Sub­sidy Ex­ten­sion Un­likely for Gas-based Power Plants

Power cos want scheme ex­tended by 2 yrs, govt for long-term so­lu­tion to bail out plants

The Economic Times - - Economy: Macro, Micro & More - Sarita.Singh@ times­group.com

New Delhi: The gov­ern­ment is un­likely to ex­tend the sub­sidy sup­port scheme for stranded and un­der-utilised gas-based power sta­tions. The scheme is due to end next month.

The power min­istry is of the view that a long-term so­lu­tion should evolve for bail­ing out the 24,000 MW gas-based power sta­tions lan­guish­ing for want of fuel, sources in the know of the de­vel­op­ment said. Se­nior of­fi­cials in the min­istry of power de­clined to com­ment on the is­sue. Power com­pa­nies have asked the gov­ern­ment to ex­tend the scheme for an­other two years.

“We have been re­quest­ing to con­tinue with this scheme as a short-term so­lu­tion till a longterm so­lu­tion can be evolved for mak­ing gas-based generation vi­able,” said Ashok Khuarana, di­rec­tor gen­eral at As­so­ci­a­tion of Power Pro­duc­ers. “This present scheme helps stem in­ter­est ac­crual, thereby keep­ing cap­i­tal cost un­der con­trol. Non-ex­ten­sion of the scheme would re- sult in con­tin­ued ac­crual of in­ter­est, which may make it dif­fi­cult to turn around the projects sub­se­quently.” The power min­istry held two rounds of im­ported gas auc­tion start­ing from June 2015 to Septem­ber 2015 and from Oc­to­ber 2015 to May 2016. The bid­ders in­di­cate the to­tal in­cre­men­tal elec­tric­ity they would gen­er­ate us­ing the e-bid re­gas­si­fied liquid nat­u­ral gas (RLNG) as well as quote sub­sidy re­quire­ment. In the last round of auc­tion held in March 2016, the bid­ders agreed to forego sub­sidy.

As­so­ci­a­tion of Power Pro­duc­ers has rec­om­mended con­tin­u­a­tion of the scheme to the min­istry, ar­gu­ing that it would be at zero cost for the gov­ern­ment as sub­sidy de­ter­mined in the third round was neg­a­tive. The Union Cab­i­net in March 2015 ap­proved the mech­a­nism for im­port­ing gas for stranded and un­der­utilised power plants, and sup­ply of such elec­tric­ity through a sup­port.

It was de­cided that to make gas af­ford­able, states will forego taxes while gas trans­porters and im­port ter­mi­nals will also of­fer dis­counts on charges for their ser­vices ren­dered to im­port LNG for this pur­pose. The Cen­tre al­lo­cated ₹ 7,500 from the Power Sys­tem De­vel­op­ment Fund to sup­port the scheme to help plants use 30-35% of their ca­pac­ity and re­pay debt. The scheme was started in 2015-16 for stranded gas­based power plants and plants re­ceiv­ing in­ad­e­quate do­mes­tic gas. The stranded plants were able to meet par­tial debt ser­vice obli­ga­tions due to the scheme as they op­er­ated at low plant load fac­tors of 30%-50%.

How­ever, of late, state dis­tri­bu­tion com­pa­nies are averse to buy­ing the gas-based generation as low cost power is avail­able from re­new­able plants and spot mar­kets.

Cab­i­net in March 2015 ap­proved the mech­a­nism for im­port­ing gas for stranded, un­der-utilised power plants

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