FinMin rejects plan to make gas projects viable through subsidy

The finance ministry has rejected a proposal by its power counterpart for making stranded gas-based projects viable through subsidising high cost imported fuel.

“We had proposed subsidising the high cost of imported regasified liquefied natural gas (R-LNG) through pooling. The finance ministry has turned down the proposal,” Power Secretary P K Sinha told reporters at a media interaction. The ministry is now reworking the proposal.

Power Minister Jyotiraditya Scindia said the government is mulling seeking a relief mechanism for the projects which have been stranded due to lack of availability and high cost of fuel.

Scindia added that power generated using costly, imported RLNG will not get scheduled as the output prices are regulated. “Power sector will not be able to bear a gas cost of more than $5 per million British thermal units (mBtu).”

Power projects are facing acute gas shortage owing to dwindling output from Reliance Industries’ KG-D6 block off the Andhra coast. The Centre has notified an increase in prices under a formula, which will push up gas prices from the current $4.2 to $8.4 an mBtu.

The new price regime will kick in from April 1 and be applicable for five years. Every quarter, prices will be reviewed and adjusted, depending on how global prices move. Scindia said the sector would get additional gas of around 8.9 million standard cubic metres per day over the next three years.