In a bold regulatory shift, the Central Electricity Regulatory Commission (CERC) has announced the introduction of market coupling in India’s power sector starting January 2026, a move set to break the Indian Energy Exchange’s (IEX) long-standing dominance over short-term electricity trading.
From Market Reformer to Market Maker
Launched in 2008, IEX transformed India’s electricity trade by introducing a digital, auction-based system that replaced the old bilateral and long-term contracts. Its flagship product, the Day Ahead Market (DAM), enabled next-day delivery bidding through an algorithmic price discovery model. This ushered in unprecedented transparency, liquidity, and efficiency.
Over the years, IEX’s dominance grew unchallenged. By FY25, it controlled over 92% of the DAM and virtually 100% of the Real-Time Market (RTM), trading 121 billion units of electricity. In Q1 FY26, IEX saw 32.4 billion units traded and 52.7 lakh Renewable Energy Certificates exchanged — a 15% and 150% YoY growth respectively. With high margins, negligible capex, and a 40% return on equity, IEX became a textbook monopoly.
Regulatory Intervention: The Case for Market Coupling
Despite three licensed exchanges — IEX, PXIL, and the newer Hindustan Power Exchange (HPX) — nearly all price discovery occurred on IEX. Competing platforms shadowed its Market Clearing Price (MCP) rather than independently establishing their own, raising serious concerns about competitive neutrality.
To address this, CERC has now ordered the implementation of market coupling, a model where a neutral Market Coupling Operator (MCO) will centrally match buy and sell orders across all exchanges to determine a uniform clearing price, independent of the originating platform.
The exchanges — IEX, PXIL, and HPX — will continue facilitating bids and handling clients but will no longer have control over price discovery.
According to the CERC order, “Grid India highlighted the need for bringing uniformity in clearing algorithms and bid structures across exchanges… and suggested that full-fledged roll-out of market coupling may be considered with the three power exchanges acting as the Market Coupling Operator (MCO) in a round-robin manner.”
Pilot Study: Underwhelming Results, Rising Resistance
Before rolling out the reform, Grid India conducted a shadow pilot (Dec 2024–Mar 2025) using 29 months of historical data. The results were mixed. While the DAM showed a theoretical gain of ₹38 crore in social welfare and a marginal 0.3% increase in cleared volumes, industry experts questioned the practical value.
A senior power ministry official noted, “If the CERC report itself acknowledges that there’s no significant price variation, then the goal of uniform pricing is already being achieved within the current framework. So why disrupt the system?”
Further criticism focused on lack of transparency. Several stakeholders pointed out that the final CERC order did not disclose the full findings of the pilot, raising concerns over procedural opacity.
Market Reaction: HPX Surges, IEX Tumbles
The announcement triggered an immediate shift in market sentiment. PTC India — which holds a 22.6% stake in HPX — saw its stock rally nearly 9% to ₹206.90, while IEX stock plunged almost 30% to ₹130.
Manoj Kumar Jhawar, CMD of PTC India, welcomed the move, stating, “Market coupling announcement will be good for the market as currently all volumes are concentrated in IEX. We are targeting at least one-third of the market share via HPX.”
Harish Saran, Managing Director of HPX, echoed the optimism: “With market coupling, all three exchanges will have volumes. HPX will stand to gain. IEX will lose some market share in the DAM.”
Looking Ahead: MBED and the Bigger Picture
Industry experts view market coupling as a precursor to the more sweeping Market-Based Economic Dispatch (MBED) system. If implemented, MBED could raise exchange-traded power from the current 8% of India’s generation to 25% by FY32.
Still, concerns remain over centralisation and regulatory overreach. Critics liken the reform to forcing NSE and BSE into a single pricing engine — a move that could stifle innovation rather than enhance competition.
What’s at Stake for IEX
Market coupling will first apply to DAM, which contributes 33% of IEX’s revenue. RTM, which accounts for 34% of its volume, may follow. If price discovery becomes centralised, IEX’s edge may shift from pricing power to product experience, UI, speed, and customer loyalty.
IEX is already diversifying: it has launched electricity derivatives trading on MCX and NSE, is working with the Coal Ministry to launch a coal exchange, and is expanding the Indian Gas Exchange (IGX) footprint.
Despite the shake-up, industry veterans believe IEX isn’t down and out. “Even if coupling comes, IEX will remain strong. Over 17 years, it has built trust, compliance, and a customer base no algorithm can replicate,” one executive said.
CERC’s market coupling initiative is a landmark moment in India’s power sector — not just a regulatory correction, but a fundamental shift in how electricity is priced, traded, and accessed. Whether it delivers on its promise of fairness and competition, or ends up burdening a well-functioning system with bureaucratic complexity, remains to be seen. But one thing is clear: the days of unchecked dominance in India’s electricity markets are numbered.
