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MAR 26 2015

Sacrifices all round to fuel gas gencos

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 26th MAR 2015

To salvage 14,305 MW of stranded gas-based power capacity, the government has decided to put in place a transient mechanism where the plants can run at 30% plant load factor with assured supply of gas, but subject to a tariff cap of Rs 5.50 per unit. The operators of gas-based power units will get monetary support from the government for a period of one year so as to be able to service their debt while forgoing their return on equity.

 In a reverse bidding method, the plant willing to take the lowest amount of support from the government’s power system development fund (PSDF) to maintain tariff at R5.50 will be given imported gas. The move would benefit Lanco Infratech, Essar Power, Reliance Power, GVK Group and GMR Energy, among others.

 Announcing the Cabinet Committee on Economic Affairs decision on Wednesday, power and coal minister Piyush Goyal said with this new arrangement, electricity generation in the country would be enhanced by 79 billion units worth R42,000 crore.

 The move comes at a time investments of about Rs 60,000 crore in stranded power plants are on the verge of becoming non-performing assets.

 Even the balance capacity of 9,845 MW entailing an investment of over Rs 40,000 crore is operating at suboptimal levels due to paucity of gas.

 “GAIL and GSPC will import LNG and supply to gas-based power plants,” Goyal said, adding that the new contingency mechanism involved “sacrifices” by all stakeholders including the operators, the Centre and state governments. To make the new system viable, public sector gas marketer GAIL (India) will cut its transportation tariff and marketing margins while LNG regasification terminals will reduce their charges. Though the exact details of the tax concessions are not immediately known, an earlier proposal was that states will waive VAT, CST and other levies on gas and RLNG, while the Centre will offer customs duty exemption for RLNG.

 The government, Goyal said, would import 10 million standard cubic metres per day (mmscmd) in the monsoon season, that is, during the next five months. The imports will be ramped up to 18 mmscmd in the remaining seven months of the year.

 Wednesday’s decision indicates that the government has abandoned an earlier plan to pool gas from multiple sources, including from abroad. Power ministry sources said since spot gas prices in the international market have come down drastically, pooling would have burdened the gas-based power plants.



Essar Power Gujarat Ltd Essar Electric Power Development Corporation Limited Coal Gas Tariff Reliance Power Energy Re-gasified liquified natural gas Import Tax Cabinet Committee on Economic Affairs Liquefied natural gas Essar Lanco Infratech Essar Steel Essar Oil Ltd. Power Electricity India

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