Fitch Ratings released a report today highlighting increased risks for power traders in India. The agency said state power utilities are facing profit and liquidity problems, causing delays or defaults in payments to traders. "If these utilities are having liquidity problems which are leading to delays or defaults in their obligation to power traders, then this in turn increases the business risk for power traders," Fitch noted. Power traders like PTC India and Tata Power Trading Company dominate the market, controlling over 80% of volumes in the past four years. Among the largest buyers of short-term electricity, some state power utilities in Tamil Nadu, Uttar Pradesh, and Madhya Pradesh suffer heavy losses. These losses worsened with annual book deficits growing to Rs 29,500 crore in FY10 from Rs 7,000 crore in FY06. According to the Planning Commission, electricity distribution losses reached Rs 70,000 crore in 2010-11. Tamil Nadu and Rajasthan utilities face major energy shortages and cash losses, making them net buyers in short-term markets. Fitch warns this raises counterparty risk for power traders, especially those without diverse customers. Traders with strong equity and cash buffers are better positioned to handle delays or defaults. Salil Garg, Director at Fitch's Asia Pacific Utilities team, added, "The agency expects larger traders to face low business risk due to many factors, including economies of scale and diversified customer base." Investors may demand higher returns or find new investment paths, impacting market dynamics in power trading.