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NTPC hits out at gas price pooling

business Updated: Jun 25, 2010 02:26 IST
HT Correspondent
HT Correspondent
Hindustan Times
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The country’s largest power producer, the state-owned NTPC Ltd, has opposed the idea of pooling of gas prices for power sector as proposed by the petroleum ministry.

NTPC, in a recent letter to the power ministry, said the pooling of gas prices was neither in the interest of the power industry nor the end consumer.

“The proposed pooling of gas prices will not only impact the existing gas-based stations (power plants) in the country including those of NTPC but also may not be able to fulfill the objective of containing high and volatile gas prices and ultimately may not benefit the end consumers of power,” NTPC said.

The recommendations on pooling of gas prices has been made by Mercados, the consultant appointed by the state-owned gas company, GAIL India Ltd on instructions of the petroleum ministry.

Mercados has proposed that the price of all gas (produced domestically by producers like Reliance and ONGC) as also LNG (liquefied natural gas) imported under spot and long-term contracts be pooled to arrive at a single price for the consuming industry.

NTPC said the recommendation by Mercados does not offer any incentives to anyone to procure LNG at competitive prices. Also the 4-5 year pool term proposed by the consultant has been turned down by NTPC stating the model would not work for power plants that require price stability for 25 years.

NTPC also said with the continuous reduction in supply of APM gas (which is produced by ONGC and OIL from nominated blocks), the pooling of price with spot LNG will expose the power sector to highly volatile prices of gas besides having an adverse impact in terms of increase in cost of generation.

NTPC has also highlighted that the duration suggested in the study for pooling as 4-5 years will lead to policy uncertainty as no greenfield gas-based capacity can be set up which will require the stable pricing and supply of gas for 25 years.