In the matter of the CERC (Procedure, Terms and Conditions for grant of Trading license and other related matters) Regulations of Inter-State trading license in electricity from Category V to IV – EQ

Summary:

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

– **Petition No.:** 14/TD/2026
– **Date of Order:** January 28, 2026
– **Petitioner:** Elsa Consultancy, a Bangalore-based firm.
– **Original Licence:** Granted Category ‘V’ inter-state trading licence via order dated 23.10.2023 in Petition No. 257/TD/2023.
– **Regulatory Framework:** Central Electricity Regulatory Commission (Procedure, Terms and Conditions for grant of Trading license and other related matters) Regulations, 2020 (‘Trading Licence Regulations, 2020’).
– **Governing Legislation:** Sections 14 and 15(1) of the Electricity Act, 2003.

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

Elsa Consultancy approached the CERC with the following objectives:

1. **Licence Upgradation:** To upgrade its existing inter-State trading licence from **Category ‘V’ to Category ‘IV’** .
2. **Increased Trading Volume:** To legally engage in a higher quantum of electricity trading. Category ‘IV’ permits trading volumes **up to 2,000 MUs (Million Units) annually**, whereas Category ‘V’ has a lower limit.
3. **Retrospective Application:** The Petitioner requested the upgradation to be effective from **April 1, 2025**, though the order ultimately grants it from the date of issuance.
4. **Business Growth Justification:** The firm cited improved power demand, competitive dynamics of power exchanges, anticipated market growth, and a consistent increase in its trading volumes as reasons for seeking the upgrade.

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

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

– **Net Worth Requirement:** A minimum net worth of **₹10 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 Elsa Consultancy, including the audited special balance sheet as of December 19, 2025.

**A. Net Worth Computation (as on 19.12.2025)**

The Commission calculated the firm’s net worth using two approaches, ultimately confirming a value of **₹18.52 Crore**, well above the ₹10 Crore requirement.

| Particulars | Amount (₹ in Lakhs) |
| :— | :— |
| **A) Paid-up Equity Capital** | 2015.19 |
| **B) Free Reserves & Surplus Considered** | |
| – Securities Premium Reserve | 0.00 |
| – Surplus (Profit & Loss Account) | 0.00 |
| – Other Free Reserves | 0.00 |
| **Total Free Reserves & Surplus (B)** | **0.00** |
| **C) Loans and Advances given to associates** | (163.67) |
| **D) Deferred Expenditure not written off** | (0.00) |
| **Net Worth (A + B – C – D)** | **₹1851.52 Lakhs (₹18.52 Crore)** |

**B. Alternative Net Worth Computation (Asset Approach)**

The Commission also verified the net worth using an asset-liability approach to ensure robustness:

| Particulars | Amount (₹ in Lakhs) |
| :— | :— |
| Total Non-Current Assets considered | 3457.13 |
| Less: Non-Current Liabilities & other reserves | (1815.36) |
| Add: Total Current Assets considered | 2760.60 |
| Less: Total Current Liabilities | (2550.83) |
| **Net Worth (Asset Approach)** | **₹1851.54 Lakhs (₹18.52 Crore)** |

**C. Liquidity Ratios Computation (as on 19.12.2025)**

| Metric | Value | Requirement | Status |
| :— | :— | :— | :— |
| **Current Ratio** (Current Assets / Current Liabilities) | 1.08 | Minimum 1:1 | **Compliant** |
| **Liquidity Ratio** (Liquid Assets / Current Liabilities) | 1.08 | Minimum 1:1 | **Compliant** |

### 5. Key Regulatory Decisions & Principles Applied

– **Net Worth Verification:** The Commission accepted the audited special balance sheet and verified that Elsa Consultancy’s net worth of **₹18.52 Crore** significantly exceeded the minimum requirement of ₹10 Crore.
– **Ratio Compliance:** The current ratio and liquidity ratio of **1.08** were both found to be above the mandatory 1:1 threshold, confirming the firm’s sound short-term financial health.
– **Business Rationale Acceptance:** The CERC accepted the firm’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).
– **Effective Date:** While the Petitioner requested retrospective effect from April 1, 2025, the approval was granted **”with effect from the date of issuance of the order”** (January 28, 2026), which is the standard regulatory practice.

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