Planning Commission supports oil ministry?s proposal to accord top priority to power sector
Lobbying by the ministries of fertilisers and power is set to intensify ahead of the coming Empowered Group of Ministers ( EGoM) meeting on natural gas allocation. The petroleum ministry is moving a proposal to accord top priority to the power sector in gas allocation on par with the fertiliser industry.
The proposal, which is in line with the power ministry?s request, is meant to mitigate domestic gas shortage to the power sector arising from the precipitous fall in production from Reliance Industries? D6 block.
The Planning Commission, too, has supported the proposal by saying that policy intervention is crucial to prevent a big chunk of gas-based power plants from becoming non-performing assets ( NPAs).
?A balance has to be struck between requirements of the fertiliser and power sectors in a way that there are no NPAs in the economy,? the Plan Panel said on the oil ministry?s proposal. However, the fertiliser ministry remains steadfast in opposing any proposal that could lead to cuts in gas supply to urea plants.
Stakes are high for both the ministries. If the proposal is accepted by the EGoM, nearly one-third of domestic gas supply to the fertilizer sector, or 9.44 million standard cubic meter per day (mmscmd), will get diverted to power plants.
As a result, the fertiliser ministry?s annual subsidy burden could go up by R5,591-8,945 crore as per an estimate. The ministry would certainly not like to bear this additional burden. In the past, the fertilizer ministry has strongly opposed such proposals. The impact will be limited on LPG plants as they will lose only 0.63 mmscmd gas.
But the other hand, the power sector will be able to generate extra 16,000 million units of electricity/year with R10,900 crore lower fuel costs than if it has to use LNG ( liquefied natural gas) as a replacement fuel.
Currently, the fertilizer comes first on government?s gas allocation priority, followed by LPG plants and the power sector in the same order. Power producers are pushing for equal treatment with the fertilizer sector in domestic gas allocation in view of the precipitous fall in production from Reliance Industries? D6 block. The field was expected to produce 80 mmscmd but its output has now since fallen to about 16 mmscmd.
While allocated gas supply of nearly 15 mmscmd to fertilizer plants remains largely unaffected by the fall in D6 output, the power sector is having to brunt because of the lower priority given to it in gas allocation. The sector did not get any gas supply from the field despite allocation of 32 mmscmd gas. If the proposal is accepted by the EGoM, Idling gas-based power plants of companies like Reliance Power, GVK, GMR and Lanco in Andhra Pradesh will benefit.