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FEB 02 2015

Oil ministry proposes to bring gas-based power plants under price pooling scheme

  • Economic Times, ET Bureau / Hyderabad
  • Created: Mon 02nd FEB 2015

The oil ministry wants all domestically produced gas to be included in the price pooling scheme to save about Rs 1,00,000 crore of private power projects, a proposal that would adversely affect some electricity generation plants operated by state-owned NTPC.

The Ministry for Petroleum and Natural Gas has informed the power ministry that no additional gas output will be available from fields auctioned under the New Exploration Licensing Policy until March 2017. If the price pooling scheme is to be a success, it is imperative to include gas produced by stateowned companies.

Under a gas price pooling proposal prepared jointly by both ministries earlier, any additional gas produced in the country in the next four years, along with imported liquefied natural gas, would be supplied to help operate power plants at 40 per cent capacity. The gas would be sold at an average 'pooled' price, while electricity from the plants sold to distribution companies would be capped at Rs 5.5 per unit.

Of the country's 24,000 Mw of gas-based generation capacity, plants with 16,000 Mw capacity are stranded, while the remainder is underutilised.

The power ministry has so far spared NTPC from the pooling scheme because it will raise electricity tariffs from the company's projects by over Rs 1 per unit. NTPC has 3,900 Mw of gas-based plants that operate at about 40 per cent of capacity and the electricity tariff is about Rs 4.30 per unit, a company official said.

The utility gets gas from fields allotted to state-owned companies Oil & Natural Gas Corporation and Oil India , the price of which is administered by the government.

"We have suggested to the power ministry that projects based on administered price mechanism (APM) gas be included in the price pooling scheme since there is no new gasavailable for power plants from NELP fields till 2016-17," a top oil ministry official told ET. To lower tariffs, the oil ministry has also suggested lowering the fixed cost realisation of power developers from the present Rs 1.31 per unit and a 50 per cent cut in re-gasification charges of imported gas.

Of the 14.5 million standard cubic metres a day of domestically produced gas supplied to power stations in the second half of December, 13.9 mmscmd were from APM fields and 0.5 mmscmd were from APM fields and 0.5 mmscmd was made available to projects from the KG D6 block operated by Reliance Industries. Besides NTPC stations, APM gas is supplied to plants operated by GVK Power and Torrent Power

The oil ministry said there will be no incremental NELP gas for power plants after meeting the requirements of the fertiliser sector during 2015-16 and 2016-17.

The power ministry is redrafting the price pooling scheme based on availability of domestic gas and may implement it in phases.

"We are reworking the gas price pooling proposal after the oil ministry said there is no additional gas available. One option being considered is to stagger the scheme over several years, depending on the availability of gas," a power ministry official said.

However, the criteria will also depend on the gas allocation policy, which the oil ministry plans to change. The oil ministry proposes to drop power plants to fifth in the priority list for gas allocation from all sources after atomic energy stations, extraction of higher hydrocarbons and urea plants.

As per a Supreme Court order, city gas distribution projects supplying CNG as auto fuel and piped cooking gas have to be accorded top priority in gas allocation.

After city gas projects, the oil ministry currently accords priority to fertiliser plants, liquefied petroleum gas plants and power stations.

State-run GAIL India and Gujarat State Petroleum Corporation Ltd were proposed as the operators of the gas price pooling scheme. The plan includes simplifying procedures to avail of customs duty waiver on LNG and scrapping value added tax and central sales tax collected by states.

Gas transporters GAIL India and Reliance Gas Transportation Infrastructure Ltd have been asked to take a 20 per cent cut in pipeline tariffs, which would help them improve utilisation of pipelines. GAIL was also asked to halve the marketing margin to $0.1 per million British thermal units of gas.

Tags

Gujarat Torrent Power Distribution Companies Gas Oil Ministry Tariff Natural Gas New Exploration Licensing Policy Oil Gail India NTPC Ltd Energy CNG New Exploration Licensing Policy Petroleum Tax Liquefied natural gas Liquefied Petroleum Gas Hydrocarbons Power Electricity India

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