The government on late Wednesday evening announced that the third round of auction for imported regassified liquified natural gas (LNG) for stranded power plants has been cancelled due to insufficient competition in the bidding process owing to technical deficiency in the auction platform.
These auctions require bidders to quote the lowest subsidy required for each gas-based power unit produced. The ceiling is fixed at the beginning of financial round. Unlike previous two rounds last year, the bidding on Tuesday saw developers forgoing subsidy and as bidding reached zero-level. However, as the system isn’t geared to take negative bids, it failed to encourage competition by not allowing bidders to go into negative. The government said it would reschedule bidding after fixing the glitch in the bidding system.
However, during the bidding, stranded gas-based power stations failed to lap up the entire quantum of imported R-NLG on offer under a special government dispensation, even as they opted not to take the subsidy available.
As per a policy announced in early 2015, a quota of 10 mmscmd of imported R-LNG was supposed to be auctioned bi-annually to let gas-based units run at a plant-load factor of at least 35% and service their debt. The government had promised subsidy subject to an upper limit of Rs 1,400 crore in each round with a reverse bidding process to reduce the outgo.
While the first two round of auctions under the policy — in March and September last year- saw good response from the power stations and the entire subsidy being used up, no subsidy was demanded by the firms in the third round that has just concluded. Also, only 7.2 mmscmd of the imported R-LNG was lifted.
“The bidding showed that the developers are willing to run their stations without any support from the power system development fund (PSDF),” power secretary P K Pujari told FE. Explaining the case of
left-over gas, he said Gujarat-based plants didn’t bid as the state is power surplus and more expensive gas-based power may not find any takers. Torrent Power and state-owned
GSECL pulled out of the reverse bidding after the subsidy amount hit zero thanks to bidding by other players.
The cancelled auction will now be held later depending on the appetite of developers. Additionally, a committee will verify the auction results and make changes in the system to accommodate negative bids for future. Analysts said that the cost of electricity from the auctioned gas will have a variable price component of Rs 3-3.5 per unit.