Bailout for gas-based power plants on the anvil
The plan, which will also revive the Dabhol plant of Ratnagiri Gas and Power Pvt. Ltd (RGPPL), will affect plants generating around 19,000 megawatts (MW) of power, and cost around Rs.5,677 crore, the amount of subsidy that will be given to the state distribution utilities to pay for costlier power.
The plan will be put up for the approval of the cabinet committee
for economic affairs (CCEA), according to a government official, who
spoke on condition of anonymity.
The plan has three parts.
The
first affects 10,382MW of power generated by gas plants powered by fuel
under the so-called administered price mechanism. These plants are
currently operating at 43.4% of their capacity, and a 1 April increase
in price of gas to $8 per million British thermal units (mBtu) from the
current level of $4.2-5.73 per mBtu will see the cost of power they buy
rising to Rs.7 a unit.
The government proposes to cushion the impact
of this tariff increase on the distribution utilities. It will make good
any excess burden that these companies have to incur in purchase of
electricity from these projects. The plan specifies a cutoff price of
Rs.5 per unit and Rs.5.50 per unit for 2014-15 and 2015-16 respectively;
anything above this will be offset through the subsidy.
This is
expected to cost the exchequer Rs.3,621 crore in 2014-15 and Rs.2,056
crore in 2015-16, money that will be paid directly to the utilities. The
government hopes the domestic availability of gas will improve by then.
The
second part relates to 6,996.5MW of capacity, including the 1,940MW
Dabhol project, that were allotted gas from Reliance Industries Ltd's D6
block. To prevent the Dabhol project from becoming a non-performing
asset (NPA), all additional gas from the New Exploration Licensing
Policy (Nelp) blocks in the next fiscal, expected to be to the tune of
3.95 million standard cubic metres per day (mscmd), is to be allocated
to RGPPL .
In 2015-16, the 5.78 mscmd of additional expected gas
(over and above 3.95 mscmd) will be allocated to the remaining projects.
In addition, all these power plants have been allowed to procure
imported liquefied natural gas (LNG) and sell power directly to buyers
at higher prices. The plan also envisages these plants receiving new
loans from Power Finance Corp. Ltd (PFC).
The Dabhol plant requires
9.7 mscmd of gas, but has been allocated 8.5 mscmd by a panel of
ministers, of which it receives only 0.9 mscmd. State-run NTPC Ltd,
which owns a 32.86% stake in RGPPL, has warned its parent, the power
ministry, that its investment in RGPPL will likely have to be written
off—a significant loss of money and face.
India has a power
generation capacity of 233,930MW, of which 18,964MW is fuelled by gas.
For these projects to operate at a plant load factor (PLF)—a measure of
average capacity utilization—of 70%, a supply of 71.7 mscmd of gas is
required. However, the total gas supply available to these projects was
26.13 mscmd, resulting in a PLF of 25.6%.
"This will improve
viability of existing gas-based stations with their limited domestic gas
supply. This increased gas-based power generation would have a
multiplier effect on the economy and would provide environment-friendly
power,"
The third part of the plan deals with gas-fuelled power projects with
an aggregate capacity of 9,322.5MW that have been commissioned or are
close to being so. The government's proposal is to provide repayment
concessions to them.
"We are trying to find a solution within the
constraints," said a top power ministry official aware of the bailout
package who didn't want to be identified.
Mint reported on 20 January
that the government was evaluating sops to power plants that would also
bring relief to banks and financial institutions that have extended
loans to them.
These concessions include extension of commercial
operation date by a year, a move that helps debt repayments be deferred
as they normally begin after this deadline.
Other sops include providing an additional three years' moratorium on repayment along with the waiver of penal interest.
The plan also involved "full refinancing of rupee loan with ECB
(external commercial borrowing) subject to overall cap ($15 billion) on
ECB borrowings and project companies hedging forex risk". Currently,
refinancing of rupee loans is capped at 40%. The banks are also to
extend the trade credit (letters of credit/guarantee) for additional two
years over and above the current practice of three years. In addition,
to improve the hedging market, a special window for ECB hedging through
the Reserve Bank of India may be created for the entire term (around 12
years) of the power project loans.
The projects mentioned in the
third part of the plan can also procure LNG and sell the power directly
to buyers at the higher price on the lines of merchant tariff and will
be eligible for further loans from PFC.
Bad loans to the power sector
accounted for 20.21% of the total bad loans of Rs.11,409 crore to the
infrastructure sector at the end of 2012-13. As on 31 March 2012, banks
had loaned Rs.4,03,822 crore to the power sector.
The new package comes in the backdrop of the earlier proposal for gas pooling being dropped.
"The finance ministry didn't agree to the pooling proposal," said the first government official quoted above.
The
government has been working on a slew of measures to bring relief to
the gas-fuelled projects, including the so-called peaking power policy
expected to provide for up to five-year contracts and a pass-through of
fuel price increases to help these projects become economically viable.
In : POWER NEWS