'No gas till 2007' likely to scuttle IPPs' plans

News that there would be no supply of gas from the Krishna-Godavari Basin to the state until 2007 is expected to upset the plans of several independent power producers (IPPs), who are slated to invest close to Rs 7,500 crore to generate about 1,500 mega watts of gas-based power.

The four IPPs "" Vemagiri Power Generation Limited (370), Gautami Power Limited (464 mw), GVK Extension Project (230 mw) and Konaseema EPS Oakwell Power Limited (445 mw) "" have a total firm allocation of 6.4 million cubic meters per day (MMCMD) and have signed power purchase agreements with the state utility, APTransco.

The four new projects which are scheduled to commence operations in the next two years will be the worst hit in the absence of additional gas supplies, apart from existing gas-based power projects which already are facing an acute shortage of gas.

According to APTransco officials, it would be a tight ropewalk to meet the growing demand if the new gas power projects fail to commence operations before 2007. According to APTransco's estimates, the energy demand in the state is expected to go up to 8,500 mw by 2007 from the existing 7,500 mw, that too if the load on agriculture sector was being restricted.

As a direct fallout, the pressure on the country's coal supplies from the ever-growing power demand is expected to build further in the coming days. Power generation in the country, as well as in the state, will continue to be coal driven, starving other sectors.

The most anguished over the Union petroleum minister's clarification on the factual position in K-G Basin are, of course, the private power developers.

Reacting sharply to the previous government's sanction of new gas-based power projects on the alleged fictitious availability of additional gas supplies, a private power producer told Business Standard on condition of anonymity: "Now the combined endeavour of APTransco, Gail and other governmental agencies should be to ensure that at least the gas requirement of the existing power projects are met."

Expressing similar sentiments, another developer recounted his gas woes and said: "My plant has been running at 69 per cent plant load factor (PLF) due to the gas shortage. Gail has not even been able to ensure supplies as per the firm-allocation. Combined with the scenario of no fresh gas supplies till 2007, there is no way we can report profits this year."

The IPPs who have gone ahead with their plans on setting up new projects cannot modify their schedules much. Though the developers of Vemagiri project responded positively to defer the commencement of operation by about one year, it still falls short of Reliance's proposed commencement of production from 2007.

Responding to a question, a private developer who is scheduled to complete the project in 2005, said they would go ahead with the construction of the project as scheduled. "I don't have any choice because the project cannot be stopped midway. I am, therefore, prepared to take risks," he said.

"We have been ensuring coal supplies to the thermal power stations by cutting on the requirements of other industries. We only hoped that the additional gas availability, if any, would ease the situation in the coming days. Due to non-availability of gas other industries which require coal would continue to suffer, affecting the overall industrial growth," a senior official in the coal sector told the Business Standard.

The state, in fact, is breathing easy now as good rains this year has buoyed the hydel power generation, which otherwise would have resulted in a supply-demand gap of at least 6 per cent.

"The new thermal units "" including the 420 mw Rayalaseema Thermal Power Project Stage-2, and Ramagundam and Talcher with 500 mw capacity each "" are expected to fill the future demand-supply gap to a great extent, provided efforts on substantial reduction of T&D losses are made simultaneously. Even then, load reliefs during peak hours may not be ruled out," a senior APTransco official told Business Standard.

The dependence on additional power purchases from outside the state is also expected to grow in the future.