Rs 18,000 crore subsidy in works for stressed gas-based power projects

Rs 18,000 crore subsidy in works for stressed gas-based power projects
Rs 18,000 crore subsidy in works for stressed gas-based power projects

The government may launch a new Rs 18,000 crore subsidy scheme for stressed gas-based power projects that will enable these fuel starved plants to run using a mix of domestic and imported gas. The move is expected to 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 scheme.    

The new scheme would be akin to the eRLNG (electronic regassified liquefied natural gas) scheme that helped 31 stranded power projects to restart operations using imported gas two years back. This scheme ran for two years between 2015 and 2017 and got financial support from the Power System Development Fund.

Sources said that power and petroleum ministry has begun work on drafting the new subsidy scheme after an empowered committee headed by cabinet secretary PK Sinha favoured revival of the eRLNG scheme to support stranded gas-based power projects that represents an investment of over Rs 60,000 crore, which is at the threshold of becoming non performing assets.

The Parliemantary Standing Committee on Energy has also recommended that a scheme like E-Bid RLNG scheme is required to support gas based plants. A group of ministers headed by finance minister Arun Jaitley will final approval to the new policy.

As per the initial discussions, the new subsidy scheme will be based on a gas auction mechanism where electricity generating units quoting least government support to offer electricity to discoms at about Rs 4.50-5 a unit using fuel being offered to them by pooling domestic gas with LNG.

Under gas pooling the price of fuel could be brought that will allow electricity tariff tio fall below Rs 6 a unit. The subsidy scheme will pay generators an amount quoted by them during bidding that helps to reduce electricity tariff by another Rs 1- 1.50 per unit. The price of domestic gas at present is $ 3.36/MMBTU (Oct., 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.

Though the 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 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.