According to the rating agency, the scheme has been devised for utilisation of stranded gas-based power plants by providing the subsidised fuel and tariff subsidy to improve availability of power and arrest deterioration in the credit quality for banks/financial institutions.
The auctions were conducted on May 12 and 13 and power plants with aggregate capacity of 10.27 GW have been selected based on the lowest quantum of subsidy per unit quoted.
"However, the success of entire scheme is critically dependent on softer prices of R-LNG and favourable dollar/ rupee exchange rate. While the scheme is intended for interim relief, the long term viability of the gas based projects would depend on improvement in domestic gas availability," it said.
These power plants are expected to add 31.49 billion units power in primarily three states of Andhra Pradesh, Gujarat and Maharashtra.
"The average cost of power purchase for discoms in these states are likely to increase between 35-40 paisa per unit in FY16 after implementation of the scheme. As the tariff, as per the scheme, is higher than the average power purchase cost for distribution entities in these states where power deficit levels are negligible, the ability to tie up PPAs would be crucial," it said.
"At current subsidy per unit and fuel prices, the project companies would be able to meet the operation and maintenance expenses and service the interest on term loans and would require moratorium on principal repayments," Care said.