Revival of stranded gas-based units to boost power generation

Sai Nikesh | The Dollar Business   In a move to boost power generation in the country, the Government of India approved a major policy intervention to revive and improve the utilization of gas-based power generation units in the country. A decision to this effect was taken in a Cabinet Committee meeting on Economic Affairs, chaired by the Prime Minister, Narendra Modi, on Tuesday. To revive the stranded gas-based plants in the country, the government has announced a mechanism where the Regasified Liquified Natural Gas (RLNG) will be imported and supplied to these plants, boosting the overall power generation in the country. Through this move, 31 gas-based power units in the country with a capacity of 14,000 MW, those have been lying idle due to shortfall in domestic natural gas production, will be allowed to import LNG through e-auctions. The new policy expects all the stakeholders including the Central and State Governments, to sacrifice by way of exemptions from certain applicable taxes and levies on the incremental RLNG being imported. The gas transporters and re-gasification terminals have also agreed to reduce their transportation tariff, marketing margin and re-gasification charges and the power developers were also expected to forego returns on their equity, says the official release. The government’s intervention has arisen in view of the issue where, the supply of domestic gas from KG basin to power plants (set up in large numbers expecting allocations from the KG basin) started declining since 2012 and finally resulting in complete stoppage since March 2013. Of the total 24,150 MW gas grid connected power generation capacity in the country, 14,305 MW has currently no supply of domestic gas and may be considered as stranded and the balance 9,845 MW involving an investment of over Rs 40,000 crore is also working at a sub optimal level with the limited domestic gas availability. However, with the new policy, the electricity generation in the country is expected to grow significantly by around 79 billion units valued at about Rs 42,000 crore. This move will also help in improving the grid stability and safety, besides supporting the renewable balancing power requirements and enabling grid integration of renewable energy. This would also give boost to the country’s gas infrastructure by creating a need for optimal usage of gas pipelines and re-gasification capacities. The intervention resulting in gas-based power generation, also gives boost to the Indian government’s aspiration to scale up renewable generation, as the gas-based power generation is  an environment-friendly option compared to that of coal-based power generation. On a whole, the revival of stranded gas-based capacity is expected to fuel the country’s economy by reducing burden on banking sector and restoring the investors’ confidence in power sector.  

This article was published on March 26, 2015.