New Delhi: The Association of Power Producers (APP) has asked the Centre to reintroduce the natural gas subsidy scheme for the revival of gas-based power plants in the country. In a letter to Power Minister RK Singh, the APP has called for dedicated allocation or auction of gas for power sector and placing natural gas under the Goods and Services Tax (GST) regime to maintain 5 percent tax across the country. The letter said that due to lack of adequate supply, gas-based power plants are operating at an extremely low plant load factor (PLF) of 22 percent.
In the letter, the APP urged the government to re-introduce a modified electronic auction of subsidy to buy regasified liquefied natural gas (E-RLNG) for the revival of gas-based power plants assets. The scheme was earlier introduced in 2015 with a view to revive stranded gas-based assets. It had helped improve the PLF of these plants at the time it was introduced but was discontinued after two years. "Now that global gas prices are again on the upswing, we recommend the reintroduction of a modified E- RLNG scheme for the overall benefit of the sector, which was the initial idea behind the introduction of the E-RLNG scheme," APP said. The body also recommended exceptions in the modified scheme like, 50 percent reduction on pipeline tariff charges, 75 percent reduction on marketing margin and 50 percent reduction on regasification charges.
One of the reasons why natural gas has not really taken off as a source of power generation is that it is imported and is priced higher due to high VAT and transportation tariff. To make it competitive with other sources of fuel, the APP suggested that all stakeholders take a haircut.
The APP has also urged the government to have a separate window for allocation of natural gas to power plants. Natural gas allocation/auction should be done similar to coal allocation, in which a special bucket is reserved for the power sector, it said. "Power sector is a regulated sector and it desperately needs additional domestic gas allocation/auction in view of the dwindling past supply to the power sector. The additional 30 MMSCMD (million standard cubic meters per day ) of domestic natural gas to be available by FY 2023 from KG basin should have some quantity earmarked for the power sector plants which have no gas presently, on priority basis to revive and operationalise them in long term," the body said.
The domestic gas that would be produced can be allocated through a bidding route, but of the total gas being bid, there should be a special bucket or a specific quantity solely for the power sector as the sector cannot compete with other non-regulated industries, it suggested.
Majority of gas-based power plants in India are either stranded or operating at an extremely low PLF. The current installed capacity of gas-based plants in India is 25 GW, of this 12 GW is under stress. Of 12 GW, while 5.60 GW have had absolutely no gas supplied to them in 2019-20 and 6.16 GW of plants have had limited gas supplies in the same year.
The APP's request is also well-timed as the government is aiming to push the share of natural gas in India's energy mix from the current 6.2 percent to 30 percent by 2030. One of the ways to do that could be by reviving idle gas-based station and those that have been operating at low PLF, especially considering the fact that natural gas is relatively cleaner than conventional fuel sources. Also, they have a fixed cost of generation of Re1/kWh, which can result in savings for discoms.
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