Cabinet allows use of imported gas to revive stuck power plants

Coming to the rescue of stranded gas-based power plants, the Government has decided to come out with a mechanism for importing natural gas. A decision to this effect was taken by the Cabinet Committee for Economic Affairs on Wednesday.

About 14,000 MW, with an investment of over ₹60,000 crore, which have no domestic fuel supply, faced immediate risk of becoming non-performing assets. In addition to these, about 10,000 MW of power plants are receiving limited quantity of domestic gas and most of them are operating at very low plant load factor. The power plants are both in public as well as private sectors.

In order to revive these plants, the Government decided to intervene, Minister of State for Power, Coal, New & Renewable Energy Piyush Goyal said after the meeting.

To ensure that electricity generated from imported gas does not become expensive, the Government has fixed a preliminary price of ₹5.50 a unit to begin with. Depending on the fluctuations in the imported gas price, an empowered pool management committee will review the rates, Goyal explained.

Besides, the Government nominees to import the gas — GAIL and GSPL — have agreed to reduce the transportation tariff, marketing margins and re-gasification charges, while the Central and State Governments will exempt the fuel from certain applicable taxes and levies. Power developers would completely forego the return on their equity. The Government also proposes to provide support to discoms from the Power System Development Fund through a transparent reverse e-bidding process. “This will make the cost of power affordable,” Goyal said.  But, industry is quick to point out that only time will tell how whether there are any takers for electricity at even ₹5 a unit.

According to the Government, with this arrangement (of firing the power plants with imported gas), electricity generation in the country would be enhanced significantly by around 79 billion units, valued at about ₹42,000 crore. The Government had to come out with a policy intervention to give a new lease of life to capacities, which have been lying idle or under-utilised due to steep decline in domestic output.

A large number of gas-based power plants had come up following the discovery of gas in the country’s East Coast. But, with the production falling beyond expectations, power plants with firm supply allocations also did not receive the allocated quantity.

Gas-based generation is also considered ideal for balancing the intermittence of renewable generation and in maintaining grid stability by utilising as spinning reserves. The aggregators will import 10 mmscmd of gas in five months of monsoon, 18 mmscmd in the other months.

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