Andhra may go for LNG to utilise idle power capacity

The Andhra Pradesh government would utilise the idle capacity of the gas power projects by allowing them to use liquefied natural gas (LNG) once the floating storage and regasification unit (FSRU) proposed to be set up by GAIL (India) Limited is ready by December 2013.

Chief minister N Kiran Kumar Reddy said the proposed LNG terminal at Kakinada would help generate power at Rs 5-5.50 per unit unlike over Rs 9 per unit cost incurred when regasified LNG (RLNG) from the western coast was used as fuel in the past.

"We are willing to use all the capacity that has remained idle for want of natural gas to the full extent by using LNG on a continuous basis. This is necessary to tide over the power crisis in future and also the cost of generation will be on a par with what the government has been paying towards power purchases now," he said.

 

At present, the government is able to procure just about 22 million units of power from the gas power projects as compared with 39 million units per day during the same time last year due to increased shortfall in natural gas supplies. About 65-70 per cent of the existing capacity (about 3,000 Mw) remains unutilised.

Extended dry spells and decrease in the availability of power have led to a supply-demand gap of about 50 million units leading to widespread protests by the Opposition parties.

“We are asking the Government of India to arrange for more power from the unallocated pool of various sources besides requesting for stepping up of natural gas supplies from the K-G basin,” the chief minister said.

In an immediate relief to the industry, the government has decided to provide VAT reimbursement to the industries on diesel being used for running own gensets. It has also in-principle agreed to do away with the electricity duty on captive power generation for the industries.

Around Rs 5 per unit reasonable
M Sahoo, principal secretary, energy department, said the cost of LNG-based power at around 5 per unit appears reasonable as the government was already purchasing about 1,300 Mw power at the rate of between Rs 5 and Rs 5.50 per unit.

“We think this price is also possible because the older units will carry lesser fixed costs due to depreciation,” he told Business Standard.

However, the government will try to drive down the prices to even below Rs 5 per unit by keeping the competition among various companies alive, according to him. “We will not keep Rs 5 or Rs 5.50 as the bench mark price,” he said.