Indian Energy Exchange Ltd (NSE: IEX) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Rohit Bajaj — Joint Managing Director
Satyanarayan Goel — Chairman & Managing Director
Analysts:
Sumit Kishore — Analyst
Mohit Kumar — Analyst
Bharanidhar Vijayakumar — Analyst
Chirag Maroo — Analyst
Viraj Mithani — Analyst
Devesh Agarwal — Analyst
Vishal Periwal — Analyst
Rucheeta Kadge — Analyst
Nikhil Abhyankar — Analyst
Rishabh Shah — Analyst
Lokesh Manik — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q2 FY ’25 Results Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sumit Kishore from Axis Capital Limited. Thank you. And over to you, sir.
Sumit Kishore — Analyst
Thank you, Neha. Good afternoon, ladies and gentlemen.
On behalf of Axis Capital, I’m pleased to welcome you all for the IEX Q2 FY ’25 Earnings Conference Call. We have with us the management team of IEX, which is represented by Mr. S.N. Goel, the Chairman and Managing Director; Mr. Rohit Bajaj, Joint Managing Director; Mr. Vineet Harlalka, Chief Financial Officer; and Ms. Aparna Garg, Head, Investor Relations and Corporate Communications.
We will begin with the opening remarks from Mr. Rohit Bajaj, followed by an interactive Q&A session. Over to you, sir.
Rohit Bajaj — Joint Managing Director
Good afternoon, everyone. I welcome you all to the IEX earnings call for Q2 FY ’25.
With me today on this call are Mr. Satyanarayan Goel, CMD, IEX; Mr. Vineet Harlalka, our CFO and Company Secretary; Mr. Amit Kumar, Head of Market Operations, New Product Initiative and Exchange Technology; Ms. Aparna Garg, Head of Investor Relations and Communications; and Mr. Aditya Wali.
Friends, Modi Government 3.0 recently concluded 100 days, maintaining its thrust on infrastructure development, innovation push, and economic growth. The Indian economy continues to be the world’s fastest major economy with yet another reported quarter of robust GDP growth. The economy grew 6.7% Y-o-Y in Q1 FY ’25, allowing the RBI to retain its GDP forecast for FY ’25 at 7.2%. In the wake of Q1 GDP growth, the World Bank has also revised its GDP growth projections upwards for FY ’25 to 7% from 6.6% projected earlier.
On the power sector front, electricity demand growth during the second quarter slowed on the back of better-than-expected monsoon. Monsoon was 8% higher than long term annual average. Power demand at 435 billion units in Q2 was largely flat at plus 0.5% Y-o-Y, with a peak demand of 227 gigawatts. However, in the first six months of FY ’25, power demand was higher by 5.6% over the previous year. To meet India’s growing energy demand, the Ministry of Power has maintained its focus on capacity addition and strengthening of overall power infrastructure. Almost 28 gigawatt of thermal capacity is under construction, out of which 15 gigawatt is expected to get commissioned in this fiscal and the balance 13 gigawatt in the next two years.
Further, 58 gigawatt of capacity is in various stages of planning, statutory clearances and bidding, and this should come in the system over next six to seven years. Capacity addition is being regularly monitored by the Ministry of Power. In addition, 40 to 50 gigawatt of renewable capacity is to be added every year till 2030. The government also plans to add 39 gigawatt of Pump Storage Project, PSP, by 2030, out of a total potential of 184 gigawatt. Recently, in September, MNRE issued guidelines for Viability Gap Funding scheme for offshore wind energy projects worth 1 gigawatt across the states Gujarat and Tamil Nadu. It is proposed in the scheme that any amp acquisition power from these projects can also be sold on the exchanges. This is expected to increase sell-side liquidity on the exchanges.
At the recently concluded Global Energy Investors Meet in Gujarat, our honorable Prime Minister also underscored India’s strategic goal to expand its renewable capacity to 500 gigawatt by 2030. Energy developers at the meet pledged substantial commitment to capacity creation under their Shapath Patra agreements. At the event, the government also highlighted plans to develop 17 cities as in Model Solar Cities.
On the fuel side, this fiscal has not seen any shortage so far. Coal is available through the e-auction route at a very nominal premium of 10% to 20% with respect to the administered price and coal inventory today stands at about 14 days. Imported coal prices in Q2 have also been competitive at $52 per ton. Similarly, gas prices at $12 per MMBTU have remained largely stable in the first half of FY ’25. With favorable monsoon this year, high hydro and wind generation and ample availability of fuel, has led to higher liquidity on the exchange platform with cell liquidity increasing by 41% over H1 FY ’24. With these trends in liquidity, volume growth is expected to continue going forward.
Let us now talk about important regulatory updates and policy initiatives that helped deepen power markets. Recently in a draft, the CERC has proposed various changes in Term Ahead Market design which will align TAM products across exchanges and also help in improving liquidity. The Deviation Settlement Mechanism Regulation 2024 has made deviation management more stringent. This is likely to promote further discipline, leading to better grid stability. Under the proposed amendments, deviation charges are again linked to grid frequency. With regards solar and wind generators, deviation percentage allowed for levy has been narrowed to 10%. This is expected to further increase RTM volumes at exchanges.
With regards to cross-border electricity market, the CEA has allowed generating stations selling cross-border power through a dedicated transmission line to facilitate sale of power within India in case of sustained non-scheduling of capacity or default notice issued by generator for delayed payment under their respective PPAs. This has the potential to increase liquidity on the exchanges. To meet high power demands, the MoP recently extended Section 11 directive to imported coal-based plants to operate up to 31st December 2024. These assets will be utilized to meet country demand and support liquidity on the exchanges.
To address challenges posed by seasonal variations in electricity demand which led to sharp surge in power consumption during crunch periods, the CERC recently issued an order to ensure adequacy of resources, identify generation, demand response capacity and generation flexibility requirements. Under the amendment to Late Payment Surcharge rules, the government has directed all generating stations which have long-term PPAs to offer unrequisitioned power on the exchange platform. As a result, about 100 million units of URS power from central generating stations is coming to the exchange platform, out of which 15 to 20 million units — unit is getting cleared on a daily basis. Soon generating stations which are within the states will start to offer URS power on the exchange which will further increase liquidity on the exchanges.
Under provisions of Energy Conservation Act 2001, the Gujarat Electricity Regulatory Commission has introduced stringent compliance norms for obligated entities. In the event an obligated entity does not fulfill its renewable purchase obligation and also does not purchase the certificates, the Commission has introduced payment of additional penalty up to INR3.72 per unit for shortfall in the specified renewable energy consumption targets. This should promote compliances and help maintain a vibrant REC market. These changes are expected to be positive for exchanges and are bound to improve sell-side liquidity and soften power prices. As prices continue to remain competitive, it is expected to present an opportunity for DISCOMs and commercial and industrial consumers to optimize their power procurement costs.
IEX business performance during Q2 FY ’25 has been strong. We recorded a total trading volume of 36.7 billion units in this quarter, with a growth of 38.2% on year-on-year basis. For the first half of FY ’25, IEX traded volume of 67 billion units, a growth of 30% over the same period in FY ’24. Consequent to reduction in REC prices, we revised our transaction fee on RECs from INR20 per certificate to INR10 per certificate on either side of transaction with effect from 12th August 2024. In Q1, a total of 63 lakh certificates were traded, a jump of 277% over the same quarter last fiscal.
RTM segment has seen strong growth this fiscal. For Q2 FY ’25, RTM volumes were higher by 31% Y-o-Y at nearly 11 billion units, showcasing its critical role in developing DISCOMs and Open Access consumers efficiently manage short-term electricity needs. In September 2024, RTM recorded the highest single-day trade volume of 173 million units. And RTM also achieved its highest ever monthly volume of nearly 3.5 billion units. The share of RTM in our overall product mix has also increased to nearly 30% over the last two quarters from 27% at the end of FY ’24. RTM’s ability to offer flexibility and immediate responsiveness highlights the opportunity to efficiently integrate renewables with the grid. Similarly, for the quarter, green market volumes rose 246% to nearly 2.6 billion units as compared with Q2 FY ’25.
In terms of new products, we continue to await approval from CERC for our long-duration contracts. We have already filed a petition with them for approval of 11-month contract on which the hearing has happened and order is resolved. Further, we have filed petition with CERC for approval of green RTM segments. Green RTM would provide opportunity for RE sellers to avail price premium over conventional power, and also buyers to avail green attributes of electricity. This segment shall also help reduction — deviation exposure due to weather events by providing revenue to trade green power just one hour in advance.
We are happy to inform that our wholly owned subsidiary, International Carbon Exchange, has been accredited as India’s first renewable energy certificate issuer. IRAC is globally recognized digital certificate that serves as a transferable proof of generation of 1 megawatt hour of energy from renewable sources. Further, the Honorable Minister of Coal Shiri G. Kishan Reddy ji, earlier this week announced that India’s first coal exchange would be set up soon and that the exchange would work under the supervision of Coal Controller Organization. IEX has been working with stakeholders to explore this diversification opportunity.
On another front, in August, the draft guideline for authorization and functioning of Extended Power Responsibility, EPR, Trading and Settlement Platform for Plastic Packaging has been issued by the Central Pollution Control Board. This will help in the transparent and competitive type discovery for EPR certificates through an online platform. EPR certification ensures proper recycling, reuse, end-of-life disposal of waste generated from electronic and plastic products. It is expected that this would be extended to other types of waste, such as e-waste, battery waste, tire waste, used oil waste, et cetera. We are working with stakeholders to evaluate business diversification opportunity in these segments.
Let us now summarize the financial performance of the company in this quarter. On a consolidated basis, revenue for the company grew 26.2% on year-on-year basis in Q2 FY ’25, increasing to INR167.8 crore from INR133 crore in Q2 FY ’24. Consolidated PAT increased by 25.2%, rising to INR108.3 crores in quarter two of FY ’25 compared with INR86.5 crores in quarter two of FY ’24.
IGX traded volume of 118 lakh MMBtu for Q2 FY ’25 compared with 195 lakh MMBTU traded in Q2 last fiscal. Profit after tax for IGX for Q2 FY ’25 came in at INR6.1 crores compared with INR7.8 crores in Q2 FY ’24. For the first half of FY ’25, IGX recorded a PAT of INR13.6 crores, higher by 20.7% compared with the same period last fiscal. Gas prices have remained stable over the last two quarters and volumes are expected to pick up as we approach the winter months.
Way forward. Friends, the power sector is undergoing rapid, visible shift. A year ago, battery storage rates were almost about INR10 lakh per megawatt per month. But rates in the recent tender of NVVN have — came down to about INR2.37 lakh per megawatt per month under the VGF scheme. The competitive rates in BESS make a promising case for market development. Prices on the exchange provide enough arbitrage to make BESS commercially viable at the current prices. This will improve liquidity during non-solar hours and will help in meeting peak-hour demand. With the CEA forecast of peak power demand of 458 gigawatt by 2032, power consumption growth will continue to drive exchange volume growth.
On the liquidity side, MoP’s initiative on renewables and thermal capacity addition will keep power procurement costs stable. The regulatory environment and government initiative to facilitate the path of energy transition shall continue to support market development. IEX shall also continue with the diversification initiative within the sector to grow them to significant value. As India marches towards achieving its net zero target, there is bound to be a growing role of power exchanges in the country’s energy landscape and IEX shall continue to be part of this journey.
Thank you. And now we can have question and answers.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities Limited. Please go ahead.
Mohit Kumar
Hi, good afternoon, sir. Congratulations on a very good set of numbers. My first question will be, sir, what was our market share in this quarter vis-a-vis with other exchanges?
Satyanarayan Goel
Our market share has been almost about 83% now.
Mohit Kumar
Understood sir. My second question, sir, is on the transaction fees. When we take the revenues and divide it by number of units, it seems like the transaction fees for the quarter is 3.7 per unit. Are we giving discount also — are we giving discount?
Satyanarayan Goel
In case of REC markets, the rates have come down. REC rates are now almost about INR120, INR110. So we have reduced the transaction fees on the REC. And this is because of that.
Mohit Kumar
Right. My last question, sir — the third question is, where is the trading volume? I think we are looking to start the new product which is more than three months. Where it is right now? When do you expect the launch of that?
Satyanarayan Goel
Now, CERC hearings are complete. Order is reserved. So we are waiting for the CERC order.
Mohit Kumar
Understood, sir. And last question, sir, has GRID-INDIA started a pilot study for market coupling? Where is it right now?
Satyanarayan Goel
They are yet to submit the report.
Mohit Kumar
Have they started the pilot or it’s still awaited?
Satyanarayan Goel
We are really not aware about it.
Mohit Kumar
Okay, Understood sir. Thank you, and all the best, sir. Thank you.
Satyanarayan Goel
We understand is that they were in the process of developing the software. They were taking the data from us to validate the software. But what has happened in the simulation, we are not aware about it.
Mohit Kumar
Understood, sir. Thank you. And all the best, sir. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sumit Kishore from Axis Capital Ltd. Please go ahead.
Sumit Kishore
Thanks. My first question is in relation to — on volume growth that you have seen in REC in Q2. I mean, during the quarter, from July to August and from August to September…
Satyanarayan Goel
There is some Interruption in the voice. I could not hear your question. Can you repeat it?
Sumit Kishore
Am I audible now?
Satyanarayan Goel
Not.
Sumit Kishore
Okay, I will go back in the queue in that case.
Satyanarayan Goel
Now it is better. Please continue.
Sumit Kishore
So I was asking that during the September quarter, the REC volumes kept coming off from July which was a very good month, followed by a lower number in August and a further decline in September. What were the dynamics here? Although REC incomes in each of these months were much higher than the prior periods on a year-on-year basis. And what is the likely roadmap going forward, now that REC prices have come off so substantially?
Satyanarayan Goel
Volumes were significantly higher in the month of July, because Bihar is one state where there was a lot of deficit and they purchased good amount of REC. And since they completed their RPO compliance in the month of July by buying significantly high number of RECs, so in August, September, they were not there — DVC was not there. And because of that the numbers have reduced. But I am sure the trend with respect to last year — increasing trend, that will definitely continue because REC rates have come down and there are many interested parties who are going to do their RPO compliance and purchase these RECs.
Sumit Kishore
Very clear. The second question is that in a quarter where India’s power demand growth was barely up 0.5%, IEX electricity volume growth was up 23%. So aside from the factors of better fuel availability, lower cost, better liquidity, were there any other factors or anything structural which would imply that the momentum of growth would continue going forward as possibly power demand actually may pick up at the India level? Your thoughts there, please.
Satyanarayan Goel
Yes, demand is definitely expected to increase. I mean, India is a growing economy. Our GDP is increasing at a rate of 7%. If GDP is increasing, power demand is also going to increase. And government also has taken many initiatives to increase electricity consumption because this is a most convenient method of transporting energy. And I’m sure demand — the projections of the demand is — demand for electricity is going to increase at a rate of almost about 7% for the next seven, eight years. And if that is the case, then definitely exchange transactions also will increase, because 7% of increase, that is virtually almost about 130 billion units increase. And I’m sure good part of this incremental demand will come to the market.
Sumit Kishore
Sure. [Indecipherable] volume growth.
Satyanarayan Goel
Pardon?
Sumit Kishore
How is the month of October panning out so far in terms of electricity volume growth?
Satyanarayan Goel
There is a growth, but October demand is slightly lower because of the temperature dip in the northern region and also rains in the south and east. But there is a — I think almost about 8% kind of volume growth.
Sumit Kishore
Thank you so much, sir.
Operator
Thank you. The next question is from the line of Bharani from Avendus Spark. Please go ahead.
Bharanidhar Vijayakumar
Good afternoon. Am I audible?
Operator
Yes.
Satyanarayan Goel
Yes.
Bharanidhar Vijayakumar
So my first question is on the transaction fee. Now in April 2023, when the transaction fee was approved by CERC for IEX, the document talked about the regulator asking the commission to come out with a discussion paper outlining global best practices on transaction fee and after that it will take a call on the transaction fee if needed. So just wanted to get your sense on, one, where is this process? And second, in your opinion whether the transaction fee for all the electricity products will be changed in the future, especially given now even we ourselves have decreased transaction fee in REC products where prices have come down.
Satyanarayan Goel
Yeah. I mean April 23 order did not specify any timeline for the discussion paper. So as of now, I mean, to our knowledge nothing has happened and nothing is happening on that. But as far as transaction fees is concerned, I think this issue has been deliberated multiple times in CERC. In 2018 also CERC order came and there also they had allowed the INR0.02 transaction fees. It was again allowed in the 2021 regulation, and then again in 2023 order. And you rightly said that in case of REC, since the rate has reduced, we reduced the transaction fees, but in case of electricity, our transaction fees is continuing as INR0.02 on either side right from 2011 when the electricity rates were almost about INR2.5, INR3.
Today, electricity clearing price is almost in the range of INR5. In spite of that we have not increased the transaction fees. So — and even if you look, the trading activities, what is happening in the sector, the regulator has allowed transaction fees up to INR0.07 per unit. Government of India company SECI, when they are buying power from the renewable generators and selling to distribution companies, they are also allowed a transaction fees of — a trading margin of INR0.07. So if that is the case, I don’t see any reason why this INR0.04 transaction fees will not be allowed or will be considered as high.
Bharanidhar Vijayakumar
Sure. I think that is good to know. Second question is on market coupling. Now in February 2024 when the result of the initial pilot study was given by CERC, the document talked about doing further pilot study, especially focusing on whether coupling RTM market with SCED market is any beneficial. Now my question is, in layman terms why should coupling in RCC — sorry, RTM and SCED be considered, if you can contextually explain, rather than coupling in the overall market?
Satyanarayan Goel
See, CERC in their order which was issued in the month of February, they have very clearly mentioned that they did simulation for three months. And based on the data, they did not find any merit in coupling only RTM market or only their market of the three exchanges. So they said that one of the suggestion which they received was to couple the RTM and the SCED. And just to explore it further, they had given the order to GRID-INDIA to do the simulations and see if there is a merit in that.
But let me tell you, SCED and RTM are two different kind of markets. SCED is basically among the generating stations who have long-term power purchase agreements, where the fixed cost is assured under the PPA. They bid — they sell the power on the basis of a variable cost — regulated variable cost. In case of RTM market, the generators are merchant generators and they have to recover the fixed and variable cost through the market. And even the coal which is given to the PPA generators is through the FSA route at the administered price, whereas the merchant generator could buy coal from the auction route.
So I think these two are two different set of generators. So theoretically speaking, coupling between these two set of generators is something not desirable. But then some simulation is — simulation studies are going on and what we — I mean we can also — we also know about that what kind of benefits they are getting in the SCED and how much of volume is getting cleared in the SCED. All these data are available in the public domain. And if you couple these two markets, significant benefit is not going to happen. The incremental benefit is going to be very, very low. And I don’t think for that kind of a small benefit, CERC will go ahead with — I mean, implementing this kind of a coupling is very, very cumbersome activity and it also involves cumbersome financial and physical settlement process. So I don’t think it is worth taking of that pain. But then we are awaiting for the study report and then CERC order thereafter.
Bharanidhar Vijayakumar
Sure. That is very clear. Thanks for answering. I will talk to you in the future.
Satyanarayan Goel
Thank you.
Operator
Thank you. The next question is from the line of Chirag from Keynote Capital. Please go ahead.
Chirag Maroo
Am I audible?
Satyanarayan Goel
Hello? Yes.
Chirag Maroo
Hello? Yes, thank you for the opportunity. Sir, will it be possible for you to give market share product-wise?
Satyanarayan Goel
Yeah. Rohit?
Rohit Bajaj
Yeah. So in Day Ahead Market and Real Time Market, which are collective segments, our market share is 99.5%. In the bilateral market, let me just give it out, just allow me. So in the Term Ahead Market, our market share is about 40%. So which overall on the total basis it makes it 82.7% — that 83% in electricity. In certificates it is 60%. And overall market share in H1, first six months is 79%. Electricity it is 83%, and certificates it is 60% and total is 79%.
Chirag Maroo
Thanks. Sir, second, I wanted to understand one thing as the earlier participant also asked [Indecipherable]. There was one simulation taken place related to RTM and DAM which didn’t — made it through because majority of the volumes were used to [Indecipherable]. So even if there is a market coupling, is this RTM and trade-based market coupling goes forward also, does that mean all the products will be coupled or it will be just two of these products [Indecipherable]?
Satyanarayan Goel
We don’t want to comment on that. Let CERC decide about it first, and thereafter — and we will talk about this. As of now, the simulation is basically for RTM and it’s good.
Chirag Maroo
Okay. The third question, I just wanted to have a view. Is there any internal discussion in the management team going on related to change in dividend policy, as we — we don’t require this much amount of cash for bringing new products itself. Has there been any talks related to slab-based dividend model taking place and changing from the current 65% of the profit?
Satyanarayan Goel
As of now, there is no such thinking about it. We are giving 65%, 70% kind of profit in the form of dividend and that’s a good dividend payout. We are also working on other initiatives. As I told in the past, gas exchange is doing well. We are also working on coal exchange, which is Government of India — Ministry of Coal is talking about that. And there are EPR trading discussions going around. Carbon exchange is another opportunity. So I think for all these things money will be required. So we are keeping that money for that purpose.
Chirag Maroo
Sir, will it be possible for you to just lay out a broad ballpark number going forward? What kind of money would be required for bringing that kind of thing?
Satyanarayan Goel
See, even in case of power exchange also, since we are counterparty to both the sites, we have to make payment to the sellers even if we are not getting payment from the buyer. And there have been some instances where there was a one or two days’ delay in making the payment by the buyer. So we have to have enough surplus fund with the company to take care of this kind of eventuality. So I think the present Surplus is about INR900 crore, is the investors money which is available with the company. It is not very high but then yes, in future we can think about a special dividend if there is a need.
Chirag Maroo
Fair enough. Thank you. Thank you so much sir.
Operator
Thank you. The next question is from the line of Viraj Mithani from Jupiter Financial. Please go ahead.
Viraj Mithani
Yeah. Congratulations sir for the good set of numbers.
Satyanarayan Goel
Thank you.
Viraj Mithani
My question is again on coupling. In case the coupling goes through, how are we going to be affected? Like, I mean, because we are the leading exchange in the — we offer more advantage too. Can you give some color on that? I know it’s too early to comment but if you can give, sir.
Satyanarayan Goel
I am very sure coupling is not going to happen. So let us not worry about that. And in case coupling happens, we have ways and means to ensure that we are able to return our market share [Indecipherable] when it comes to that. Okay?
Viraj Mithani
Good. Okay. Thank you, sir. All the questions are answered. Thank you.
Satyanarayan Goel
Thank you.
Operator
Thank you. The next question is from the line of Devesh Agarwal from IIFL Securities. Please go ahead.
Devesh Agarwal
Good afternoon, sir, and thank you for the opportunity.
Satyanarayan Goel
Good afternoon.
Devesh Agarwal
Again on — continuing on market coupling. If you could help us understand whether this URS power that has been coming into the RTM market, in any way does that kind of bring down the benefit that could have possibly come out by coupling the SCED with RTM market or it doesn’t impact?
Satyanarayan Goel
See, number one SCED volume itself is very less. It was earlier about 30 million, 35 million units per day, whereas RTM market volume is about 100 million units. And after this government new rule of sale of URS power on the exchange platform, we are seeing that in the RTM market, on an average, daily about 20 million units of this URS power which is being sold through the market itself. So that means that opportunity available for further optimization in the SCED market is further reduced. So today the SCED market is less than 28 million units per day. So I think the optimization opportunity is definitely further reduced. And if all generators, they participate in the DAM and RTM market, the URS power is sold, there will be practically no optimization opportunity by coupling DAM and RTM.
Devesh Agarwal
Understood, sir. And secondly sir, if we see the numbers for the October, you said there is some growth. But if we see for our numbers in the month of October, we are seeing that there is a month-on-month decline, and the decline is largely in the RTM segment where volumes have come by — come down by 20 to 25 MUs on a daily basis. Any particular reason for this, sir?
Satyanarayan Goel
Yeah, month-on-month there is a decline. But if you look at year-on-year, there is a positive number. And month-on-month is — month of September is a slightly hot and humid month. Agricultural demand is also there. Because of that the demand was high in the country. Now demand also has reduced. And, fortunately, availability of generating units is high. So that is why I think volume is on month-on-month basis reduced. But we have — our comparison is mainly on year-on-year basis, because you will see on every month — I mean, next year November is going to be further colder month and the demand may further go down. But if you compare — with respect to last year, that is the basic comparison what we do.
Devesh Agarwal
Understood sir. And sir, I think you touched upon in your introductory remark this CERC regulation which came at the start of the month, around TAM pricing. Could you just explain a bit better what does the draft paper talks about and how would this impact the TAM market, and does this benefit or impact us in any ways if this were to be implemented?
Satyanarayan Goel
See, it is basically to streamline the transactions in the TAM market. Today there are multiple products and exchanges were given the flexibility to introduce whatever product they feel like. And as a result of that, different exchanges have introduced different kind of products. So there is no standardization in that. And that is why the liquidity in this market is getting fragmented across these different products. So CERC has now decided to streamline this activity and there will be standard products available in the market, so that buyers and sellers can see what is there available for the sale and what they want to buy. And I think this is a very good initiative of the CERC and it is good for the market.
Devesh Agarwal
But does it impact any of our segment volumes or no, not really?
Satyanarayan Goel
No, it doesn’t impact that and I’m sure we’ll be a larger beneficiary of this.
Devesh Agarwal
Understood. And lastly sir, you talked about diversification and you spoke about EPR trading and coal exchange. So among this one, which one do you think has the largest potential in terms of becoming sizable? And secondly, which is the one that you think will be started first — will come into operation soon?
Satyanarayan Goel
Both questions are difficult to answer because both these initiatives are dependent on the government decision. Coal exchange, I mean, I’ve been hearing about it from the last one year and Honorable Minister of Coal also had made statement earlier that it is a part of the 100 days and the 100 days are over. In the last week also he said that yes, we are going ahead with the coal exchange. So I think only after a decision is taken by the government in this regard, then only we will be able to start work on that. And then after that, we will have to approach the regulator, whoever is the party identified for this purpose and take approval and thereafter launch. Yes, I think it will need some time and dependant on the government approval. But once approval is there, after that we will need maybe about six months to eight months time to start.
Similar cases in the EPR trading. EPR trading also draft regulations have been issued and they have received the public comments. They are in the process of finalizing the regulations. Once the regulations are finalized, then they will appoint the agency for the purpose of EPR trading. So — and there multiple parties may apply and then it depends whom they select. So we have good chances to get selected. But then there is opportunities available to everybody.
Devesh Agarwal
Understood, sir. That’s all from my side. Thank you so much.
Satyanarayan Goel
Thank you.
Operator
Thank you. The next question is from the line of Vishal Periwal from Antique Stock Broking. Please go ahead.
Vishal Periwal
Yes, sir, thanks for the opportunity. Sir, on this REC transaction fee that we have revised, I mean I just wanted to understand the rationale for it. When the volume for any product when it’s going strong, what was the reason of reducing the fee that we charge?
Satyanarayan Goel
Now, since the rate for the REC, those got substantially reduced. And so we felt that transaction fees should also be reduced because rates earlier were INR1,000, it came down to almost about INR120.
Vishal Periwal
Okay. So — no, but we have not seen a similar thing for even like power product that we have, maybe like the tariff moves to maybe INR8, INR9.
Satyanarayan Goel
Yeah, I agree with you. In case of electricity, when the rates increase from INR2.5 to INR5, our transaction fees should have increased there. But we did not increase that. But this time we — to pass on the — I mean give benefit to the distribution companies, we decided to reduce the transaction fees for REC.
Vishal Periwal
Okay. So maybe I can ask it another way. Is there any other players, they have done, or maybe like changes in the fee that made probably the industry to follow it? Maybe one player started it, or how that you force or we were the first one?
Satyanarayan Goel
We wanted to be rational in charging our fees.
Vishal Periwal
Okay, sure sir. And one last thing is on this the TAM product, the three months to 11 months. So I know — I mean it has been pending from quite some time. So anything that you’re hearing which is probably delaying the whole process? Any color that you can provide would be useful.
Satyanarayan Goel
We were expecting that it will happen within one month of the order when the order was reserved. But now significant time has passed. So I don’t know what is the issue behind that. Maybe when they finalize this — I mean, they have also issued a draft order about the TAM market. So once they get the comments on this and maybe along with this they will finalize that also.
Vishal Periwal
Okay, sure sir. Sure. Yeah. Thanks. That’s all from my end.
Satyanarayan Goel
Thank you.
Operator
Thank you. The next question is from the line of Rucheeta Kadge from i-Wealth Management. Please go ahead.
Rucheeta Kadge
Hello sir. Good afternoon. Sir, my question was on the REC segment. I just wanted to know sir, what is the opportunity size in this segment in terms of volume?
Satyanarayan Goel
Yeah, opportunity is very high because the Government of India has specified RPO compliance norms. And there are many states, many distribution companies, many industries who are not meeting that. So — and earlier the inventory was not available. Now the inventory also is there. Almost about INR3.5 crores to INR4 crores are in — INR4 crores REC inventory is available. Rates also have come down. So it is the right time for these entities to meet their RPO obligation. So I’m sure that it’s a big opportunity, but again, depends on the market participants and also the enforcement which is done by the state regulators because state regulators are the agencies who have to — who are monitoring these things and ensuring compliance.
Rucheeta Kadge
Okay. Thank you.
Operator
Thank you. The next question is from the line of Nikhil Abhyankar from UTI Mutual Fund. Please go ahead.
Nikhil Abhyankar
Thank you, sir. Just one question. So you mentioned that we are accredited to issue carbon certificates. So can you just brief us about that, what exactly is this about? Like, all the carbon credits issued in India will be through us, and do they have to trade only with us or something like that?
Satyanarayan Goel
No. It is not carbon credit, it is IREC. It is International Renewable Energy Certificates. We have a REC market in India which is a compliance market. There is another market which is a voluntary market, which is operating — which are operated by one of the international agencies. And earlier, they had one agency which was doing issuance of the IRECs and now they have given the job to ICX, our subsidiary company.
Nikhil Abhyankar
Okay. And sir, when should we expect any operations on ICX?
Satyanarayan Goel
No, activities have started but the opportunity is very small here.
Nikhil Abhyankar
Okay. Yeah, sure. Thank you.
Operator
Thank you. [Operator Instructions] The next follow-up question is from the line of Chirag from Keynote Capital. Please go ahead.
Chirag Maroo
Yeah, thank you for the follow-up. Sir, actually I wanted to build some clarity on IGX. As the prices of gas has come stable to INR12 — $12 prices, what’s the reaction on the volume trading taking place? That’s one. Secondly, which type of gas is being traded? Is it the domestic gas or is it the international gas that is traded more on IGX?
Satyanarayan Goel
See, we have basically three kinds of gas in the Indian market; RLNG, APM gas and non-APM gas. Non-APM gas is gas produced by Reliance, gas produced by Canes, PMT et cetera, So trading on exchange platform is basically happening in other than APM gas, whether it is domestic or RLNG, both kind of gases are traded here because for the domestic gas also, the trade allocation document says that the gas can be sold through the competitive bidding route or through the exchange. So good part of that gas is also sold through the exchange.
And as far as the gas price is concerned, yes, prices are about $12, $13. But very recently I saw a report that there is going to be a significant increase in the LNG capacity in the world. And in 2025 and in ’26, we are expecting the gas prices to come down. It may come down to almost about $6, $7. And when that happens, I’m sure the gas consumption in India is going to increase and particularly in the power sector. So we see good opportunity — big opportunity in the gas exchange.
Chirag Maroo
Yes, sir. That is from my side. Thank you, sir.
Operator
Thank you. The next question is from the line of Rishabh Shah from Birla PMS. Please go ahead.
Rishabh Shah
Yeah, hello? Am I audible? Hello?
Satyanarayan Goel
Yeah. Hello?
Rishabh Shah
Hello?
Satyanarayan Goel
Yeah, I’m able to hear you.
Rishabh Shah
Yeah. Am I audible, sir?
Satyanarayan Goel
Yes, sir.
Rishabh Shah
Yeah. So how would you attract new customers, so that more and more trading is possible on our platform?
Satyanarayan Goel
Can you repeat your question, please, and talk slightly louder?
Rishabh Shah
Okay. Sir, I’m asking how would you attract new customers, so that more and more trading is possible on our exchange?
Satyanarayan Goel
Yeah. Number one is that customer side, one is seller and other is buyer. On sell side, we have almost all generating thermal generators who are — they are registered with us. On renewables side also, most of the renewable capacities are registered with us. On buy side, 100% of the distribution companies of the country are registered with us. Industrial consumers, we have more than 4,500 large industries. They are all registered with us. And we continue to work with industries, tell them what kind of benefits they can take. So every year, we find that there is increasing number of — number in that. So it’s a continuous business development activity on which we are working.
Rishabh Shah
Okay. And sir, my next question is the Open Access volumes have only been contributed by few states. So what necessary actions are we taking so that those volumes increase? And all states are participating in these volumes?
Satyanarayan Goel
Yeah. Open Access volume is basically purchased by the industries and purchase by the industries is dependent on the state Open Access regulations, particularly the cross-subsidy surcharge, additional surcharge and billing charges. And looking at the exchange clearing price which is about INR4 these days — INR4, INR4.5, with this — on top of it if you add these charges, the viability in many of the states is not there, because in those states the charges are higher. But in few states where the cross-subsidy surcharge and additional surcharge is lower, there is still liability and they participate on the exchange platform. We regularly interact with the state regulatory commissions. We submit our comments also, suggestions also in the ARO hearings. And our endeavor has been to ensure that there is a rationalization of cross-subsidy surcharge, so that Open Access is promoted. And that is the objective of the Government of India also, the basic spirit of that also.
Rishabh Shah
And my next question is, sir, if I remember clearly, in FY ’22 we had a market share of 94%. In FY ’23, we came down to 88.4%-something. In FY ’24, we were 84%. And now we are on a consol basis, like all the products this year around 83% something. Am I correct?
Satyanarayan Goel
Yeah. See, in…
Rishabh Shah
Sir, my, just, question is what is happening, sir? Why are we losing that market share? Is it because of competitors — more competitors are coming into our market or what is it?
Satyanarayan Goel
No, in 2022, these long-duration contracts for delivery beyond 11 days were not there. So these products were introduced in June — July 2022. And thereafter, in these products also, significant volume transactions have started happening. The DAM market and RTM market which are our key market segments where our market share is practically 100%, there is a volume increase in these two segments also, where some volume shift has happened from the trading companies to the long-duration contracts from the exchange platform. And in those contracts, all three exchanges have reasonable volume — reasonable market share. So market share has reduced because of that. But if you look at our volumes, our volumes are increasing. Our volumes increased in 2023 — ’23-’24 was also there and ’24-’25 is also there.
Rishabh Shah
Okay. And sir, how is the market share distributed among the three exchanges in totality in the TAM market?
Satyanarayan Goel
I told you, in totality it is 83% in electricity, whereas it is in DAM, RTM and GDAM it is 100%, practically 100% — 99.5% you can say.
Rishabh Shah
Okay. And what would be your top three priorities going ahead for the next four to five years?
Satyanarayan Goel
Yeah. One is electricity exchange. Continue to introduce more products on this and — through business development activities, policy advocacy, so that we are able to deepen this market. Second is our gas exchange. There also we are working to ensure that there is a — volume increase happen there because the opportunity size is much bigger there. Third is, I told you diversification initiatives, Coal exchange, EPR trading. These are the new initiatives on which we are working.
Rishabh Shah
You said new products. So any new products are in pipeline? What kind of thinking are we going into those new products?
Satyanarayan Goel
I mean, 11-month contract is under approval. We have also filed petition for green RTM market. So these are the two new things.
Rishabh Shah
Okay. Thank you. Thank you so much, sir.
Satyanarayan Goel
Thank you.
Operator
Thank you. The next question is from the line of Lokesh Manik from Vallum Capital. Please go ahead.
Lokesh Manik
Yes, good afternoon sir. My question, just a clarification. What is the volume we would be doing in long-duration contracts today, which are beyond one month?
Satyanarayan Goel
The question is not clear.
Lokesh Manik
Sir, the volume in long-duration contracts, how much would we have done this quarter?
Satyanarayan Goel
Just a minute.
Lokesh Manik
Yeah.
Satyanarayan Goel
5.2 billion units in this quarter we have done. Sorry, not this quarter, for six months’ time.
Lokesh Manik
Okay. In six months we’ve done 5.2. And we have — just clarification — we have 40% market share in this segment. Am I clear on that?
Satyanarayan Goel
Yes, you are right. You’re right.
Lokesh Manik
Okay. So 40% at 5.2, that’s 10 — that’s about 20 billion is the total industry. So trading would be 50 billion, 60 billion, the power trading market, long duration?
Satyanarayan Goel
Long duration is about 13 billion units in all three exchanges taken together. And if you look at that, trading companies also, they do long duration. So accounting for that also it becomes 50 billion, 60 billion units.
Lokesh Manik
Okay. Sir, we have more products in the pipeline to capture more market share from there. Do you think they are reasonably positioned to grow from here?
Satyanarayan Goel
Yeah. I mean 11-month contract is the next item, because up to three months we have all kind of contracts available. 11-month contract, we have already apply to CERC for approval. With that, we will be able to offer the complete range of products.
Lokesh Manik
Understood. So when is that expected, sir?
Satyanarayan Goel
Difficult to say. It is under regulatory approval.
Lokesh Manik
Okay. Got it. Sir, the second question was on the…
Satyanarayan Goel
Not able to hear you.
Operator
Lokesh, are you…
Lokesh Manik
Hello?
Operator
Yes, sir.
Lokesh Manik
Yes, sir. I’ll come back in the queue for any further questions. Thank you.
Satyanarayan Goel
Okay. I think we can have another one more question.
Operator
We have no further questions, sir.
Satyanarayan Goel
Okay. Thank you. That’s great, because I have another meeting.
Operator
Thank you. Ladies and gentlemen, we’ll take this as the last question. I would now like to hand over the conference to the management for closing comments.
Rohit Bajaj
Thank you, friends. I would like to thank each one of you for being part of today’s call. We have had a good first half of this fiscal on the business front. We have witnessed several efforts announced by the government and regulators to further develop the market. We remain committed to contribute to the development of a sustainable and efficient energy future for India. Thank you. Have a wonderful evening.
Satyanarayan Goel
And happy Diwali to all of you.
Operator
[Operator Closing Remarks]