Public sector utililty GAIL India is in favour of extending the LNG support scheme for gas-based power plants. Speaking to BusinessLine on the sidelines of the World Energy Policy Summit in New Delhi, a top official said GAIL was in favour of continuing 50 per cent exemption on the natural gas pipeline tariff for gas-based power plants to boost pipeline utility to the next financial year. He also said the government is positively considering extending the scheme.

GAIL is in favour of extending VAT exemption on natural gas for gas-based power plants, but the final decision on this depends on the negotiations between the state and Central governments.

The government had reduced the basic import duty on liquefied natural gas (LNG) to 2.5 per cent from 5 per cent to make fuel cheaper by about 20-25 cents. But, consumers such as power producers are far from satisfied.

According to industry watchers, fuel costs account for 75-90 per cent of the cost of running a gas-based power plant at current prices. Adding to this is the depreciation of the rupee compared to the dollar, making the customs duty cut offer from the Finance Minister not-so-attractive, said Amarthaluru Subba Rao, Executive Director, Finance and Strategy at CLP India.

Association of Power Producers, Ashok Khurana, said: “We are in favour of the move to extend tariff reduction and VAT exemption beyond financial year 2017. APP hopes that the government will continue the scheme until a permanent solution is in place for supporting gas-based power plants.”

Speaking at the event, Minister of State (Independent Charge) for Power, Piyush Goyal, said natural gas price stability is needed to make headway in promoting gas-based power plants.

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