Third round of RLNG auction cancelled

The government on late Wednesday evening announced that the third round of auction for imported

regassified liquified natural gas (LNG) for stranded power plants has been cancelled due to insufficient

competition in the bidding process owing to technical deficiency in the auction platform.

These auctions require bidders to quote the lowest subsidy required for each gas-based power unit

produced. The ceiling is fixed at the beginning of financial round. Unlike previous two rounds last year,

the bidding on Tuesday saw developers forgoing subsidy and as bidding reached zero-level. However, as

the system isn’t geared to take negative bids, it failed to encourage competition by not allowing bidders

to go into negative. The government said it would reschedule bidding after fixing the glitch in the

bidding system.

However, during the bidding, stranded gas-based power stations failed to lap up the entire quantum of

imported R-NLG on offer under a special government dispensation, even as they opted not to take the

subsidy available.

As per a policy announced in early 2015, a quota of 10 mmscmd of imported R-LNG was supposed to be

auctioned bi-annually to let gas-based units run at a plant-load factor of at least 35% and service their

debt. The government had promised subsidy subject to an upper limit of Rs 1,400 crore in each round

with a reverse bidding process to reduce the outgo.

While the first two round of auctions under the policy — in March and September last year- saw good

response from the power stations and the entire subsidy being used up, no subsidy was demanded by

the firms in the third round that has just concluded. Also, only 7.2 mmscmd of the imported R-LNG was

lifted.

“The bidding showed that the developers are willing to run their stations without any support from the

power system development fund (PSDF),” power secretary P K Pujari told FE. Explaining the case of

left-over gas, he said Gujarat-based plants didn’t bid as the state is power surplus and more expensive

gas-based power may not find any takers. Torrent Power and state-owned

GSECL pulled out of the reverse bidding after the subsidy amount hit zero thanks to bidding by other

players.

The cancelled auction will now be held later depending on the appetite of developers. Additionally, a

committee will verify the auction results and make changes in the system to accommodate negative bids

for future. Analysts said that the cost of electricity from the auctioned gas will have a variable price

component of Rs 3-3.5 per unit.

NGS INDIA