Comments
To revive gas-based power projects stuck due to non-availability of fuel, the Power Ministry has renewed its demand for pooling the price of imported and domestic gas.
Gas price pooling refers to the weighted average price of imported and domestic gas based on proportion of volume.
Officials from the Ministries of Power and Petroleum and Natural Gas will present their views on pricing to the Prime Minister’s Office on Tuesday. The Power Ministry has sought views from companies affected by non-availability of gas. The power sector wants gas at an affordable price and subsidy for the State distribution utilities to enable them purchase electricity generated from gas-based plants.
Electricity generated using coal costs ₹3-3.5/unit and this is sold to the consumer at ₹4-5.30/unit. However, electricity generated from gas costs not less than ₹5/unit and the consumer gets it at ₹6-7/unit.
With the Petroleum Ministry working on a new price for domestically produced gas, the Power Ministry feels that anything beyond $5/mmBtu is not viable for plants running on this fuel.
Domestic gas price is in the range of $4-5.7/mmBtu. For the power plants, it costs $7-8/mmBtu after adding local taxes, marketing margins and transmissions charges.
According to power companies, every dollar increase in gas price will raise power costs by 45 paise/unit and the financial health of distribution utilities in the States may not allow them to purchase expensive electricity.
The industry’s arguments flow from the fact that two years ago the Government had allowed power companies to import gas without customs duty, but most players had shied away. This was because Indian electricity buyers were not willing to purchase expensive power, said a senior official from NTPC.
The landed cost of imported gas from long-term contract is $12/mmBtu, and to the user it is available at $13.5-14. While liquefied natural gas (LNG or imported gas) bought from the spot market is available at $10-10.5/mmBtu, the user gets it at $12.5-13.
In 2012, the Power Ministry had issued an advisory to all the developers not to plan any projects based on domestic gas till 2015-16. But, now with output from Reliance Industries-operated KG-D6 block unlikely to increase before 2018-19, and electricity generated from imported gas having few buyers, the power sector is in a quandary.
Idle capacity Existing gas-based capacity (commissioned) in the country, as on June 30, was 21,211 MW, operating at an average plant load factor of 23 per cent. Of this, 6,996.5 MW, which is predominantly dependent on D6 gas, is lying idle, as supply from the fields has stopped since March 2013.
In addition, 3,760.5 MW gas-based power plants (commissioned without gas tie-ups) are also lying idle, taking the total stranded capacity to 10,757 MW – both public and private sector – and the normative total investment involved is about ₹43,000 crore.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.