The Hindu Business Line : AP to invite private investments in gas grid

The State is faced with a piquant situation, where it has to pay a fixed cost of about Rs1,000 crore to independent power producers, even though they are not generating at full capacity due to inadequate gas supplies from GAIL.

Hyderabad , May 12

The Andhra Pradesh Government is in the process of finalising plans to woo private sector to harness the potential of the huge gas find in the Krishna-Godavari basin.

Speaking at a conference on Natural Gas hosted by the Confederation of Indian Industry, the State Information and Power Minister, Mr Mohd Ali Shabbir, said, "Through public-private participatory approach, we expect to attract investments in the sector. Once the proposal for a gas regulator is in place, we would be able to finalise strategy."

In his inaugural address, Mr Shabbir Ali said given the proximity of the wells to the State, Andhra Pradesh would be ideally placed to tap the gas reserves. The gas grid planned by the State would be able to reach out gas both to industrial and domestic consumers through a pipeline network.

Citing a study conducted by the IDFC Private Equity and Ernst & Young, Mr Shabbir Ali said there is huge demand-supply mismatch even within the power sector. As against total installed capacity of 2500 MW in the gas sector, barely 990 MW capacity is being supplied. And these are working at barely 66 per cent capacity due to gas shortage.

The State was faced with a piquant situation, where it has to pay a fixed cost of about Rs1,000 crore to independent power producers (IPPs), even though they are not generating at full capacity due to inadequate gas supplies from GAIL. The Minister hinted at arriving at an amicable settlement with all parties concerned.

The Gujarat State petroleum Corporation (GSPC) has struck gas in the KG basin and the reserves are estimated at 20 trillion cubic feet (TCF) worth about $50 billion. The State is in the process of finalising plans to partner with GSFC and other stakeholders for a pipeline to evacuate and supply gas.

Striking a different note, the CII Senior Advisor, Mr V. Raghuraman, said with the spiralling gas prices, it would be more appropriate to take up tried and tested coal-based power plants, as opposed to gas projects. This will check prices sand we can use gas for other areas. The Convenor of AP Infrastructure panel, Mr Y. Harish Chandra Prasad, said that the industry is both eager and frustrated with the gas supply situation. While the supplies themselves have been stagnant, the prices have been spiralling, causing hardship to power producers and other consumers.

While additional capacity of about 1500 MW is ready, there is no gas supply, a major cause for concern. Therefore, he favoured the creation of a gas corporation within the State, which would act as a nodal agency for gas supply. The infrastructure for the gas grid could be created through private participation.

Gujarat was stated to have the highest sales tax, but this has changed now. Andhra Pradesh seems to have pipped Gujarat in this with a sales tax of about 14 per cent on gas and its transport. This is a major cause for concern for power projects, Mr Prasad said.

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