For imported RLNG, power plants forego subsidy

Govt to save an estimated Rs 18 crore

The e-auction of imported re-gasified liquefied natural gas (RLNG) for gas-based power plants at subsidised rates has received negative bids. Nine plants with a cumulative capacity of 5,942 Mw were allotted 7.62 million standard cubic metres per day (mscmd) in the e-auction, a government release said on Sunday.

This was the third round of reverse e-auction process for power plants to avail subsidy to buy imported RLNG, which is costly. This involves reverse bid for the subsidy amount to come from Power System Development Fund (PSDF).

Read more from our special coverage on "GAS PRICE"

• Cabinet nearly doubles undeveloped gas finds price
• Govt to hike gas price for ONGC, RIL by 60% for undeveloped gas discoveries

However, this time, bidders quoted below zero per unit bid. Zero bid indicates the power producers wish to take no subsidy and negative bid entails the companies would pay premium to the government in return.

“The re-auction resulted in aggressive negative bidding with the lowest bid at Rs 0.03 per unit. As a result, there is estimated savings of Rs 18.29 crore to the government’s PSDF,” the release noted.

The eligible bidders indicated the total incremental electricity they would generate using the e-bid RLNG. The companies also quoted the subsidy they require to ensure the net purchase price for the distribution companies to buy that power, without exceeding the target plant load factor.

“These plants would generate 6.79 billion units of electricity, which will be supplied at or below Rs 4.70 per unit to the purchaser discoms during the period from April 1, 2016 to September 30, 2016,” the release added.

The last time an e-auction was held was on March 15, 2016. In that auction, the bidders did not get an opportunity to bid below zero as the option for the same was not built in. After a review by a government committee, the bidders were allowed to bid again on Sunday, which witnessed negative bidding.

The second round of the revival plan for gas-based power plants received bids from power plants with cumulative installed capacity of 8,262.08 Mw last August. This involved government support of Rs 1,590.09 crore from PSDF.

In the first round of auctions in June 2015, 14 gas-based power plants with a cumulative capacity of 8,100 Mw had bid.

Under the new gas mechanism announced last year, 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.

The lead banker to these 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 costs.

India’s grid-connected gas-based power generation capacity is 24,150 Mw. Of this, a capacity of 14,305 Mw had 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, given the limited quantity of domestic gas in India.
KEY TAKEAWAYS

• Some of the plants that got gas allocation: Konaseema Gas Power Limited, GMR Rajahmurdy Energy Ltd, Ratnagiri Gas and Power Ltd, Sravanthi Energy
   
• Total capacity: 5942 MW
   
• Gas allotted: 7.62 MMSCMD
   
• Units of electricity: 6.79 billion units
   
• Lowest bid: Rs 0.03 per unit.
   
• Government estimated savings of Rs 18.29 crore in PSDF