Needs of gas-based projects ignored by allocation of gas to merchant plants

Hefty electricity bills received by power consumers every month is being attributed to a “mistake” committed by the Union Petroleum Ministry in allocating gas to two merchants plants in the State -- Lanco II (370 MW) and GMR II barge-mounted (220 MW) -- ignoring the needs of gas-based projects in the State grid.

The deep crisis in the power sector is such that AP Transco/the four distribution companies are forced to buy power from these plants at about Rs.5.5 per unit, an extra of Rs.2.40 per unit compared to Rs.3.10 per unit paid to State grid gas-based projects, said a top official involved in grid operation.

These are the second projects owned by Lanco and GMR developers, as Lanco I (350 MW) and GMR I or Vemagiri (370 MW) are already run by them in the State grid and covered by the Power Purchase Agreements (PPA) signed by the power utilities. Under the PPAs, the power from them is being sold for Rs.3.10 per unit to the utilities.

Citing the guidelines issued recently by the ministry which, in a way, questioned its own allocation of gas to merchants plants, AP Transco proposed to the developers of these two merchants plants to divert their gas to the State grid plants so that some relief could be offered to consumers.

One guideline provided for the diversion of gas from one of the two plants owned by single management to any other more efficiently operated State grid project.

The developers, however, rejected the proposal outright and continued the status quo. Now, AP Transco is preparing to launch a battle with the Petroleum Ministry asking why it had allocated gas to merchant plants in the first place and then issued different guidelines. It is taking up the matter with the State government.

Although the State has an installed capacity of about 5,000 MW under gas-based projects, only 2,770 MW is in the purview of State grid covered by PPAs. Owing to inadequate gas supply, they are being operated at 15 per cent capacity.