers like SAIL and HPCL in public sector and the Tata group, Aditya Birla group and Reliance Industries Limited in the private sector.

The Railways requires around 3,000 MW annually, which is expected to go up to 4,000MW over the next decade. “In our discussion with REMC, we have suggested that the Railways should do phase-wise trading, starting with 100MW in states where it is most feasible,” said Rajesh Mediratta, director (business development), India Energy Exchange (IEX), one of the country’s largest power trading houses that had also played an advisory role in the formation of REMC.

The Northern Grid, especially in states like New Delhi, Punjab and Haryana, is known to be better for power trading both in terms of infrastructure and implementation of the Centre’s open access policy.

According to Mediratta, some states in Southern and Western grid could also be looked at as an option for rolling out this scheme since they have better infrastructure for power trading.

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