AP seeks PM's help on Gail issue

While persuading the four independent power producers (IPPs) to go slow on their original schedule for commercial production on account of the non-availability of gas, the Andhra Pradesh government has decided to put more pressure on the Union government for ensuring that Gas Authority of India Limited's (Gail) commitment on firm allocation be implemented.

Chief minister Y S Rajasekhara Reddy yesterday went to Delhi carrying a letter to Prime Minister Manmohan Singh seeking his intervention for ensuring the supply of natural gas to the four power projects as per the earlier allocation plans.

He had also written a letter last month to the Union petroleum minister Mani Shankar Iyer on the same issue.

The four IPPs, namely, Vemagiri Power Generation Limited, Gautami Power limited, GVK Extension Project and Konaseema EPS Oakwell Power Limited have a total firm allocation of 6.4 million cubic meters per day(MMSCMD).

The power purchase agreements (PPAs) were inked only after these projects secured firm allocations from Gail.

Gail's perceived inability to supply gas to the four projects has put the government in a tight spot.

The government would have to pay a huge sum of around Rs 1,500 crore towards deemed generation to these projects if they commence commercial operations taking advantage of the alternate fuel usage clause in the PPAs.

According to a senior minister, GAIL can supply additional gas with little effort. Taking a serious view on the issue, sources say that the government has already referred the matter for legal opinion.

Meanwhile, after sensing the mood of the state government, the senior GAIL officials on Thursday were said to have decided to comply with the earlier commitment on firm allocation with regard to those projects which will commence commercial operations as per the original schedule.

It may be recalled that the promoters of Vemagiri have agreed to defer the scheduled date of completion of the project and suitably modify the PPA with APTransco on Thursday.

In case of non-availability of gas, the government wants these projects to wait until the Reliance gas is made available some from the year 2007-08 as announced by the group.

The Ambanis are expected to visit Hyderabad to hold talks with the chief minister on their future investments beside gas allocation.

According to sources, the group head was scheduled to visit the city on the second week of this month, but the programme was postponed.