Lanco and GMR in firing line over KG-D6 gas

Vol 16, PW 5 (20 Sep 12) Midstream & Downstream

Andhra Pradesh-based GMR and Lanco are at the centre of a row between the oil and power ministries over the supply of D6 gas.

Oil ministry joint secretary Neeraj Mittal wrote to his power ministry counterpart ICP Kesari on September 14 demanding to know why it has not responded to repeated queries about whether the two companies have signed long-term PPAs with state-owned electricity distributor AP Transco: GMR for its 220-MW Tanir Bavi station at Kakinada; and Lanco for its 366-MW gas-fired Kondapalli Phase-II. “We have requested the power ministry to confirm the commencement of supply to AP Transco at the regulated tariff Rs5.5/unit,” writes Mittal.

“But in the past three months we have not received any confirmation either from the power ministry or from the Andhra Pradesh state government.” Under pressure, the oil ministry is bound by a February union cabinet directive to suspend allocations of 883,000 cm/d to GMR and 1.46m cm/d to Lanco at the government-approved price of $4.2/mmbtu by May 30 unless they provide evidence of long-term PPAs selling electricity at regulated tariffs.

“We are being questioned again and again why we are not discontinuing the D6 gas supplies to these power stations,” says an oil ministry source. “But how can we discontinue supplies without getting a comment from the power ministry We can’t suddenly stop gas supplies; the whole chain will be affected.

” Lanco and GMR tell us they have signed only short-term contracts with AP Transco. “No long-term contract for more than five years is possible,” we hear, “because AP Transco has not floated any tender to buy electricity for the long-term.