Existing independent power producers fear that they would be put in a disadvantageous position if the Empowered Group of Ministers (EGoM) decides on proportionate allocation of available natural gas among the old and new power projects. Their apprehensions are based on the uncertainty over the prospects of ramping up the natural gas production from the K-G D6 wells.
“We know for certain that the promoters of soon-to-be-commissioned gas power projects are pressing for proportionate allocation of available natural gas as the prospects of additional production in the KG Basin are nowhere in sight,” a senior official of a Hyderabad-based company, which runs a gas-fired project in the coastal region, told Business Standard.
Gas power projects of close to 3,000 Mw currently run on a part load operation basis at 70 per cent PLF, a tad better compared with last year when the PLF had gone down to 60 per cent on account of fall in gas supplies.
Existing IPPs, including Lanco Infratech, GMR and GVK PIL, have undertaken an additional 3,000 Mw expansion in the state. This apart, the 2,400-Mw Samalkot project by Reliance Energy is also under implementation. In Gujarat, on the other hand, about 6,000 Mw projects are being executed in addition to the 5,000 Mw installed capacity which is already in operation there.
“If the EGoM decides to adjust the available natural gas among all the projects, the existing ones may end up operating at half the capacity (50 PLF),” said a company official on condition of anonymity.
IPPs in the state had to waiting for natural gas till 2009 after readying the plants. They now are facing supply shortage, which is leading to huge financial losses. They said the proportionate allocation formula would affect them as its difficult to tell when the situation in K-G D6 would improve.
Natural gas production from Reliance Industries (RIL)-operated K-G D6 wells has fallen to as low as 48 mmscmd (million metric standard cubic metre per day) from the peak of 60 mmscmd. According to the original plan, the production should have increased to 80 mmscmd by this time.
The Andhra Pradesh government is also concerned about these developments on two counts. First, it fears that more gas would go to Gujarat if the proportionate allocation is mandated by the EGoM forcing the state power utilities to buy power at higher price from outside during peak hours. Secondly, the state will be at a disadvantage if those projects with which it had power purchase agreements (PPAs) run at lower PLF.
Four IPPs with an installed capacity of 1,500 Mw are mandated to sell the entire power to the state under the PPAs. The rest of the units, including those under implementation, are merchant power plants and are not obliged to sell power to the state at a predetermined price.
The companies that have entered into PPAs not only have to sell their entire power to the state power utilities, but also have to sell power to the state without charging the fixed cost if they achieve over 80 per cent PLF. “As these projects are running at below the 80 per cent PLF mark, we are not able to buy cheap power from these companies,” a senior government official said. The discoms have to pay 7 paise per unit towards fixed cost for power produced beyond 80 per cent PLF while it pays 98 paise per unit for the same generated at under the stated PLF.
The loss on this count alone runs into more than Rs 1,000 crore, which otherwise would have improved the bottomline of the discoms, said the official. In times of peak demand, the government utilities buy power at Rs 5.50 per unit, even from within the state as the new ones are merchant power plants, resulting in an additional financial burden on the state exchequer.
