To consider major changes in gas allocation priority

The Empowered Group of Ministers (EGoM), headed by Defence Minister A. K. Antony, will meet on July 17 to consider major changes in gas allocation priority, and allot more gas to the power sector to kick-start the Rs.40,000 crore worth of idle capacity which faces the threat of turning into non-performing assets (NPAs).

This follows recommendation by the Planning Commission and the Power Ministry which, according to the note prepared for the EGoM, has pointed out that majority of the funds tied up in the power sector are loans taken from nationalised banks and face the threat of becoming NPAs if gas allocation priority is not changed. However, this move is being opposed by the Department of Fertilizer, which feels that any change will cost the exchequer Rs.1,000 crore per million metric standard cubic metres per day (mmscmd) of gas.

On its part, the Power Ministry feels that investment worth Rs.40,000 crore is lying idle as capacity was built-up expecting KG-D6 field would achieve the gas production target of 80 mmscmd. However, this could not happen and, as a result, the gas-based capacity of 18,713 MW was not running at optimal capacity and for a 70-75 plant load factor (PLF), they need 72 mmscmd of gas. Another 17,000 MW of new gas-based capacity has been lying idle for want of gas. At present, the power sector is getting 27.13 mmscmd of gas from various sources but not from KG-D6. “Additional allocation of gas will help investment worth Rs.36,000-40,000 crore from becoming NPAs as most of the loans taken are from nationalised banks,’’ a note put up for the EGoM states.

The Department of Fertilizer has argued that if there is any cut in supply of gas to the fertilizer sector, then investment of Rs.5,000 crore of five fuel oil-based and one naphtha-based fertilizer plant (that changed their feedstock to gas) will go waste. The six plants that changed feedstock need 7 mmscmd of gas. “Equal priority to all the core sector (for KG-D6 gas) will reduce domestic gas supply to the fertilizer sector by 9.41 mmscmd and put additional Rs.8,917 crore subsidy burden annually. (Power sector will start getting 6.29 mmscmd in non-Andhra Pradesh plants and 2.8 mmscmd in Andhra plants). The EGoM note also states that equal priority to power and fertilizer sectors will result in drop in supply to the fertilizer sector by 9.07 mmscmd while that to power sector will go up by 9.74 mmscmd.