Editorial January 2019

Giving a big leg-up to the country’s ailing gas-based power generation segment of almost 25 GW, the Parliamentary Standing Committee on Energy has presented a new report this month, recommending strong measures for reviving the stranded gas-based capacity.

The report has recommended that the government should explore all possible approaches including assured gas allocation to stranded gas-based power plants from ONGC’s deep-water fields, diversion of domestic gas from non-core sectors to the power sector and cost moderation of RLNG till sufficient domestic gas is made available.

For handholding the stranded gas-based plants for the next two to three years, it has recommended that the government should come out with schemes, like the earlier e-bid RLNG scheme, under which RLNG may be pooled with domestic gas. The power produced under the scheme may be used for bundling with low cost power as has been done by NTPC in the past.

It also cautions against the gas ministry’s proposal to remove the power sector from priority allocation. In November 2018, the government reportedly moved a note to the cabinet for dismantling the existing price system and replacing it with a market-based discovery mechanism, and removing power plants from the priority allocation list. This would have been a major setback to the power sector. The committee has stated that the power sector being a regulated sector needs domestic gas allocation more than any other sector.

Further, holding a strong view on policy flip-flops in the segment, the report notes that projections regarding the availability of domestic gas have turned out to be terribly wrong, as supply from the KG-D6 field for the power sector has reduced to zero since March 2013. Since these gas-based power plants were set up on the basis of the government’s assurance regarding supply of gas, the committee notes that it becomes incumbent upon the government to help them ride out stress.

Further, it notes that the gas ministry should be cautious in making future projections about the availability of domestic natural gas as such situations reflect poorly on the credibility and reliability of the government’s projections and policies. To recall, last year, Korea’s state power utility, Korea Western Power Company, had begun arbitration proceedings against India for not honouring the fuel supply commitment to its 388 MW gas-based power plant in Maharashtra.

The gas-based power segment now accounts for only 4 per cent of the energy mix with utilisation levels at 24 per cent. The committee’s recommendations have been welcomed by the industry and have given the segment hopes for a reprieve. What is needed now is urgent policy action.

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