The Cabinet Committee on Economic Affairs (CCEA), on Friday, approved 49 per cent foreign direct investment (FDI) in power trading exchanges.

The CCEA, headed by Prime Minister Manmohan Singh, approved the proposal to permit FDI up to 49 per cent in power trading exchanges in compliance with SEBI Regulations; Central Electricity Regulatory Commission (Power Market) Regulations, 2010.

Addressing reporters here, Commerce and Industry Minister Anand Sharma said of the total 49 per cent, the FDI should not exceed 26 per cent, while investment by foreign institutional investors (FII) should be restricted to 23 per cent of the paid-up capital. At present, there are two exchanges in the country, namely Power Exchange India and Indian Energy Exchange.

“FII would be permitted under the automatic route and FDI would be permitted under the government approval route,” he said.

This is subject to the conditions that FII purchases shall be restricted to secondary market only, and no non-resident investor or entity, including persons acting in concert, holding more than 5 per cent of the equity in these companies.

The approval is expected to strengthen the power trading exchanges, enhance the availability of power and improve its distribution for inclusive development.

Mr. Sharma said in view of the functions they perform these exchanges need to be promoted through greater investment. Introduction of global practices, concomitant with the induction of FDI, was expected to lead to higher service standards , he added.

As per existing policy, FDI up to 100 per cent, under the automatic route, is permitted in the power sector (except atomic energy).

This includes generation, transmission and distribution of electricity as well as power trading, subject to the provisions of the Electricity Act, 2003.

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