Gas-based plants need fuel succour from new govt

Written by Subhash Narayan | New Delhi | Updated: May 20 2014, 11:08am hrs
Addressing the issue of fuel supply to the countrys stranded gas-based power stations will be one of the key priorities of the Narendra Modi government.

A group of officials in the power ministry has prepared a blueprint under which a new peaking power policy will be implemented for gas-based stations where the resource will be re-allocated keeping in mind the need for generation of electricity during peak hours.

Government sources said the proposal would be put before the new power minister, so that Cabinet approval could come at the earliest.

Dwindling domestic gas production and rising prices in the international market have substantially impacted the performance of the countrys 18,964-MW power stations, leading to fears that these may soon turn into NPAs.

Most existing gas-based power plants are currently running at 25% of their rated capacity. The situation is unlikely to improve even in FY 15 as prime gas producer Reliance Industries has further lowered its output estimates from KG-D6 to 12.31 mmscmd from an average output of 13.17 mmscmd in FY14.

As per the plan in the works, the ministry of petroleum & natural gas would be asked to re-allocate gas to power stations depending on their need to generate peaking electricity.

This could vary from plant to plant and may need gas supplies mainly between 6 am and 8 am and between 6 pm and10 pm.

States are also being brought on board to re-work power-purchase agreements (PPAs) to allow peaking power generation at a price higher than the current regulated tariff of around R3-3.5 per unit.

The high-level committee on financing infrastructure, headed by Deepak Parekh, has also favoured using the scarce gas resource for meeting only peaking power requirements of the country. A task force consisting of secretaries of the ministries of power, petroleum and natural gas, finance and Planning Commission would look into the issue and recommend ways for re-allocation of gas with equitable sharing of costs, said an official source in the power ministry, asking not to be named.

Gas-based stations would also be allowed to generate additional power from imported gas and sell such power to open-access consumers for whom the opportunity cost may be higher in several cases.

This would imply some reduction in gas allocation to existing power plants, which would need to be compensated by an increase in price of peaking power. Such re-allocation would only be possible if it is equitable and is implemented across states, said the official.