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Gas price pooling for power plants hits subsidy block

Ahead of giving its nod to pool prices of imported and home-grown natural gas, the Ministry of Finance has asked the  Power Ministry to provide details of fuel allocation to gas-based plants.

Published: 05th November 2013 02:44 AM  |   Last Updated: 05th November 2013 02:57 AM   |  A+A-

Ahead of giving its nod to pool prices of imported and home-grown natural gas, the Ministry of Finance has asked the  Power Ministry to provide details of fuel allocation to gas-based plants.

It may be mentioned that last month, the ministry issued a Cabinet note seeking approval to pool imported Liquefied Natural Gas (LNG) with the fuel available from the KG-D6 block after meeting the requirements of fertiliser units. The idea is to help gas-starved power plants.

As per estimates, currently, 7,800 MW of gas-based power generation is stuck due to scarcity of natural gas.

“The Ministry of Finance has asked us to provide the gas allocation list of power plants and also the ones which have signed PPAs (Power Purchase Agreements),” said an official.

It was proposed to pool prices of imported and domestically produced natural gas to be supplied to power plants stranded due to drop in production of the fuel from Reliance Industries’ KG-D6 block.

The proposal will be finalised once the MoF agrees to provide the subsidy. GAIL India will be the facilitator for the price-pooling mechanism.

As per the Ministry’s proposal, during 2014-15, about 3,000 MW capacity power plants will get gas under the gas-pooling mechanism. The electricity produced from these plants is likely to be sold at a tariff of `7 per unit.

The proposed electricity tariff was derived after pooling the prices of imported and domestic gas and deducting government subsidy, which requires approval, the official said.

The tariff may increase to Rs 7.50 per unit in 2015-16, when gas will be made available to additional power plants. And in the financial year 2015-16, the remaining 4,800 mw capacity plants will also be able to get gas.

The price of KG-D6 gas was set at $4.2 per million British thermal units (mmBtu) by the government and is proposed to be doubled from April 2014. LNG costs about $13-14 per mmBtu.



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