Seeking to come down heavily on power plants “misusing gas” allocated from the KG-D6 block and violating the power purchase agreements (PPAs), the Petroleum and Natural Gas Ministry has proposed cancellation of allotment to all those plants which have failed to comply with the terms and conditions of allotment.
The Ministry has also proposed that in order to check the misuse of administered price mechanism (APM) gas from the KG-D6 block, as a policy measure, the existing and future allocations of New Exploration Licensing Policy (NELP) gas to power plants be subject to the condition that the “entire electricity produced from the allocated gas shall only be sold to the distribution licensees at tariffs determined or adopted (in case of bidding) by the tariff regulator of the power plant and be supplied only for the duration of the PPA with gas supply starting subject to the signing of the PPA.”
These proposals have been sent for the consideration of the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee. The Ministry of Power has been asked to identify all such violators so that appropriate action is taken for cancellation of these projects by the EGoM.
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The note states that it has come to the notice of the Petroleum Ministry that some power plants which were allocated KG-D6 gas have not entered into long-term PPA with the state discoms to sell the power produced by them at regulated rates. “It is felt that domestically produced gas (which is substantially cheaper than imported RLNG) should be made available only to those power plants that sell power to the State utilities at regulated rates under long-term PPA so that cheap power is available to the people at large,” the note states.
Similarly, it says that the Comptroller and Auditor General (CAG) in its report had raised the issue of certification of end use by the fertilizer plants using APM gas as it affected the revenue from the gas. It is felt that KG-D6 gas will also require such end-use certification as it is being allocated for specific end-users. “It is further proposed that the Ministries should ensure that the allotment conditions are also complied with by the allottees,” the note states seeking the nod of the EGoM.