To revive power plants govt to ink gas deals with Gulf countries | business | Hindustan Times
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To revive power plants govt to ink gas deals with Gulf countries

In a bid to fuel stranded gas based power projects the government is negotiating long term contracts with leading gas suppliers in the Gulf region. The plan is to enter into contracts for importing 70-80 million metric standard cubic metres (mmscmd) of natural gas through long-term contracts of 10-15 years and at affordable rates. Given the price sensitivity of fueling a power project, the government wants these long term contracts in the price range of $5 per million British thermal unit (mmBtu).

Modi Govt Two Years Updated: May 25, 2016 12:03 IST
Suchetana Ray
As banks continue to red-flag the power sector for escalating the NPA situation, the challenge for the government is find ways to kick-start projects stuck due to non-availability of fuel.
As banks continue to red-flag the power sector for escalating the NPA situation, the challenge for the government is find ways to kick-start projects stuck due to non-availability of fuel. (Reuters)

In a bid to fuel stranded gas based power projects the government is negotiating long term contracts with leading gas suppliers in the Gulf region. The plan is to enter into contracts for importing 70-80 million metric standard cubic metres (mmscmd) of natural gas through long-term contracts of 10-15 years and at affordable rates. Given the price sensitivity of fueling a power project, the government wants these long term contracts in the price range of $5 per million British thermal unit (mmBtu).

“With excess coal-based power available for states to buy at a little over Rs 2, the cost of fuel to power plants is the most important factor and so the government’s effort and insistence on long-term gas purchase agreements at low costs” explains a government official, who did not wish to be named.

During his recent visit to Qatar and other Gulf countries, oil minister, Dharmendra Pradhan had re-negotiated contracts for importing gas, bringing down the price from earliar highs of $16 per mmBtu to less than $5 per mmBtu. “Similar long term contracts are being negotiated that will enable India to operate its idle gas-based power capacity” says an official in the know of the matter, who did not wish to be named. The source further explained that the government is unlikely to pay anything more than $5 per unit of gas, keeping the global slide in prices in mind. Top sources say that discussions with Oman and Iran are already underway.

An internal report of the government circulated in early 2015 showed that power projects worth Rs 50000 crore were stranded due to lack of gas linkage and warned that these would turn into non-performing assets. Of these stranded projects 13000 MW belonged to private developers.

Through various initiatives including reverse auction of gas, some of these stuck projects have been pumped back into life. But still gas-based power projects with capacity around 12000 MW are stuck due to lack of fuel.

This proposal to rescue stranded power plants involves power and oil ministries, and sources say that it has already been discussed and approved by the prime minister’s office.

Top sources in these ministries without wanting to be quoted said that prime minister Narendra Modi’s recent visit to Saudi Arabia and forthcoming to Iran will further discussions on these contracts.

“In the interest of 24x7 power for all and to ensure that investments made in these idle power plants don’t turn bad, the government is trying to provide cost-effective fuel linkages” said the source quoted earlier.