For imported RLNG, power plants forego subsidy

For imported RLNG, power plants forego subsidy

The e-auction of imported re-gasified liquefied natural gas (RLNG) for gas-based power plants at

subsidised rates has received negative bids. Nine plants with a cumulative capacity of 5,942 Mw were

allotted 7.62 million standard cubic metres per day (mscmd) in the e-auction, a government release said

on Sunday.

This was the third round of reverse e-auction process for power plants to avail subsidy to buy imported

RLNG, which is costly. This involves reverse bid for the subsidy amount to come from Power System

Development Fund (PSDF).

However, this time, bidders quoted below zero per unit bid. Zero bid indicates the power producers

wish to take no subsidy and negative bid entails the companies would pay premium to the government

in return.

“The re-auction resulted in aggressive negative bidding with the lowest bid at Rs 0.03 per unit. As a

result, there is estimated savings of Rs 18.29 crore to the government’s PSDF,” the release noted.

The eligible bidders indicated the total incremental electricity they would generate using the e-bid

RLNG. The companies also quoted the subsidy they require to ensure the net purchase price for the

distribution companies to buy that power, without exceeding the target plant load factor.

“These plants would generate 6.79 billion units of electricity, which will be supplied at or below Rs 4.70

per unit to the purchaser discoms during the period from April 1, 2016 to September 30, 2016,” the

release added.

The last time an e-auction was held was on March 15, 2016. In that auction, the bidders did not get an

opportunity to bid below zero as the option for the same was not built in. After a review by a

government committee, the bidders were allowed to bid again on Sunday, which witnessed negative


The second round of the revival plan for gas-based power plants received bids from power plants with

cumulative installed capacity of 8,262.08 Mw last August. This involved government support of Rs

1,590.09 crore from PSDF.

In the first round of auctions in June 2015, 14 gas-based power plants with a cumulative capacity of

8,100 Mw had bid.

Under the new gas mechanism announced last year, every stakeholder in the supply chain would have

to forego a part of their returns on operations. While the central government would give up the service

tax it levies on gas sourcing, the power plant operators would forego return on equity.

The lead banker to these plants would ensure all receipts of money would be utilised only for payments

towards the variable cost of generation (fuel cost) and the operation and maintenance expenses in

accordance with regulatory guidelines. Debt servicing would be made after capping fixed costs.

India’s grid-connected gas-based power generation capacity is 24,150 Mw. Of this, a capacity of 14,305

Mw had no supply of domestic gas. On this front, an investment of about Rs 60,000 crore is at the

threshold of becoming a non-performing asset. The remaining capacity (9,845 Mw), involving an

investment of about Rs 40,000 crore, is working at a sub-optimal level, given the limited quantity of

domestic gas in India.


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