Increase R-LNG subsidies for gas-based stations

Vol 20, PW 5 (17 Nov 16) Midstream & Downstream

If the government really wants to revive India's stranded gas-based power stations then it must increase subsidies to bridge the price gap between power generated using R-LNG and cheaper coal.

Despite boasts by the power ministry, the last bidding round for 10m cm/d of R-LNG for stranded power producers failed. "Nobody has signed a gas off-take agreement with GAIL," reports an Andhra-based power producer.

"Bidding closed in early September. We won more than 2m cm/d but we can't sign off-take agreements because there are no buyers for power generated using R-LNG." Nine power producers were announced on September 3 as winners of the reverse auction for gas under the Power System Development Fund (PSDF) scheme, among them Lanco, GMR Energy, Ratnagiri Power and GVK Power.

One successful bidder who decided against drawing gas explains that LNG delivered under the PSDF scheme is $5.50/mmbtu. After adding taxes, levies, transportation and other charges it costs him $7.50/mmbtu and the power generation cost using this gas is Rs5.30/unit.

But state governments like Andhra Pradesh, Telangana and Tamil Nadu are unwilling to sign Power Purchase Agreements for anything over Rs4.70/unit. "There is power available for as little as Rs4/unit elsewhere (generated with coal or other fuels)," we hear.

Launched in March 2015, the only hope for the PSDF scheme he says, is if the subsidy per unit of power produced using R-LNG increases from Rs0.30 to Rs1.30.