Government mulls revival of gas-based power plants

With high sea imported gas price hitting below $5/MMBtu, power ministry feels it’s time to revive the stranded gas-based power plants.

The power ministry is likely to seek a 50 percent discount on pipeline charges from GAIL and reach out to states for a waiver on Value Added Tax before floating a cabinet note for approval, sources told CNBC-TV18.

“ LNG prices have hit so low that government may not even need to give subsidy support to the power developers for providing gas to ensure the plants are run at a high PLF (Plant Load Factor)," a source working on the Cabinet note said.

India has about Rs 25,000 MW gas-based power capacity of which only about 11,000 MW is working at a PLF (plant load factor) of 24 percent, rest 14,000 MW is stranded for want of gas.

In a report filed by High-Level Empowered Committee (HLEC) on stressed assets of the thermal power, the sector had suggested power & petroleum ministry to devise a scheme in line with the earlier e-auction of gas which was supported by power system development fund of the government.

“Falling spot prices of liquefied natural gas (LNG) make this an opportune time for the revival of stressed gas-based power assets in the country. A proactive push from the government at this stage thus becomes the need of the hour," said Crisil.

In a scathing report by Standing Committee on Energy in January 2019, it had blamed the government that policy flip-flops crippled the gas-based power plants and also lamented on banks for not arriving a solution.

"The Committee is dismayed to note that State Bank of India, the largest lender in the county, does not have any solution regarding these stranded plants and wants to write off the investment made in these gas-based plants. In the opinion of the Committee, such an attitude of the lenders reflects that they just want to shrug off the responsibility of this crisis by referring the stressed plants to the NCLT. The committee is disappointed with the attitude of the ministry as well as the banks/lenders towards this problem," it said.

India has a total installed capacity of about 3,45,000 MW, of which close to 25,000 MW is for gas-based power plants which require about 116.59 mmscmd of gas per year to run at optimal levels. Total 67 power projects are based on gas as fuel, of which 31 plants are stranded which include one power plant of Central Sector (1967 MW), six power plants of State Sector (2665.30 MW) and 24 power plants of Private Sector (9673 MW) alone have an investment of about Rs 65,000 crore.