The new arrangement would also benefit a dozen other power plants with a combined capacity of 9,000 MW and an estimated investment of Rs 40,000 crore that were running at sub-optimal level, to run at 30% of capacity - considered an economically viable operation. In all, an investment of Rs 1 lakh crore will get a boost from the decision.
The approval of the plan for mixing gas from different sources - commonly referred to as 'gas pooling' - would reduce the overall fuel cost and help generate 79 billion units at an affordable rate, or nearly 10% of 793.7 billion units produced in 2014-15 valued at Rs 42,000 crore. The projects would be subsidized.
The proposal would help companies such as Torrent, GVK, Lanco, GMR and Reliance Power to revive their existing plants and commission new or upcoming units. The 2,000-MW Dabhol power plant, owned by a joint venture of state-run GAIL and NTPC, could also be another beneficiary. Banks and financial institutions have lent Rs 8,500 crore to this project alone, which can now be saved from turning into bad loans. The southern region, including Andhra and Telangana, has some 5,000-MW gas-fired capacity idling and would benefit from the additional generation.A joint study by NCAER and GMR Energy has estimated that the country's GDP will rise by 0.5%, or Rs 69,431 crore, if the stranded plants are run at 30% capacity through this mechanism. According to coal and power minister Piyush Goyal, gas-fired projects would have to go through a transparent electronic bidding process and forego their return on investment to become eligible. He said it could take 30-35 days for framing the rul es and start bidding.
He said the Centre and state governments would also take a hair cut by sacrificing some levies on imported gas, while GAIL take a shaving on marketing margin and pipeline charges. The plan would require 10 million units of gas per day during the rainy season and 18 million units in other times.
MSTC (formerly Metal Scrap Trading Corporation) would conduct the e-bidding in a reverse mode. Under the reverse bidding norm, the company that quotes the lowest subsidy would win and get fuel at the pooled price. The government would then provide subsidy to discoms through the Power System Development Fund.
Pooling of gas prices has been made necessary as discoms cannot afford to buy power generated by using only imported gas, which is three times costlier than domestic gas priced at $5.6. Pooling helps reduce power cost by lowering overall gas price.
The stranded plants were built on supply projections from RIL's KG-D6 and have been languishing since production fell to less than 10% of the projected output. This forced the government to issue an advisory in 2012 asking promoters not to plan new gas-fired capacity.
"It is a good beginning. In the first phase, about 8,000-9,000 MW should come on stream. There is a premium on efficiency as the bid on subsidy means whoever can convert the gas into heat more efficiently - using less fuel - would win," said Ashok Khurana, director general of Association of Power Producers, which represents private power companies.
The revival of gas-fired plants would also support the Modi government's plan to ramp up solar power capacity to 100,000 MW in the next five years. Since gas-fired plants can be switched on and off quickly, these can be used as spinning reserve to offset weather-induced drop in supplies from solar projects or to bridge peak shortage.
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