The Association of Power Producers (APP) has strongly opposed any move by the government to increase gas prices. Any upward revision would not only be untimely but also have a rippling affect on the consumers, discoms and the power sector at large, it warned the government.

In identical letters to the Petroleum and Natural Gas Minister, Jaipal Reddy, and the Finance Minister, Pranab Mukherjee, who heads the Empowered Group of Ministers (EGoM) on gas, the APP said that for the gas-based power plants, the dwindling KG-D6 production was likely to lead to the plants running on PLF (plant load factor) of only 30 per cent by 2015, rendering them technically inoperable. “Considering this, we have requested for gas pooling with the available domestic sources and imported RLNG which appears to be the only feasible solution to rescue the gas-based power units. Keeping in mind the price arbitration benefit between domestic and imported gas sources, which will be brought about through pooling, it is imperative that the domestic gas prices are kept low and not increased in order to ensure that power costs do not increase any further,” it said.

The association said gas prices under the administered pricing mechanism (APM) and NELP sources are U.S. dollar denominated. However, looking at the rupee depreciation since 2007 (Rs.40 to a dollar) to now (almost Rs.55 to a dollar), this had a direct increase of 35 per cent on the cost of gas-based power, thereby increasing power tariffs by around 44 paise/ kWh. “This can have a significant impact on various discoms (distribution companies) which are already reeling under the impact of under-recoveries and poor financial situation. This would affect their ability to pay for power, which eventually affects the power producers and would have a ripple effect on the power sector at large,” it said.

The APP said that, therefore, it would like to re-iterate that to meet the country's agenda of inclusive growth and power for all, it was imperative that power prices be kept at a minimum and, therefore, any proposed increase in fuel prices be considered in the context of its consolidated impact on the power sector before any decision was taken in this regard.