New power plants out of RIL gas use policy change

Sanjay Dutta, TNN | Jul 16, 2013

NEW DELHI: The ministerial panel tasked with distributing gas is set to leave newly-built gas-fired power plants out in the cold and leave government with egg on its face when it considers a proposal to put electricity generation at the top of the pecking order for getting fuel from RIL's Andhra offshore field. The panel, headed by defence minister A K Antony, is scheduled to meet on Wednesday to put power on a par with fertilizer in the priority list for getting RIL's gas. If the meeting finally takes place, the panel could end up trying to bail out plants whose gas supply agreement (GSA) with RIL may be deemed as invalid under its own policy. This is how it works: the proposal drawn up by the petroleum ministry says only plants with a GSA with RIL would benefit from the changed priority. The volume of gas diverted from other industries would be distributed in proportion to the quantity for which each plant has contracted with RIL. These pacts were signed in May 2008 in accordance to the gas utilization policy decided that year by a ministerial panel headed by then external affairs minister Pranab Mukherjee. According to that decision, the policy was to be valid for five years, or May, 2013.

Executives of power firms say if the policy itself has expired then any agreement signed in accordance to the policy too would be invalid in law, even if the pacts may have a validity of six years. "Just because two parties sign a six-year GSA when the policy itself is valid for five years doesn't automatically extend the validity or conditions of the pact beyond five years. After re-allotting gas now, the ministerial panel is unlikely to review it again when the six-year period of GSAs end in April 2014. So new capacity of over 8,000 mw would continue to languish," one senior executive said. Fertilizer industry has so far enjoyed top priority and hogged most of the gas allotments, followed by cooking gas plants and power units. But a drastic fall in output from RIL's field - estimated at 14 mcmd (million cubic metres per day) against a peak of 80 mcmd - has landed the government with 15,000 mw idle power plants and forced it to snap supplies to other non-core units. Faced with such a huge idle capacity, the power ministry and private power producers demanded a change in the allocation priority to seek equality with fertilizer industry.