Power Ministry wants Cabinet to decide on gas pooling for power stations

Power Ministry wants Cabinet to decide on gas pooling for power stations

NEW DELHI: The power ministry has left it to the Cabinet to decide whether to include power stations based on administered price mechanism (APM) gas in the price-pooling scheme in a fresh proposal aimed at salvaging gas-based power projects to the tune of Rs 64,000 crore being run by companies such as Essar Power, Reliance Power, GMR Energy, GVK Power and Lanco Infratech.

The fresh proposal comes after the oil ministry said no additional gas output is expected from domestic sources in the next three years to pool with imported gas.

The new scheme seeks about Rs 7,000 crore of financial support from a fund comprising penalties paid by distribution utilities and generators for grid indiscipline besides proposing various tax reliefs to the plants, a government official said.

As per the proposal, gas will be imported and supplied along with domestic gas at an average ‘pooled’ price to run the stranded plants at 40% capacity to help them recover fixed costs. The scheme is being proposed for three financial years beginning April 2015 as the oil ministry has indicated that no incremental domestic gas is available till then.

The ministry has given two options to the Cabinet. The first is a pooling proposal, including more than 6,000-MW APM gas-based plants operating at less than 40 per cent capacity so that enough domestic gas is available for pooling with imported LNG, the official said.

The second option excludes the APM gas-based power stations from the pooling scheme. The power ministry has sought phased implementation of the scheme by giving priority to over 10,000-MW commissioned projects in the first year that have power purchase agreements with states.

The power ministry has also asked for about Rs 7,000 crore in financial support from the Power System Development Fund to keep the electricity tariffs to the targeted Rs 5.50 per unit against Rs 7.5 per unit. Fiscal benefits such as streamlining customs duty on gas imports, waiver of value added tax and central sales tax have also been sought.

The ministry has also sought financial relief from banks such as extending the repayment schedule to 25 years from 10 years, extending the year of commercial operation by a year and waiver of penal interest, the official said.

State-run GAILBSE 1.54 % India and Gujarat State Petroleum Corp (GSPL) are proposed to be the pool operators. Gas transporters GAIL India and Reliance Gas Transportation Infrastructure have been asked to take a 20% cut in pipeline tariff, which will help improve utilisation of pipelines.


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