15 gas-based power plants win subsidy to import LNG

15 gas-based power plants win subsidy to import LNG

New Delhi: At the conclusion of the first phase of bidding under the new gas mechanism formulated to bail out gas-based power plants not receiving domestic fuel supply, 15 such power plants have qualified for subsidy to purchase imported gas and sell power at lower rates.

Leading the pack is Torrent Power from Gujarat, whose three plants have secured imported gas supply. Torrent is followed by two plants of NTPC and five power plants in Andhra Pradesh of GMR, GVK and Lanco and others. Around 10,000 megawatts of additional capacity would start firing from June.

The government had, on May 12, launched bidding for providing imported gas (regasified liquefied natural gas, or R-LNG) to power plants through a subsidy mechanism. Out of the technically qualified 14 stranded power plants with cumulative 8,100 Mw, 10 power plants of 6,868 Mw successfully made a bid.

The companies submitted bids for the subsidy amount they would require to sell the incremental electricity that they would produce from the gas supplied to them at subsidised rates. The government will provide INR35bn ($547m) in financial support to the power plants in the ongoing financial year, and another INR40bn in the next.

GAIL, which is importing the R-LNG, is to notify its price after the total requirement has been finalised, in the aftermath of the bidding. GAIL, along with Gujarat State Petronet Ltd, will forego 50% of its transmission rate and 75% of marketing margin in supplying imported R-LNG. The central government will give up the service tax it levies on gas sourcing, and the power plant operators will forego return on equity.

Shirish Nadkarni

Shirish Nadkarni is a management consultant and freelance international journalist, who has been writing on all spheres of Indian business for the past three decades for a number of reputed overseas publications. An avid sportsman, Nadkarni has represented India in international veterans' badminton since 1997, and was the 55+ age group doubles world champion in 2005.

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