New Delhi, Indian power exchanges may soon host buyers and sellers from neighbouring countries as India looks to operationalise cross-border sale and purchase of electricity for which regulations were finalised last year.

As per the plan, the country's largest power exchange, India Energy Exchange (IEX), will begin hosting buyers and sellers from countries such as Nepal, Bhutan and Bangladesh to participate in power trading with both buy and sell calls initially.

Such participation from overseas entities on Indian exchanges would not be direct but through any electricity trading licensee of India. Trading will be through bilateral agreement between two countries, bidding route or through mutual agreements between entities.

"We have recently created a framework on how cross-border power trading can be initiated on the exchange. The CERC has already come out with regulations in this respect. Now we expect that this should begin in the next couple of months," said Rohit Bajaj, head (business development) of IEX.

While cross border transactions in TAM (Term Ahead Market) segment is currently operational with India exporting power Bangladesh, the same is yet to pick up for short-term power purchase through exchanges. The CERC regulations allow power producers to offer electricity directly to distribution entities in neighbouring countries through Indian power exchanges.

Bajaj said the operationalisation of cross-border trade in the short-term market would provide Indian generators additional market access for sale of their surplus power.

Both Nepal and Bangladesh import power and trade through exchanges here would be possible. Bhutan, which has surplus power, could look at offloading some of it through Indian exchanges in markets closer to its borders. This could also help India increase the share of renewable power in its generation mix.

India already has transmission links with Nepal, Bhutan and Bangladesh so power trading through exchanges could be started with them quickly. The facility could be extended to other neighbouring markets such as Myanmar and Sri Lanka once necessary infrastructure is created.

The power market has been going through a downturn for some time now and the present Covid-19 crisis has further depressed power demand putting the country's generators to lower their plant load factor and look for opportunities to sell surplus power. Trade through exchanges would provide them some outlet.

Experts point out that cross border transactions would only be successful once the monopoly of state distribution entities is broken and a multi-buyer-multi-seller market is developed for trading for efficient price discovery.

Though correct estimates are yet to be made, industry sources said that there could be demand for 300 to 400 MW from cross border trade in the spot market initially.

Currently, just about 3,000 Mw of power is traded in the South Asia region among seven countries including India, Bhutan, Bangladesh, Nepal, Pakistan, Sri Lanka and Myanmar. India annually imports about 1,200-1,500 MW power from Bhutan and exports about 1,200 MW to Bangladesh, 500 MW to Nepal and 3 MW to Myanmar.

A vibrant power exchange market with ability to trade in spot market for consumers in domestic as well as overseas market would also be good news for power generators as they could tide over any situation of low demand in the domestic market to transfer capacities overseas.