After fertiliser, the power ministry has also opposed the recommendations made by the Rangarajan panel to increase domestic gas price from the current $4.2/mmbtu to $8.8/mmbtu, saying it will impact the power sector by about R46,360 crore annually.
The gas supplies to the sector have completely halted from the KG D6 block of Reliance Industries, which recently hit an all-time low of 15.5 mmscmd from a peak of 69.43 mmscmd in March 2010.
In the draft EgoM note on domestic gas pricing, the ministry said the ?base price of domestic gas beyond $5/mmbtu will be unviable for power generation and will put enormous burden on the state discoms. It shall negate the effect of financial restructuring initiative by the government?.
As many as six gas-based power plants in Andhra Pradesh, including those operated by GMR, Lanco and GVK, with a combined capacity of more than 2,000 MW, have stopped operations due to shortage of gas from the Krishna-Godavari basin.
RGPPL, formerly known as the Dabhol Power Company, also faces fresh closure as gas flows have been completely stopped. ?RGPPL is going to become sick in the next four months. I have informed the government that all the efforts taken to revive the project have become redundant,? said NTPC chairman and MD Arup Roy Choudhury. At present, gas-based fertiliser plants get first priority in allocation of natural gas. These are followed by LPG-extraction units, while gas-based power plants come third in the priority list. The power ministry wants the ministerial group to rework allocation priorities follows the stoppage of gas supplies to power plants.
The ministry of fertiliser has also in it’s draft note said that the implementation of the panels recommendations could adversely affect the government?s subsidy reduction plan and make the new urea investment policy ?redundant?.
The fertiliser ministry also wants to protect the fuel allocation for the sector for the benefit of farmers. In the absence of domestic gas, fertiliser companies would have to import gas at thrice the domestic price of $ 4.2/mmbtu and would increase the government subsidy bill. ?
The panel has suggested a gas pricing formula based on the average of two prices ? price at other producing destinations and the volume-weighted price of US?s Henry Hub, UK?s NBP and Japan Custom Cleare.