Opposing the demand of Reliance Industries Limited (RIL) for an upward revision of KG-D6 gas price, the Association of Power Producers (APP) has warned that such a move would only push up electricity price by 50 paise per unit for every dollar increase in gas price.

In a representation to Prime Minister Manmohan Singh, and the Petroleum and Natural Gas Minister, Jaipal Reddy, the APP, which also includes Reliance Power, Tata Power, Lanco Infratech and the Adani group, said in a letter that no consideration should be given for increasing the price of natural gas from the current rate of $4.2 per million British thermal unit (mBtu). RIL had been arguing, during the last few months, that the price of gas should be increased, a demand that has been rejected time and again by the Petroleum Ministry. The revision in gas price is due in 2014.

Unaffordable

“It is worth taking note that for every $1 per mBtu increase in gas price, the cost of generator increases by 35 paisa per unit, and the cost of power to the end-consumer goes up by 50 paisa per unit. This would make the fuel unaffordable to the power sector,” APP Director General Ashok Khurana said in the letter.

Claiming that the price increase would go against the basic principle of the Gas Utilisation Policy, it said the hike in rates was also against the Supreme Court judgment in the Reliance-RNRL case, which had stated that the utilisation of gas should be in a manner to “sub-serve the best interests of the country. Therefore, any move to increase gas price would make over 15,500 MW of existing gas-based capacity and 9,500 MW of upcoming capacity unable to operate. This would result in stranded assets and NPAs or if the discoms are made to buy this expensive power it would increase the existing cash deficit and subsidy burden,” Mr. Khurana said.