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FEB 11 2014

Ministry to the rescue of gas-hit power plants

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 11th FEB 2014

In a Cabinet note circulated on February 5, the Ministry has proposed subsidy for distribution utilities based on the difference in actual tariff and Rs. 5/unit for 2014-15 and Rs. 5.50 for 2015-16. The indicative subsidy to be borne by Government would be about Rs. 3,621 crore in 2014-15 and Rs. 2,056 crore in 2015-16.

Gas-based power plants directly compete with coal fired plants and distribution utilities reeling under severe financial constraints are reluctant to buy expensive electricity. The Ministry has also proposed a three-year moratorium on loan repayments. This will benefit companies such as NTPC, Lanco, GMR, GVK, Torrent, Reliance Power and Essar Power.

"In view of the financial stress being experienced by generating entities on account of lack of gas supply, the Commercial Date of Operation needs to be extended by one more year. This would allow re-structuring of loan anytime up to three years from the Commercial Date of Operation instead of the current two years," a Power Ministry official said.

According to RBI guidelines, a loan for an infrastructure project can be re-structured any time for two years from the original Commercial Date of Operation.

The Power Ministry proposes to seek approval from the Cabinet Committee on Economic Affairs (CCEA) on various steps to improve the viability of 18,964 MW that are running at just 25.6 per cent plant load factor (PLF).

PLF is a measure of average capacity utilisation and is affected by fuel availability, maintenance shut-down, unplanned break down and no off-take, which in turn impacts the generation.

Refinance sop

The Ministry has also proposed that power developers be allowed to refinance 100 per cent of rupee loans with external commercial borrowings (ECBs), instead of present cap of 40 per cent and the balance 60 per cent required to meet the fresh capital expenditure. The inability to invest in fresh capital has made the facility of using ECB borrowings for re-financing rupee loans a non-starter in the power sector. Now, it is proposed that for the entire tenor (10-12 years) of power project loans subject to the condition that at least 70 per cent of the debt remains hedged throughout the loan cycle. Moreover, for power plants with no gas allocation can procure imported gas and sell it directly to customers. In such cases, where the generator has entered into contracts for supply of R-LNG and power purchase agreements with consumers, further loans would be made available from PFC.


Essar Power Gujarat Ltd Essar Electric Power Development Corporation Limited Power Finance Corporation Gas Reliance Power NTPC Ltd Central Electricity Authority RBI Cabinet Committee on Economic Affairs Prospecting Licence Liquefied natural gas Essar Essar Steel Essar Oil Ltd. Power

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