Lanco and GMR win support against oil ministry

Vol 15, PW 14 (26 Jan 12) People & Policy

Lanco Infratech and Bangalore-based GMR Group have won power ministry support in their fight against the oil ministry cancellation of their D6 gas allocation.

Only the Empowered Group of Ministers (EGoM) can take such an arbitrary decision against the two power generation companies, argues IP Kesari, joint secretary in the power ministry. In a letter to oil ministry director Neeraj Mittal this month, Kesari says the EGoM first allocated gas to GMR’s 220-MW ‘combined cycle’ Tanir Bavi power station at Kakinada in Andhra Pradesh and Lanco’s 734-MW gas-fired Kondapalli power station in November 2009, and that only the EGoM could cancel the allocation.

Kesari was responding to a December 19 letter written by Mittal, who repeated allegations that Lanco and GMR were ‘profiteering’ by selling power using cheap D6 gas at unregulated market rates. Mittal accused Lanco and GMR of deliberately not signing Power Purchase Agreements (PPAs) with state-owned electricity distributor AP Transco.

But Kesari hits back, saying the EGoM issued no pre-conditions. “EGoM policy is to allocate gas ‘as and when’ the project is ready for commissioning,” he says.

“A PPA cannot be the pre-condition for gas allocation.” Kesari stresses that, “Other projects in future which are allocated gas and fulfil the prescribed (EGoM) norms cannot have allocations cancelled by the oil ministry.

” GMR receives 880,000 cm/d of D6 gas at Tanir Bavi while Lanco receives 1.46m cm/d at Kondapalli, both at the government-approved price of $4.2/mmbtu. A power ministry source stresses that both GMR and Lanco have now agreed to supply all D6 gas-generated power to AP Transco from January 1 this year until May 31, 2016 after winning ‘short’ and ‘medium term’ contracts through open tender.