AP expects more gas for power projects

The meeting of top industry leaders with the Prime Minister on power sector issues has raised hopes of a possible improvement in the power situation in Andhra Pradesh. The state is set to see substantial capacity addition in gas-based power generation this year in addition to projects lined up using imported coal in the coming years.

Though production of additional gas from the K-G Basin is not expected anytime soon, the recent recommendations of an inter-ministerial committee on natural gas, if accepted, would help ease the supply-demand mismatch during the ensuing summer, according to state government officials.

The committee in its report, submitted in August last year, has recommended that a substantial portion of natural gas currently used by non-priority industry be diverted to fertiliser and power sectors as they operate in a market environment where their output prices are market driven with no regulatory burden unlike the priority sector.

Of the 18.43 mmscmd (million metric standard cubic metre per day) of natural gas currently used by the non-priority industry, the committee suggested only 5 mmscmd be set aside for these users in addition to a small portion, which is being supplied to court mandated users.

The balance 10 mmscmd be diverted to power and fertiliser plants as against 16 mmscmd additionally required by these two core sectors.

The committee further stated that the non-priority industry has to meet its balance needs from imported R-LNG. This may be reviewed only when the gas output touches 239 mmscmd from the 132 mmscmd recorded in June last year.

“If the Prime Minister takes a positive view on these recommendations, the state will get additional gas supplies to help increase capacity utilisation of the existing power plants in addition to putting new capacities quickly into generation mode,” said a senior energy official.

AP has around 3,000 Mw installed capacity in gas-power, of which about 1,000 Mw has remained idle as these plants are running at a lower PLF due to shortage in natural gas supplies from the K-G Basin.

In addition to this, the 2,400-Mw expansion project at Samalkot by Anil Ambani-promoted Reliance Power and the 768-Mw expansion project at Rajahmundry by the GMR group would be ready this year itself.

In fact, the Samalkot project is expected to be completed much ahead of its original time line, which is December, 2012, according to a company official. GMR has already done test run for the first unit of its expansion project.

Though these projects need not supply power to state utilities, things may change as the petroleum ministry recently sent a note to the Empowered Group of Ministers stating that domestically produced gas be made available only to those plants that sell to the state utilities at regulated rates under long-term PPA.

Once the EGoM endorses the ministry's stand, then all those merchant power plants, including Lanco's second unit, will have to sign pacts with the state power utilities.

The government authorities are also hopeful of some solution to the issues involving imported coal and pricing of power as the Krishnapatnam ultra mega power project, which offers 1,600 Mw to the state, is stuck after the rise in prices of Indonesian coal. The companies are also seeking removal of import duty on coal.