Power producers seek relief for stranded gas-based projects

Want relaxation in NPA, provisioning rules as well

With around 7.5 Gw of gas-based generation capacity being stranded, of which those with a combined capacity of around 3.5 Gw face a supply shortage, private power producers have asked the government for a revival package.

In a presentation, Association of Power Producers (APP) has said these plants have a combined debt of around Rs 48,000 crore which have either been declared as non-performing assets (NPAs) or are undergoing Statutory Debt Restructuring (SDR). It says loans to infrastructure projects that are stranded for reasons beyond the control of developers (and lenders) should not be classified as NPAs, with the provisioning norms for banks to be loosened.

It says the current SDR timeline for banks is to sell at least 26 per cent of the equity shares to new promoters in 18 months from the reference date. This is most unlikely and banks will be forced to sell at distress value. "Considering the expected improvement in the overall demand for power in the next two to three years, the Reserve Bank of India RBI may extend the standstill period and the time limit for divestment of stake from 18 months to 48 months," it has asked.

The ministry of power recently held a meeting on such stranded gas-based power plants. Another meeting is expected next month.

Of India's power generation capacity of 330 Gw, the gas-based part is 25 Gw. The ministry had in March 2015 introduced a scheme for utilisation of stranded gas based power generating capacity for two years, up to March 2017. The Central Electricity Authority had identified about 14 Gw capacity as stranded, for the scheme. Under it, the Union government had envisaged Rs 7,500 crore support from the Power System Development Fund (PSDF) for two years.

However, only Rs 1,500 crore was utilised. Power producers want PSDF support to be revived. A report of India Ratings & Research (Ind-Ra), however, says even if the scheme is made available again, the appetite of distribution companies to buy power at Rs 4.7/unit would remain low, considering their weak financial health and access to cheaper alternatives.

"Further, the majority of stressed gas-based power plants belong to the private sector and sometimes do not enjoy long-term power purchase agreements. Also, some plants do not have the flexibility to declare availability basis alternative fuels or RLNG, impeding the full recovery of fixed costs," said the report.

Ind-Ra estimates variable cost of the power generated from imported re-gasified liquefied natural gas (RLNG) at landed prices as low as $5/mBtu is likely to be Rs 2.84/kwh, higher than the variable cost of generation from domestic coal (Rs 1.92/kwh) or imported coal (Rs 2.68/kwh).

The possibility of these plants running on spot RLNG and selling the short-term power through the exchanges is also low,. Short-term prices on the power exchanges have reduced substantially; it would not even cover the variable cost of generation, said the report.

The total requirement of existing gas-based projects is around 117 million standard cubic metres a day (mscmd); allocation of domestic gas is 87 mscmd, of which only 30 mscmd was supplied in 2016-17. Consequently, the plant load factor (PLF) of gas-based plants decreased from around 65 per cent in 2010-11 to 23 per cent in 2016-17. Gas contributed only four per cent in power generation, as against 77 per cent from coal.

APP wants exemption from value added tax by state governments or bringing of natural gas under the new Goods and Services Tax (GST) regime. It has also made a case for GST waiver on regasification and gas transportation charges, cutting by half the pipeline rates and regasification charges, and a 75 per cent reduction on marketing margin. Also, it wants power transmission charges and losses to be exempted for interstate transmission.

Any additional gas required for operating the stranded power plants at 45 per cent PLF can be met by importing LNG the same way as was done in the earlier scheme, it says. APP estimates about 7,500 Mw capacity of the stranded generation plants can be made operational at 45 per cent PLF, with minimal PSDF support, considering the present discovered rate of Rs 3.5/unit.