Central Electricity Regulatory Commission (CERC) has asked the power exchanges to cap prices at Rs 12 ($0.1580) per unit amid a surge in power demand and the rising cost of imported coal.
During the past few days, prices discovered at power exchanges have remained "significantly" higher, CERC said in a statement.
Abnormally high prices at power exchanges, even for a short period, hurt consumers' interests and erode buyers' confidence in the market, the commission said.
It also noted that India's power demand has surged due to the onset of summer and an uptick in economic activities after the coronavirus pandemic.
Power demand could rise further after weather officials forecast maximum temperatures above normal in April in most parts of the northwest, northeast and central regions.
The Indian Energy Exchange (IEX) and unlisted PXIL are the two major power exchanges in India.
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