New Delhi, Jul 15 (PTI) In a significant move, the power ministry has approved trading of electricity through forward and derivative contracts subject to the outcome of a case in the Supreme Court.

The issue of forward contracts and derivatives contracts for electricity has been a bone of contention between the Central Electricity Regulatory Commission (CERC) and the Securities and Exchange Board of India (Sebi).

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The more than a decade-old long dispute between the two regulators is now before the Supreme Court.

In an office memorandum, dated July 10, the ministry has given its go-ahead for such contracts. subject to the order that will be passed by the Supreme Court later.

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According to the memorandum, Solicitor General of India has given a favourable opinion for introduction of such contracts.

Shruti Bhatia, Head of Corporate Communications at the Indian Energy Exchange, said the ministry's office memorandum is a welcome and positive step for the power markets and would indeed facilitate it to leapfrog to the next level of growth.

"It is a significant development which indicates resolution of a decade old jurisdictional conflict between CERC and Sebi ably led by the Government. Once the longer duration delivery based forward contracts and derivatives contracts are introduced, they will potentially alter the way power is procured in our country," she told PTI.

She also said that specifically, the office memorandum would pave the way for introduction of long duration delivery-based contracts on the power exchanges under the jurisdiction of the CERC.

"The derivatives contracts, as and when introduced, will be under the jurisdiction of Sebi. With this development, we at IEX, will be able to design long duration contracts and move forward with the approval process in CERC," she noted.

In 2011, the Bombay High Court held that CERC and Sebi cannot have exclusive jurisdiction over forward contracts and derivative contracts unless the respective rules and Acts are amended for the purpose. The matter is now before the Supreme Court.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)