In­dus­try seeks fuel sup­ply, PPA re­jig for gas-based power projects

The Hindu Business Line - - TAKE 500 - KSE­NIA KONDRATIEVA

Power in­dus­try ex­perts be­lieve the mea­sures to re­vive gas-based power projects cur­rently in dis­cus­sion by the gov­ern­ment could work only in the short-term.

That’s be­cause more than half of around 24,000 MW gas-based ca­pac­ity is stranded mainly due to non-avail­abil­ity of do­mes­tic gas. The list of 30 stranded gas based projects, most of which are in the pri­vate sec­tor, in­cludes those of Tor­rent Group, Lanco, GMR, GVK, Astha Power, Re­liance In­fra and RVK En­ergy.

The gov­ern­ment has been lately mulling a ₹18,000-crore sup­port scheme for the gas-based power plants, ac­cord­ing to in­dus­try sources, to sal­vage the sec­tor. Ear­lier this month, the Stand­ing Com­mit­tee on En­ergy in its 42nd re­port on stressed/non-per­form­ing as­serts in gas-based power plants had rec­om­mended in­clud­ing ex­plor­ing gas al­lo­ca­tions to stranded plants from ONGC deep-wa­ter fields and di­ver­sion of do­mes­tic gas from non-core sec­tors to power sec­tor, cost mod­er­a­tion of re-gasi­fied liq­ue­fied nat­u­ral gas (RLNG) as well as re-think­ing of in­tro­duc­ing free mar­ket pric­ing for nat­u­ral gas, among other mea­sures. In­dus­try play­ers, how­ever, feel the gov­ern­ment should fo­cus on mak­ing gas avail­able for such projects as well as look at chang­ing power pur­chase agree­ments (PPAs) to al­low these plants to act as peak­ing plants.

In­terim mea­sures

“Un­for­tu­nately, most mea­sures have been short-term rather than long-term holis­tic ones,” Naveen Mun­jal, Di­rec­tor – Busi­ness De­vel­op­ment & Com­mer­cial (Con­ven­tional), CLP In­dia Lim­ited which op­er­ates 655 MW gas fired power plant in Bharuch, Gu­jarat, told Busi­nessLine. He added that these mea­sures have been in­terim ones and “prin­ci­pally driven by the need to ar­rest the NPAs while the fo­cus should be on the long term mea­sures.

Vivek Sharma, Se­nior Di­rec­tor – En­ergy and Nat­u­ral Re­sources, CRISIL In­fra­struc­ture Ad­vi­sory, agrees: “While sup­port schemes and fi­nan­cial in­cen­tives are pos­i­tive, they would lend only a tem­po­rary re­lief to such plants.”

In ad­di­tion to mak­ing gas avail­able for plants, a wellde­fined peak­ing power pol­icy along with peak­ing power-spe­cific PPAs from dis­tri­bu­tion com­pa­nies would lead to a more fun­da­men­tal im­prove­ment, Sharma said.

Gas un­der GST

“The Com­mit­tee’s rec­om­men­da­tions to op­er­ate gas based plants as peak­ing plants could be im­ple­mented through re­draft­ing PPAs,” Kameswara Rao, PWC Part­ner (GRID), agrees. He be­lieves any fi­nan­cial sops or sub­si­dies of im­ported gas could only save few gen­er­a­tors, but wouldn’t re­vive the sec­tor.

“In the cur­rent sit­u­a­tion when there are no short­ages, such a strat­egy will push other gen­er­a­tors out of merit or­der, and cause them dis­tress. There is no net gain. A bet­ter ap­proach is to re­draft their PPAs to act as peak­ing­plants, which will help in­te­grate re­new­able en­ergy bet­ter,” he said. The Stand­ing Com­mit­tee had also sug­gested bring­ing gas un­der GST which, ac­cord­ing to CRISIL, would be a pos­i­tive step since it would re­duce tax in­ci­dence which cur­rently ranges from 3 to 28 per cent and lower gas price, lead­ing to a more com­pet­i­tive tar­iff. Cur­rently gas­based plants sell power at the tar­iff higher than ₹8 per unit — dou­ble of av­er­age ther­mal, wind and so­lar tar­iffs.

The Com­mit­tee, in its re­port, blamed the gov­ern­ment for un­re­al­is­tic pro­jec­tions of avail­abil­ity of do­mes­tic nat­u­ral gas from KG D6 fields and “pol­icy flipflops” that have “crip­pled the gas­based power plants con­se­quently mak­ing them stranded.”

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