10,000 Mw stuck gas power generation gets subsidy support

Torrent, GMR, GVK and NTPC are among the beneficiaries

With the first phase of bidding under the new gas mechanism concluding, 15 major gas-based power plants have qualified for subsidy to purchase imported gas and sell power at lower rates.

Leading the pack is Torrent Power from Gujarat, whose three plants have secured imported gas supply. It is followed by two plants of NTPC and five power plants in Andhra Pradesh of GMR, GVK and Lanco and others. Around 10,000 Mw of additional capacity would start firing from June.

The government on Tuesday launched bidding for providing imported gas (Re-gasified Liquefied Natural Gas or RLNG) to power plants through a subsidy mechanism. Out of the technically qualified 14 stranded power plants with cumulative 8,100 Mw, 10 power plants of 6,868 Mw successfully made a bid. The bids received from stranded power plants were in the range of Rs 1.42 to Rs 1.45 per unit. The companies submitted bids for subsidy amount they would require to sell the incremental electricity that they will produce from the gas supplied to them at subsidised rates. The tariff of power was capped at Rs 5.5 per unit and power supply is to commence by June 1.

Among the eight technically qualified plants, which were getting sub-optimal supply, five qualified for subsidy. The bids range was Rs 1.7 to Rs 1.9 per unit. The reverse bid by the companies would come from Power System Development Fund to purchase the RLNG. The government will provide Rs 3,500 crore in financial support to the power plants this financial year and another Rs 4,000 crore in the next.

In the first phase, the companies competed for 8.9 mmscmd of RLNG to be sourced by GAIL. GAIL would notify the price of RLNG after the total requirement has been finalised after the bidding. GAIL would source the imported gas and along with Gujarat State Petronet Limited would forego 50 per cent of their transmission rate and 75 per cent of marketing margin in supplying imported RLNG.

The government brought a new gas mechanism to bail out gas based power plants not receiving domestic fuel supply. Under the new gas mechanism, every stakeholder in the supply chain would have to forego a part of their returns on operations. While the central government would give up the service tax it levies on gas sourcing, the power plant operators would forego return on equity. GAIL would source the imported gas and along with Gujarat State Petronet Limited would 50 per cent of their transmission rate and 75 per cent of marketing margin in supplying imported RLNG.

 

The lead banker to these power plants would ensure all receipts of money would be utilised only for payments towards the variable cost of generation (fuel cost) and the operation and maintenance expenses in accordance with regulatory guidelines. Debt servicing would be made after capping fixed cost. Of the 24,150 Mw of gas grid-connected power generation capacity in the country, 14,305 Mw has no supply of domestic gas. On this front, an investment of about Rs 60,000 crore is at the threshold of becoming a non-performing asset.

The remaining capacity (9,845 Mw), involving an investment of about Rs 40,000 crore, is working at a sub-optimal level, based on the limited quantity of domestic gas in India.