No subsidy for new projects importing gas, says power ministry

 In what may be a big setback to 16,000 MW of existing and upcoming gas-based power projects that originally were to rely on Reliance Industries’ KG-D6 gas but now need to use imported RLNG, the power ministry has decided against recommending any Central subsidy for these projects.

In a draft note moved by the power ministry, it has proposed that Centre would provide subsidy of about Rs 5,700 crore for next two financial years only for 10,382 MW of existing gas-based capacity running on administered price mechanism (APM) gas. This has been proposed so that electricity tariff from these plants are maintained at Rs 5-5.50 /kWhr even after domestic gas price is doubled from present $ 4.2 per mmBtu to around $ 8.4 per mmBtu from April 2014.

Due to the increase in gas price, tariff from these plants is expected to shoot up to over Rs 6-7 per unit, making scheduling of this expensive power difficult.

The proposed policy, which needs the approval of all the key ministries such as finance and Planning Commission in the Cabinet, aims to prevent gas-based power capacity from getting idle and becoming non-performing assets. The finance ministry had earlier strongly objected to a draft Cabinet note moved by the power ministry that proposed the entire subsidy burden of about Rs 25,000 for gas-based projects on the Centre.

As per the redrafted note, all the PMT gas-based projects would get government subsidy only for 2014-15 and 2015-16 after which there is an expectation that availability of domestic gas would improve.

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Source: The Financial Express

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SUMIT KUMAR

Executive at India Electron Exchange

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