In the matter of the CERC (Procedure, Terms and Conditions for grant of trading licence and other related matters), Regulations of inter-State trading licence in electricity – EQ

Summary:

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### 1. Case Overview (The Regulatory Event)

– **Petition No.:** 11/TD/2026
– **Date of Order:** January 28, 2026
– **Petitioner:** Adarsh Stainless Private Limited (ASPL), a Pune-based company.
– **Original Licence:** Granted Category ‘IV’ inter-state trading licence via order dated 15.08.2023 in Petition No. 72/TD/2023.
– **Regulatory Framework:** Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of trading licence and other related matters), Regulations, 2020 (referred to as ‘Trading Licence Regulations, 2020’).
– **Governing Legislation:** Sections 14 and 15(1) of the Electricity Act, 2003.

### 2. Purpose of the Petition (The Business Ask)

ASPL approached the CERC with the following objectives:

1. **Licence Upgradation:** To upgrade its existing inter-State trading licence from **Category ‘IV’ to Category ‘III’** .
2. **Increased Trading Volume:** To legally engage in a higher quantum of electricity trading. Category ‘III’ permits trading volumes **up to 4,000 MUs (Million Units) annually**, whereas Category ‘IV’ has a lower limit.
3. **Business Growth Justification:** The company cited improved power demand, competitive dynamics of power exchanges, anticipated market growth, and a consistent increase in its own trading volumes as reasons for seeking the upgrade.

### 3. Key Requirements for Upgradation (Regulatory Criteria)

To qualify for a Category ‘III’ trading licence under the Trading Licence Regulations, 2020, an applicant must meet specific financial health criteria:

– **Net Worth Requirement:** A minimum net worth of **₹20 Crore**.
– **Liquidity Ratios:** Must maintain a minimum **current ratio** and **liquidity ratio** of **1:1** (i.e., current assets at least equal to current liabilities) as on the date of the audited special balance sheet.
– **Compliance with Procedure:** Must follow the application procedure under Regulation 15, including submission of an audited special balance sheet and payment of the applicable fee difference.

### 4. Financial Analysis & Approved Figures

The CERC conducted a prudence check of the financial documents submitted by ASPL, including the audited special balance sheet as of November 15, 2025, and subsequent affidavits.

**A. Net Worth Computation (as on 15.11.2025)**

The Commission calculated ASPL’s net worth based on the formula: **Paid-up Equity Capital + Free Reserves & Surplus – Loans/Advances to Associates – Deferred Expenditure**.

| Particulars | Amount (₹ in Lakhs) |
| :— | :— |
| **A) Paid-up Equity Capital** | 702.08 |
| **B) Free Reserves & Surplus Considered** | |
| – Securities Premium Reserve | 0.00 |
| – Surplus (Profit & Loss Account) | 201.13 |
| – Other Free Reserves (General Reserve, etc.) | 1617.32 |
| **Total Free Reserves & Surplus (B)** | **1818.45** |
| **C) Loans and Advances given to associates** | (479.41) |
| **D) Deferred Expenditure not written off** | (0.00) |
| **Net Worth (A + B – C – D)** | **₹2041.12 Lakhs (₹20.41 Crore)** |

**B. Liquidity Ratios Computation (as on 15.11.2025)**

| Metric | Value | Requirement | Status |
| :— | :— | :— | :— |
| **Current Ratio** (Current Assets / Current Liabilities) | 1.33 | Minimum 1:1 | **Compliant** |
| **Liquidity Ratio** (Liquid Assets / Current Liabilities) | 1.29 | Minimum 1:1 | **Compliant** |

### 5. Key Regulatory Decisions & Principles Applied

– **Net Worth Verification:** The Commission accepted the audited special balance sheet and verified that ASPL’s net worth of **₹20.41 Crore** exceeded the minimum requirement of ₹20 Crore.
– **Ratio Compliance:** The current ratio of **1.33** and liquidity ratio of **1.29** were both found to be above the mandatory 1:1 threshold, confirming the company’s short-term financial health.
– **Business Rationale Acceptance:** The CERC accepted ASPL’s justification for seeking the upgrade, which was based on market growth and increased trading volumes, as a valid reason under Regulation 15(1)(a), which allows upgradation based on “volume proposed to be traded.”
– **Fee Payment:** While not detailed in the approved figures, the order notes that under Regulation 15(1)(e), the licensee must pay the difference in licence fee between Category ‘IV’ and Category ‘III’ for the relevant year.

### 6. Order Directives & Administrative Points

– **Upgradation Approved:** The CERC formally approved the upgradation of ASPL’s inter-State trading licence from Category ‘IV’ to Category ‘III’ with effect from the date of the order (January 28, 2026).
– **Continued Compliance:** The licensee remains bound by all other terms and conditions of its original licence granted in 2023.
– **Endorsement on Licence:** The Commission directed that a necessary endorsement be made on the physical licence document to reflect the change in category.
– **Information to Authorities:** An extract of the order is to be sent to the Ministry of Power and the Central Electricity Authority (CEA) for their records, as required under the Electricity Act, 2003.

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