As the country braces itself for harsh summer months, 24,000 Mw of gas-based power projects will go off the grid owing to no gas supply.
The central government had been supporting these projects via its subsidised gas bidding programme, which is now slated to be shelved. The decision follows the states' refusal to purchase power at Rs 4 per unit.
Power units belonging to state-owned firms – NTPC and Gujarat State Electricity Supply Company Ltd – and private players – CLP India, Torrent Power, GVK Industries, Lanco Power and GMR Energy – will be hit.
"The states which were part of the programme – Gujarat, Andhra Pradesh, Maharashtra, among others – and have gas power projects have refused to buy power from these plants citing high cost. After the last round of bidding held last year, states did not sign power purchase agreement as well," said a senior power ministry official.
The Minister of State with Independent Charge for Power, Coal, New & Renewable Energy and Mines, Piyush Goyal, reportedly said, "The scheme is being discontinued but if there is interest from all sides, we can resume it."
Of the 24,150 Mw of gas grid-connected power generation capacity in the country, 14,305 Mw has 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 due to the limited quantity of domestic gas in India.
The government had floated a reverse e-auction process for power plants to allow them to avail subsidy for buying costly imported gas — Regasified LNG (RLNG). This involved a reverse bid for the subsidy amount coming from the Power System Development Fund (PSDF) to purchase the RLNG.
The bid amount depicts the amount of subsidy support that the power generators seek from the government. The bidding was held on the e-bidding platform built by MSTC.
The eligible bidders indicated the total incremental electricity they would generate using the e-bid RLNG. The companies also quoted the subsidy they required in order to ensure the net purchase price for the distribution companies to buy that power, without exceeding the target plant load factor.
The four rounds were held in June 2015, March, May and September 2016, respectively.
Under a unique arrangement, 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. GAIL would source the imported gas and, along with Gujarat State Petronet Limited, would forego 50 per cent of their transmission rate and 75 per cent of marketing margin in supplying imported RLNG.
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 cost.