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Implementing a gas price pooling mechanism in the country is feasible. However, the Finance Ministry will have to take a call on whether the Government can bear an additional subsidy burden of nearly Rs 24,339 crore, Petroleum Secretary Vivek Rae said on Thursday.
“Gas pooling is feasible because you are doing a basic weighted price common for everybody and then supply at that price. As far as subsidy is concerned, the Finance Ministry will have to decide. The Ministry of Petroleum and Natural gas is not involved in that (subsidy payout). We have to get the price for which gas is imported. Now, how that is further pooled and distributed across the system, that Power Ministry would decide,” Rae told mediapersons in the national Capital.
Recently, the Power Ministry prepared a proposal for gas pooling for three years starting 2013-14.
When asked how soon the Cabinet Committee on Economic Affairs (CCEA) would take up the matter, the Secretary said currently it was only being circulated for discussions.
At the same time, the bureaucrat clarified that GAIL would not take any hit on its revenues if pooling was implemented.
“The pooling arrangement would mean that some money will come into the pool and some would go out. GAIL would purely be an administrator. There would be no question of GAIL taking a hit on its revenues,” Rae said.
If implemented, the pooling mechanism move may come to the rescue of NTPC, Lanco, GMR, GVK, Torrent, Reliance Power and Essar stations, though it could mean higher tariffs for consumers.
Mixing domestic and imported gas would raise prices multi-fold, resulting in higher cost of electricity generation. Government subsidies would be needed to offset the rise in electricity cost, else there won’t be any buyers.
India’s total installed power generation capacity is 225,793 MW of which 18,714 MW, or nearly 8 per cent, is gas-based. Another 7,815 MW may be commissioned soon. To operate these stations at 70-75 per cent plant load factor (PLF), 92.34 mmscmd of gas is required. In June, just 20.70 mmscmd (17.26 mmscmd domestic and 3.44 mmscmd imported gas) was available, leaving a gap of 71.64 mmscmd.
Production from the Reliance Industries-operated KG D6 fields nose-dived from a peak of around 63 mmscmd in late 2011 to under 14 mmscmd; supply to the power sector has become zero since March 2013. This has resulted in significant gas-based capacity getting stranded or operating at sub-optimal levels with an average PLF of 27.8 per cent.
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