The Power Ministry has rejected the gas price pooling mechanism within the power sector proposed by the Ministry of Petroleum and Natural Gas, terming it as non-workable.
In a response to the demand by the Petroleum Ministry and the Association of Power Producers (APP), the Power Ministry, in a note to the Prime Ministers' Office (PMO), says that the pooling price mechanism with 7 mmscmd of additional RLNG has been found to be non-workable.
“A pool can envisage only 20-25 per cent of RLNG with 75-80 per cent of domestic gas and could work as and when the additional domestic production comes through. Further, the pool should be only for future allocation of gas without affecting the pre-allocation of existing capacities,'' the Power Ministry says in the note, a copy of which is with The Hindu .
For the pooling mechanism to work in future, the note says, it is imperative that the domestic gas, allocated to the non-core sector, must be de-allocated and then allocated to the power plants. “It would be equally important to enhance the RLNG terminal capacity and source cheaper RLNG for achieving higher plant load factor of existing as well as additional capacity,'' the note says. Another option could be to encourage the new power plants ready for commissioning/under construction to source spot RLNG and sell the power at merchant rates till additional domestic gas is made available, the note adds.
Asserting that no new power plants will be considered for gas allocation till 2015-16, the Petroleum Ministry, in its presentation to the PMO on gas price pooling, says the landed price of RLNG would be around $22 per mmscmd, which will result in the cost of electricity to be Rs.9. “Such expensive power is unlikely to be scheduled, hence the necessity for pooling. However, until 2013-14, only around 7 mmscmd of RLNG can be imported due to infrastructure constraints.
Therefore, it is proposed that the present allocation for the existing plants will not be changed. Incremental RLNG may be allotted to old/ new plants as advised by the Power Ministry. “The price of the pooled gas could be around $6.77 per mmBtu (excluding transportation, marketing and taxes). A small additional charge will have to be levied on the pooled price to provide for increased subsidy to Northeastern States as well as to keep a cushion for price/exchange rate fluctuations.
