The government proposes to use the National Clean Energy Fund (NCEF) to support gas-based power projects, including the 31 stressed ones, as it looks to launch one of the biggest rescue operations for these clean fuel-run power plants that are on the verge of complete shutdown in the absence of fuel and viable power purchase agreement.
Sources privy to the development told Financial Chronicle that allocation to NCEF may be doubled in next fiscal from the level of Rs 29,645.29 crore transferred to it by till the end of FY18. A large portion of additional fund will be used to support gas-based power plants including a proposed new Rs 18,000 crore subsidy scheme that will enable these fuel starved plants to run using a mix of domestic and imported gas.
The NCEF was created out of cess on coal at Rs 400 per tonne to provide financial support to clean energy initiatives and an Inter-Ministerial Group chaired by the Finance Secretary was constituted to approve the project/schemes eligible for financing under the fund.
The coal cess collected from 2010-11 to 2017-18 amounts to Rs 86,440.21 crore, out of which only Rs 29,645.29 crore have actually been transferred to NCEF. Whereas, the amount financed from NCEF for projects is only 15,911.49 crore i.e. only about 19 per cent of the total amount collected as coal cess.
“The Parliamentary Standing Committee on Energy has also expressed concern over shoddy progress of NCEF and its negligible support to gas-based power projects that also comes under clean the definition of clean energy projects. We have accessed the situation and now asked finance ministry for higher transfers to NCEF that can support stress in the gas-based power sector,” said an official source privy to the development.
“The Committee feels that this fund should be used for its intended purpose i.e. to support clean energy initiatives and it should not be diverted to compensate GST losses. Diversion of this fund to unrelated activities reflects poorly on our commitment towards cleaner environment and shows Government's apathy towards clean energy projects. Since it is levied on coal as that is a polluting fuel, so the amount collected should be used to promote cleaner fuel. The Committee, therefore, recommend that financial support should be extended to gas-based power projects from NCEF for their sustainability as natural gas is also a clean energy source,” the committee said in its recent report.
Higher support to develop gas-based economy will immediately benefit 31 stranded projects worth 15,000 MW belonging to Essar Power, Torrent Power, GSPC, Reliance Infra, GMR, GVK, NTPC, and Lanco. Another 10,000 MW of projects running but at lower load factor of 25-30 per cent could also take advantage of the new scheme.
India’s total installed power capacity stands at around 350 Gigawatt (GW). Of this, 7.2 per cent or 25 GW comprised gas-based power plants. However, gas-based projects were responsible for only 3.8 per cent or 49.77 Billion Units of India’s total electricity generation in FY18. This was mainly because 14,305 MW of gas-based capacity is currently stranded due to non-availability of domestic gas and un-affordability of imported gas.
According to industry reports, investments ranging from Rs 4-5 crore per MW have been made into these stranded gas-based projects, out of which around 70–80 per cent of the capital cost has been financed by banks using public money. Also, cost escalation ranging from 50-75 per cent of the original project cost has been experienced on account of delay primarily due to non-availability of gas.
The price of domestic gas at present is $ 3.36/MMBTU (October 2018 to March 2019). The gas price at power plants remains in the range of $ 4.0 - 5.5/MMBTU for domestic gas and $ 10-12/MMBTU for RLNG. Pooling these two will substantially bring down the fuel cost for generators. Also, subsidy to discoms will allow them to buy power from gas units.
Though Central Electricity Authority (CEA) has classified only 14,305 out of total gas-based capacity of 24,867 MW as stranded due to fuel shortage, almost entire capacity remains stressed and remaining plants are also running at sub-optimal levels and able to support just interest component on loans.
The domestic natural gas production in the country during 2017-18 was about 86.93 MMSCMD as against 89.57 MMSCMD in 2014-15. From 2011-12 to 2016-17, domestic gas production had been continuously declining, while in 2017-18, there was a slight increase. The import of RLNG has been continuously increasing from 50.78 MMSCMD in 2014-15 to 72.13 MMSCMD in 2017-18 and about 50 per cent of the country’s requirement of gas has now been met by the imported gas.
The total domestic gas allocated to power projects is 87.12 MMSCMD but the average domestic gas supplied to gas-based power plants during 2017-18 was only 25.71 MMSCMD which is 70 per cent short of the allocation. Due to this shortfall, the PLF of gas-based power plants has come down to 24 per cent which used to be 67 per cent in 2009-10.