With drying up of gas supplies from Reliance Industries’ KG-D6 gas fields, the Power Ministry has moved the Cabinet Committee on Economic Affairs (CCEA) proposing `11,000 crore payout to subsidise costlier power arising from increased gas rates.
Due to the decreased supply of gas from KG-D6 fields, power plants presently get just 17.25 million standard cubic metres per day of gas from domestic fields as against an allocation of 71.29 mmscmd.
Despite buying about 3.5 mmscmd of liquefied natural gas (LNG), several plants are stranded for want of fuel.
In its draft note, sources said, the Ministry has proposed averaging of the price of cheaper domestic gas with costlier imported LNG to have a uniform rate for all gas-based electricity generation stations.
Even after such averaging, the cost of generation would be close to `10 and the Ministry can pass on to consumers only `5.50 per unit and the rest being subsidised by the government by way of direct cash payout, official sources said.
The Ministry wants the pooling or averaging of the price of cheaper domestic gas and expensive LNG prices to be in effect from this fiscal.
The averaging will give a fuel rate of $11.43 per million British thermal unit, leading to cost of electricity generation of `10.47 per unit.
The Ministry has told the CCEA in its note that such expensive cost of electricity production cannot be absorbed by consumers and hence the government should subsidise any cost over and above `5.50 per unit.
It worked out a subsidy payout of `2,498 crore for the remaining four months of the current fiscal.
Using a similar pooling principal, the Ministry indicated a subsidy outgo of `8,646 crore next fiscal and `10,849 crore in 2015-16.
By pooling of domestically available gas and imported LNG, gradually all the gas-based power plants can be operated thus preventing them from being stranded and render them as uneconomic assets unable to service their debt, the Ministry argued.
The Power Ministry had last year rejected pooling of gas prices as it would have meant older plants of state-owned firms paying higher price for the fuel just to make feedstock affordable to newer units that are mostly owned by private sector.
But at the request of Association of Power Producers – a body of private power producers, it is now proposing to CCEA to consider averaging the price of cheaper domestic gas with costlier imported liquid gas or LNG.