The Central Electricity Regulatory Commission has turned down Tata Power's application for a trading licence on technical grounds. It has asked Tata Power to form a trading subsidiary and apply for a licence afresh.

Tata Power had applied for a trading licence in November, stating that it was incorporating a trading subsidiary. The CERC, after evaluating the application, said the Tatas would have to form the subsidiary first, which would have to apply afresh because the licence could be handed out only to the applicant.

The Tatas would have to forfeit the licence fee of Rs 100,000 deposited with the CERC, official sources said. Energy trading has been recognised as a distinct activity under the Electricity Act, 2003, with the CERC entrusted with regulation of the market. While the CERC has been permitting power trade for some months now, companies were trading their own risk pending notification of norms.