As per the data from Indian Energy Exchange, the short-term tariffs have increased 78% M-o-M to Rs5.77/unit in March 2010. The average merchant tariffs are at their highest level after almost six months (in August 2009, the average tariffs were Rs7.2/unit followed by a six months lull with prevailing average merchant tariff of ~Rs3.5/unit during September’09 – February’10).
The average tariffs in March’09 were more than Rs8/unit and hence, on a y-o-y basis; the March’10 average tariffs are 29% lower. However, the comparison is distorted due to the fact that March’09 was just prior to general elections in India and the governments were willing to pay higher rates for power procurement in order to avoid power cuts in their respective states.
Typically, March-June is a strong season for merchant tariffs/short-term demand for power (vs. winter months). Our channel checks suggest that the strength in prices is largely due to sharp change in weather in Western and Northern regions of the country as this has led to increased demand. The other reason is lesser than expected hydro generation.