615mw Pipavav project in doldrums

Project suffers from viability questions as centre reneges on cheap gas promise

The Gujarat government may be forced to shelve its proposed 615 mw gas-based power project at Pipavav in Amreli district, with the central government backing off from its earlier assurance of providing gas at controlled prices.

The state government says that the gas-based power project will become unviable if it receives gas at market price instead of the controlled price which was assured earlier.

"Earlier, the central government had assured us that gas would be available at controlled prices, but it has turned its back on this assurance. As of today, there seems no other option than shelving off the project, although we will continue to be in talks with the government for lower priced gas. There is also no proposal of changing the fuel choice at the moment," said, Saurabh Dalal, minister of state for energy, Gujarat.

The minister said that there were plans to transport gas from the middle and south Tapti gas fields to Pipavav.

The controlled price of liquefied natural gas (LNG), at which the central government had agreed to sell gas to the state for the proposed power plant was Rs seven per cubic metre, while the market price today is over Rs ten and is expected to touch Rs 12 per cubic metre soon.

Dalal said that the cost of power produced would shoot up considerably if gas is purchased at a higher cost. The cost of producing power is about Rs 1.30 per unit, which goes up marginally to around Rs 1.60 per unit in case LNG is used as fuel. If the gas is purchased at market price, the cost of producing power will reach Rs two per unit, which makes the project unviable, Dalal said.

As of now, there has not been much progress on the 615 mw gas-based power project except purchase of land and other formalities.

It became clear to the state government that it will not receive gas for the power project at controlled prices following a reply by the Union minister for petroleum to the questions raised in this regard by state MPs- A K Patel and Alka Kshatriya.

The minister told the Rajya Sabha on March 1 that while an "in principle" allocation of natural gas to the extent of 2.25 million metric standard cubic metres per day (MMSCMD) was made for the power project at Pipavav, the allocation is subject to additional development of the field, for which a development plan has been submitted.

However, direct marketing of gas has been allowed for the Tapti gas fields and the Gujarat government can directly approach it for gas, the minister told the Rajya Sabha.