Subsidy Extension Unlikely for Gas-based Power Plants

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 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 recei ving 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.

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