Financial Daily from THE HINDU group of publications
Tuesday, Apr 19, 2005
Financial Daily from THE HINDU group of publications Tuesday, Apr 19, 2005 |
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Financial Institutions Industry & Economy - Power Lenders reluctant to fund gas-based power projects Archana Chaudhary
Mumbai , April 18 LENDING institutions including Power Finance Corporation (PFC), ICICI and IDBI, among others are increasingly reluctant to fund gas-fired power projects. They seem more willing, however, to back coal-fired projects, even if these use imported coal. "PFC will not fund gas projects if the promoters cannot source gas," says Mr Arvind Jadhav, Chairman and Managing Director, Power Finance Corporation. "Today, the average plant load factor or efficiency of existing gas-fired projects is 58 per cent. It could have been 95 per cent. But gas is in short supply," says Mr Jadhav, who is also Joint Secretary, Ministry of Power. As of today, the only gas available is produced by ONGC and marketed by GAIL (India) through its limited pipeline network. Almost all gas that has been and will be imported at Petronet LNG's five-million-tonne Dahej import terminal has already been contracted by various industries. Shell's five-million-tonne Hazira LNG import terminal has yet to announce which country this gas will come from. "Lenders are asking a simple question: where is the gas?" says a senior ICICI official. According to him, barring a few promoters such as Reliance Industries, which has its own gas reserves off the eastern shores, very few power generation companies will be encouraged by lending institutions. The reasoning is simple. India has reasonably abundant coal reserves. In case of coastal locations, coal can be imported and transported through road and rail linkages. Gas available in India, on the other hand, has competition from numerous other industries. And imported gas, if available, will need pipelines to transport it inland. The reasoning is apparent in the upcoming projects. Based on the report of the Working Group on Power constituted by Planning Commission, the Tenth Plan has targeted a capacity addition of 41,110 MW. Of this, coal/lignite-based capacity will be 20,053 MW and 5,364 MW will be gas-fired. For Eleventh Plan, the Central Electricity Authority has identified capacity addition requirements of 67,439 MW. Of this, 30,411 MW will be coal or lignite-based while only 7,700-odd MW will be gas-fired.
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