The Indian power sector is one of the most diversified sectors in the world. Today India is the fifth largest producer and consumers of electricity in the world. The demand for the electricity in the country has been growing at a rapid rate and expects to increase further in the years to come. The ministry of power has set a target of adding 76000 MW of electricity in the 12th five year plan (2012-2017) and 93000 MW in the 13th five year plan (2017-2022). Power is regarded as a commodity capable of being brought, sold and traded. Power trading inherently means a transaction where price of power is negotiable and option exists about whom to trade with and for what quantum. It is an effective tool to strike the balance between the availability and the distribution of power in various parts of the country or between various countries.