Govt to provide imported gas at concessional rates to revive stranded power projects
26 March 2015
The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Narendra Modi on Wednesday approved a nrew policy intervention, through an innovative mechanism, to revive the stranded gas based power generation capacity that has been lying idle or under-utilised due to shortfall in the production of domestic natural gas in the country.
The mechanism envisages importing regasified liquefied natural gas (RLNG) for supply to these plants so that they can generate power. It also envisages concessions by all stakeholders, including the central and state governments, by way of exemptions from certain applicable taxes and levies on the incremental RLNG being imported for the purpose.
Besides, gas transporters and re-gasification terminals, including GAIL and GSPL, have agreed to reduce their transportation tariff, marketing margin and re-gasification charges on the incremental RLNG.
Under the new mechanism, key gas suppliers GAIL and GSPL would have to fore go 50 per cent of their transmission tariff and 75 per cent of marketing margin in supplying imported R-LNG for utilisation of stranded gas based generation capacity.
Power developers would completely forego the return on their equity.
The Government of India also proposes to provide support to discoms from the Power System Development Fund (PSDF) through a transparent reverse e-bidding process. This will make the cost of power affordable.
The new arrangement will help generate an additional 79 billion units of electricity, valued at about Rs42,000 crore.
The additional generation would help light up many unconnected households in the country, besides benefitting the public at large, including farmers and poorer sections of the society who have limited access to electricity.
This initiative is another key step towards achieving the government's commitment of 24X7 power supply to all.
The decision will also help improve grid stability and safety, as gas based plants are ideal for being used as spinning reserve, and for meeting peaking power requirements, as they can be started and shut down at very short notice.
Gas based power is also environment friendly and much less polluting than coal based generation.
Reviving these gas based power plants will go a long way in making peak load shortages in the summer months a thing of the past. Many of the stranded gas based power projects are located in the southern region which is power deficit. With their revival, power shortage in the southern region will be minimised significantly.
The revival of stranded gas based capacity would also ameliorate stress on the banking sector. Besides, it would kick-start growth and have a multiplier effect on the economy as also restore investors' confidence in the power sector.
The mechanism will also result in optimal use of gas infrastructure like gas pipelines and re-gasification capacities in the country, which are currently underutilized.