This will help kick-start about 18,000 MW of gas-based projects

The Cabinet Committee on Economic Affairs is likely to take up on Thursday the Power Ministry’s proposal for a Rs.11,000 crore subsidy payout to cover the hiked electricity tariffs on account of the proposed price pooling of gas. This will help kick-start about 18,000 MW of gas-based projects.

The Power Ministry has moved a Cabinet note, seeking approval of pooling of gas and re-gasified liquefied natural gas (RLNG) within the power sector. It has also sought the appointment of GAIL India as the ‘Pool Operator’. The Cabinet note has also sought constitution of an Empowered Committee, headed by Additional Secretary (Power), to finalise plant-wise supply of gas for each month.

The subsidy for electricity tariff, which would stand hiked in view of pooling of domestic and imported RLNG, would be released quarter-wise through the Ministry of Power’s budget to GAIL on the recommendations of the proposed Empowered Committee. GAIL India would maintain a separate pool account for this purpose and operate the same under the directions of the Empowered Committee. The note proposes averaging of the price of cheaper domestic gas with costlier imported LNG.

Even after such averaging, the cost of generation would be close to Rs.10 and the Ministry will pass on only Rs.5.50 a unit to the consumers, and the balance will be subsidised by the government through direct cash payout. At present, power plants get just 17.25 million standard cubic metres per day (mmscmd) of gas from the domestic fields as against an allocation of 71.29 mmscmd. Despite buying about 3.5 mmscmd of LNG, several plants are stranded for want of fuel.

The averaging will give a fuel rate of $11.43 per mBtu, leading to the cost of generation of electricity at Rs.10.47 a unit. The Power Ministry has worked out a subsidy payout of Rs.2,498 crore for the remaining four months of the current fiscal. Using a similar pooling principal, the Ministry indicated a subsidy outgo of Rs.8,646 crore next fiscal and Rs.10,849 crore in 2015-16.

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