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Power producers urge Centre to speed up the revival of gas-based power plants

ksenia kondratieva Mumbai/New Delhi | Updated on September 30, 2018 Published on September 30, 2018

The Association of Power Producers (APP) has written to the Centre requesting the revival of gas-based power plants. The industry has seen no progress since a meeting held in August on the issue, chaired by Sanjiv Nandan Sahai, Additional Secretary, Ministry of Power, it said.

In a letter addressed to the Additional Secretary, reviewed by BusinessLine, the APP has noted that India has gas-based plants with installed capacity of about 25 GW, of which around 11 GW are stranded. The rest are not economically viable due to short supply of natural gas from domestic sources or because of prohibitive prices from international sources.

“There is an increase in demand, especially peak demand, with no further capacity to be added,” APP said. “During September 2018, energy generation from renewable sources varied between 481 million units and 220 million units, leading to the market cleared price at Indian Energy Exchange reaching as high as ₹14.08 a unit, and this upward trend may continue if the situation is not improved.”

The plant load factor (PLF) of gas-based plants has dropped by 43 per cent over the past seven years, from 66 per cent in FY11 to 23 per cent in FY18, the APP letter said. Considering positive indicators for power demand increase in the near future, and given that no base load capacity addition is planned further, the gas-based plants could be revived, it added.

Giving a detailed presentation on the issues faced by gas-based projects, including the price of gas being denominated in US dollar, the association has requested the Centre to take adequate measures towards long-term sustainable revival of the plants.

One of the first steps could be reviving the E-RLNG scheme (discontinued in 2016), said the letter. The scheme was intended to supply imported re-gasified LNG (RLNG) to the stranded gas-based plants and plants receiving domestic gas, up to the target PLF, selected through a reverse e-bidding process.

“The rationale of discontinuing the scheme is still not clear, especially when the funds allocated to the scheme remain unutilised,” the APP letter said.

APP also said that gas from ONGC’s deep water fields should be allocated to the power sector, as it will allow a cheaper and assured supply to the domestic gas-based power producers.

Bidding for gas

Similar to coal auctions, a separate bucket for the power sector is needed for ONGC gas from deep water fields. “Existing 5.45 million standard cubic meters of day of ONGC gas should be allocated to the power sector. ONGC envisages production of another 16 mscmd gas from deep water fields by 2020,” it said. An aggregator like GAIL could bid for the gas on behalf of the gas-based power plants, it added.

While the industry expects the tariff from gas-based plants to be around ₹4.70 per unit, the margins may not be sufficient for debt servicing and hence the industry is seeking additional support in the form of budgetary allocations or Power System Development Fund support along with preferential gas price worked out for the power sector, said the letter.

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Published on September 30, 2018
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