The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has proposed options for developing a ‘power trading model' for optimum utilization of generated power by removing technical and commercial constraints to facilitate flow of power easily from surplus to deficit areas. In a paper on power trading of the future, the Chamber has suggested that one option would be that all power exported is at the rate of the incremental charges only, that is, no profit, no loss. From the point of view of the Government, this is the best solution to ensure merit order generation on an all India basis i.e. maximum generation from the most efficiently operating units. From the exporting utility's point of view, however, there is no incentive for generating more for export to other utilities at incremental charges tariff, only except perhaps getting the maximum PLF and related awards. In case of most of the efficient generating units being located in a particular state, it is likely to be challenged by other states on the premise that they are not being given the opportunity to generate more and that the commercial mechanism is inhibiting their generation, causing them to show a poor PLF. Another formula, according to ASSOCHAM, would be that power is exported at the rate of pro rate fixed charges and variable charges. While variable charges are all non-fixed charges, incremental charges are the additional charges for increasing generation from an old value to a new value. Variable charges will always be positive, incremental charges may turn out to be negative in some cases. For example, in the case of a coal-fired thermal unit running under heavily backed-down condition, say at the level of 50 per cent of installed capacity, burning costly oil to maintain flame stability. If it increases the generation to 70 per cent of installed capacity, no oil may be required for burning, and this would be replaced by coal. It may happen that the increasing generation may result in reduced variable charges, hence negative incremental charges. As per the first formula, ASSOCHAM feels, if only incremental charges are levied for export of surplus power, the exporting state would be given free power and in fact paying the importing state/utility, because of negative incremental charges. From that point or view variable charges at that point of time, rather than incremental charges would be a better formula for surplus power. Loading the pro-rate fixed charge on the surplus power, which is infirm, might it be too expensive for an importing state if the wheeling charges and transmission losses are accounted for. ASSOCHAM has said that a viable proposal for pricing of surplus power would be the given weightage in terms of some profit over the incremental cost to the generating utility. The Chamber stated that such a formula would put pressure on non-efficient generating units to be more productive. This would pose much of a problem in the present scenario of general shortage, as all units would be required to generate for most part of the day. In the present deficit situations, some utilities are able to sell their surplus power at a rate much higher than their incremental charges, in fact with full charges (fixed and variable) loaded on it, i.e. the same as the cost for the next region/state. Bureau Report