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Power Ministry to approach CCI on additional gas, price pooling

NEW DELHI: With gas supplies to power plants drying up, the Power Ministry will approach the Cabinet Committee on Investment seeking fuel meant for other sectors and approval for pooling price of domestic and imported gas. 

The Power Ministry is moving the newly constituted Cabinet Committee on Investment (CCI) to seek diversion of as much as 6 million standard cubic meters per day of gas currently consumed by non-core sectors like steel and petrochemicals, to power plants, sources privy to the development said. 

Besides, it also wants 6.47 mmscmd of gas state-owned Oil and 
Natural Gas Corp (ONGC) will produce from new fields as well as 5.24 mmscmd gas from Gujarat State Petroleum Corp's (GPSC) Deen Dayal West (DDW) gas field in KG basin. 

These proposals are parallel to the Oil Ministry's approach to an Empowerd Group of Ministers (EGoM) on gas allocation for abolishing the priority ranking in natural gas allocation so that fuel currently consumed by urea plants can be diverted to fuel-starved power stations. 

Abolishing priority ranking, according to which power plants get gas only if any is left after meeting requirements of front ranking sectors of fertilizer and LPG, would make available another 8 mmscmd to electricity generating units. 

These moves would help generate 16,044 MW of power, sources said quoting the Power Ministry's proposal. 

The Power Ministry had last year rejected pooling of gas prices as it would have meant older plants of state-owned firms paying higher price for the fuel just to make feedstock affordable to newer units that are mostly owned by private sector. 

But at the request of 
Association of Power Producers - a body of private power producers, it is now proposing to CCI to consider averaging the price of cheaper domestic gas with costlier imported liquid gas or LNG. 

Sources said the power ministry has projected an electricity generation cost of between Rs 4.10 to Rs 7.90 per KiloWatt-hour or unit as compared to Rs 2.8 per unit cost of producing power currently. 

Under the ministry's most viable pooling option, price of all the gas - domestic as well as LNG - consumed by power and fertiliser sector are to be clubbed and an average rate applied to them all. 

This would mean that fertiliser plants and old power plants which currently pay USD 4.2 per million British thermal unit for the gas would end up paying more than double the price, while the newer power plants would have to pay much less than the average LNG price of USD 12-13 per mmBtu. 

Not just increase in power tariff, it would also mean an additional fertiliser subsidy of up to Rs 20,210 crore per annum, they said, adding this subsidy was in addition to the Rs 5,591 crore a year outgo on account of urea having to be imported because of 8 mmscmd of gas they use being diverted to power plants.