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The Government has re-started discussions on pooling domestic and imported natural gas to feed fuel-starved power plants. If implemented, the 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.
The Power Ministry has prepared a proposal for three years, starting 2013-14. This may burden the Government with an additional subsidy of Rs 24,339 crore over this period, a senior Power Ministry official told Business Line .
The Ministry’s proposals will be reviewed by the Ministries of Petroleum & Natural Gas, Fertiliser, Law, and Finance besides the Planning Commission before it is taken up by the Cabinet Committee on Economic Affairs.
Mixing domestic and imported gas will raise the price multi-fold, resulting in higher cost of electricity generation. Government subsidies will be needed to offset the rise in electricity cost, else there won’t be any buyers, said the official.
For instance, in 2013-14, it is proposed to allocate 1.125 million standard cubic meters a day (mmscmd) of domestic gas to the power sector. This will be clubbed with 5 mmscmd of imported gas, which would make the weighted average price of gas at $11.43 per million British thermal unit (mBtu).
However, this would mean the cost of electricity generation will more than double to Rs 10.47 a unit. The Power Ministry is mooting a tariff of Rs 5.50 a unit with the difference to be subsidised. This subsidy works out to Rs 2,498 crore for 2013-14.
Similarly, for 2014-15, if 12 mmscmd of imported gas is used, the subsidy stands at Rs 10,992 crore. In 2015-16, the subsidy would be Rs 10,849 crore. “By pooling the additional available gas from domestic fields with imported gas, gradually all gas-based power plants can be operated preventing them from turning into non-performing assets and defaulting in loan repayments,” the official added.
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 Reliance Industries-operated KG D6 fields has nose-dived from the peak of around 63 mmscmd in late 2011 to under 14 mmscmd; the supply to power sector has become zero since March 2013. This resulted in significant gas-based capacity getting stranded or operating at sub-optimal levels with an average PLF of 27.8 per cent.
The Power Ministry has proposed public sector GAIL as the ‘pool operator.’ An empowered committee headed by Additional Secretary will finalise plant-wise allocations every month. The panel will also approve the monthly pooled price and volume of imported gas. The subsidy will be released every quarter to GAIL from the Power Ministry’s budget to GAIL.
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