Gas-based power plants in limbo as fuel in short supply

Sep 04 2013

Even as the power ministry proposes to cap the price of gas for power firms at $5.5 per mmBtu (million British thermal unit), the viability of projects would continue to hang in balance unless the production of gas from the country improves substantially, which does not appear a possibility in near future.

Ashok Khurana, director general of Association of Power Producers, said the projects based on gas would continue to run at lower plant load factor (PLF) or 24-25 per cent unless the domestic production of gas increases substantially to occupy around 35-40 per cent of the total requirement. The pooling of gas is unviable when the domestic production is lower as in the existing case.

Around 16,000 MW of gas-based power projects require around 61 mmscmd of gas while around 8,000 MW projects are under construction that would additional demand of 38 mmscmd when the domestic production is around 30 mmscmd. Some of the major power companies including the public and private sector companies are running their gas based plants at a PLF of 23-25 per cent due to non availability of gas or the landed cost of RLNG being too high.

The next round of additions to gas production from KG basin and other blocks from Cauvery and Panna-Mukta of Reliance Industries (RIL), Cairn, ONGC and OIL are expected only after 2017-18.

"The four year period can make or break the gas based power plants. There is every possibility that companies may not be able to pay the interest cost to the lenders and they may become the non-performing assets for banks. There is no other solution but increasing the domestic production," said Khurana.

Some of the important gas based power plants that are lying idle or running at much lower PLF are the 2,400 MW Samalkot plant of Reliance Power, Dabhol Power plant of NTPC & GAIL as joint venture operators, and 6,500 MW worth of projects with the state generation corporations like Haryana, Andhra Pradesh, Puducherry and other states. All together around 16,000 MW of gas based power projects are either lying inactive or are working at very low PLFs.

Arup Roy Choudhury, CMD of NTPC, whose gas-based Dabhol power plant is running at 24 per cent PLF and other around 4,000 MW of gas-based projects have been postponed beyond the 12th Five Year Plan period, believes project viability would suffer further if the gas is not made available at the existing rates.

"There is no demand for power at higher rates based on RLNG even as our availability is around 90 per cent. We will continue to get our dividends because of our availability but that is not the long-term solution. Also, the hike in gas price to $8.4 from April next year would make gas price pooling ineffective. It is better to concentrate on other alternatives like coal and renewables till gas production improves in the country."

In case the government accepts the power ministry's proposal to cap the gas price for power companies at $5 per mmBtu, the subsidy of $ 3.4 per mmBtu will have to be borne by the government and public sector oil companies. There is bound to be resistance from the state governments to increase power tariff, which has already gone up substantially in several parts of the country. The enhanced fuel bill for power and oil companies alone may be to the tune of Rs 26,400 crore as per initial projections made by different ministries and it will need to be absorbed by different stakeholders.