Gas-based independent power producers are focussing their attention on securing gas supplies for their plants rather than the pricing implications.
A report on the Indian utilities sector, prepared by Credit Suisse based on interaction with gas-based power developers, suggests that they are focussed on improving gas supplies rather than pricing.
Power developers are lobbying for the diversion of gas supply from the fertiliser sector and lowering of the plant capacity for recovery of fixed costs and assured return on equity, Amish Shah of Credit Suisse Research, states in the report. This is important in the backdrop of the Government seeking to prioritise supplies to power and fertiliser plants.
It is proposed to hike the price from $4.2 mmbtu to $8.4 mmbtu.
Low PLF
It states that there are concerns about the affordability of power generated from gas-based power plants after the Government recently decided to double domestic gas prices effective April 2014. The generation cost from the gas-based plants would increase by about 50 per cent, with the cost at about Rs 5.7 per kWh (a unit). According to the assessment, merchant power tariffs would be cheaper than even the variable cost of gas-based power projects. This may lead to a situation where State electricity boards may curtail power purchases from gas-based plants.
The Government has indicated plans to extended subsidies to the power and fertiliser sectors. The subsidy-related discussions are at the initial stage. And, the quantum of subsidy and allocation among sectors will help resolve the issues relating to gas pricing.
Lanco, GMR, GVK, Essar, NTPC, RGPPL, Torrent, VBC Group — with a total capacity of 9,861 MW — are functioning at low plant load factor due to dwindling gas supplies. The power generated ranged from about 11 per cent to 57 per cent last year. The average output was about 39 per cent last year and 17 per cent in May, according to estimates.
In the case of gas-based projects yet to sign power supply agreements, the producers want the Government to encourage State entities to sign long-term power purchase agreements that allow complete pass through of fuel costs.