FinMin rejects power ministry's plan to make gas projects viable through subsidy…

 

The finance ministry has rejected a proposal by its power counterpart for making stranded gas-based projects viable through subsidizing high cost imported fuel.

“We had proposed subsidizing the high cost of imported Re-gasified Liquefied Natural Gas (R-LNG) through pooling. The finance ministry has turned down the proposal last week,” power secretary P K Sinha told reporters at the sidelines of the ministry’s media interaction. The ministry is now reworking the proposal.

Speaking at the event, power minister Jyotiraditya Scindia said the government is mulling seeking a relief mechanism for the gas-projects which have been stranded for want of lack of availability and high cost of fuel.

He added that power generated using costly imported Re-gasified Liquefied Natural Gas (RLNG) will not get scheduled as the output prices are regulated. “Power sector will not be able to bear a gas cost of more than $5 per million metric british thermal units (mmbtu).”

Power projects are facing an acute gas shortage owing to dwindling output from Reliance Industries’ KG-D6 block off Andhra coast. The government has notified an increase in prices under a formula that will push up gas prices from the current $4.2 per mmbtu to $8.4 an mmbtu.

The new price regime will kick in from April 1 and be applicable for five years. Every quarter, prices will be reviewed and adjusted, depending on how global prices move. Scindia said the sector will get additional gas of around 8.9 mmscmd over the next three years helping ease the crunch.

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Government moves RBI to bail out lenders of Dabhol Gas based power plant...

 

Coming to the rescue of the lenders of Ratnagiri Gas and Power Projects Ltd (RGPPL), including SBI and ICICI Bank, and PSU promoters NTPC Ltd and GAIL India Ltd, which have huge exposure in the beleaguered Dabhol project, the finance ministry has asked the Reserve Bank of India (RBI) for a one-time relaxation to save the company and its Rs. 13,000-crore  assets from being classified as a non-performing asset (NPA).

“At a recent meeting chaired by finance secretary Arvind Mayaram it was directed that the department of financial services (DFS) will take up the matter for relaxation of asset classification norms to RGPPL with RBI, with a request for extended forbearance till March 31 2014 as a one-time exception, considering the circumstances and the exposure of PSUs, including PSU banks,” a senior government official told Hindustan Times.

The move would not only provide RGPC a breather, but also give some time to the lenders who would otherwise have had to show fresh slippage in their books.

RGPPL is the company promo­ted by NTPC and GAIL India’s largest gas-based power plant, the 1967 mega watt Dabhol Power project that is currently stranded due to lack of availability of domestic natural gas.

The lenders and PSU promoters of RGPPL have been sounding the alarm over Dabhol’s balance sheets. NTPC, SBI and ICICI Bank had in separate communications to the government warned that the project is on the verge of becoming an NPA, which would have a backlash on its promoters.

The company has a debt exposure of Rs. 8,500 crore, apart from equity ownership by PSU and banks.

“The viability of the plant is in question, and it was clearly pointed out in the meeting that RGPPL has not been able to repay debt to lenders from September 2013, and unless adequate affordable domestic gas is ensured and the beneficiaries commence paying corresponding fixed cost, the plant will be declared an NPA,” the official said.

The meeting also decided that the petroleum ministry would move a note seeking directions from the empowered group of ministers (EGoM), about gas allocation and implementation of priority to RGPPL along with fertiliser units as per its original decision.

Further, Mayaram will write to chief secretary of Maharashtra, indicating that the state government is required to pay outstanding dues to RGPPL for the period when power was supplied to it.

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FinMin seeks gas allocation details from Power Ministry...

 

The Finance Ministry has sought from the Power Ministry details of fuel allocation to gas- based plants before giving its nod to pool prices of imported and domestically produced natural gas.

"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)," a Power Ministry official told PTI.

The ministry has 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 ministry floated a Cabinet note last month to seek 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 move is aimed at helping gas-starved power plants.

As per the ministry's proposal, during 2014-15, around 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 Rs 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.

Currently, 7,800 MW of gas-based power generation is stuck due to scarcity of natural gas.

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

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

The fertiliser sector currently gets 31 million standard cubic metres a day of gas from domestic fields.

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