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Home News Power Sector News Administrative gas price increase will raise electricity tariff: Shinde

Administrative gas price increase will raise electricity tariff: Shinde

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ShindeUnion power minister Sushil Kumar Shinde said that the recent administered price mechanism (APM)  gas price increase would lead to commensurate hike in electricity tariff for gas-based power plants. However, industry players are of the view that the overall impact of the hike on electricity tariffs will be much less as power generated using gas makes up about 11 per cent of the overall generation in the country. Of this, less than half the fuel requirement is met by APM gas currently.

“APM gas price increase will certainly lead to electricity tariff hike for gas-based power plants,” Shinde told reporters on the sidelines of a seminar organised by trade body Ficci here. The Union Cabinet on 19-05-2010 approved the petroleum ministry’s proposal to increase APM gas price from $1.79 per million British thermal unit (mmbtu) to $4.2 per mmbtu in line with gas from Reliance Industries Ltd’s (RIL) D6 block in the Krishna-Godavari (KG) basin.

States like Delhi, Punjab Gujarat, Haryana Rajasthan, Himachal Pradesh and J&K are the states which will be effected by the new APM. The price hike will increase the electricity generation price for gas based utilities from 90 paise to Rs. 1.20 per Kwh. The prices consumers pay may be a little higher depending on the formulae used to decide the price. APM gas is from blocks which ONGC and Oil India gets without competition.

“We have not worked out details but tariff for gas-based power plants could go up by Rs 0.90-1.20 a unit. However, there might not be much impact on overall tariff level,” Shinde added.

“We pleaded the case of industry. However, public sector oil companies are also feeling financial pressure. The matter was considered in detail and based on that, a final decision was taken. Let us see what happens,” the power minister said.

The contribution of gas as feedstock to the country's total installed generating capacity of 1,59,398 MW was 10.7 per cent (17,056 MW) as on March 31, 2010. In 2009- 10, gas-based plants accounted for 12.5 per cent in the actual electricity generation of the country. At present, of the total availability of natural gas of 140 mscmd (million standard cubic metres per day), APM gas constitutes 55 mscmd. Of this, 24.5 mscmd is being supplied to the power sector.

"The power sector consumes 40 per cent of natural gas, of which 47 per cent is APM gas. So the impact is not going to be that high, especially with the share of APM gas set to progressively come down over the next few years," an executive with a utility operating gas-based stations said.

APM gas essentially refers to gas produced by entities awarded gas fields prior to the PSC (Production Sharing Contract) regime. The price of gas from these fields is administered by the Centre and the APM gas is allocated under Ministry of Petroleum and Natural Gas' directive issued on June 20, 2005.

India has installed power generation capacity of 159,648 mw, out of which 17,055 mw is based on gas. The key power plants getting APM gas supplies are NTPC’s generating stations at Faridabad, Dadri, Anta, Auraiya, Kawas and Jhannore. Delhi’s Pragati Power and Indraprastha Power Generating Company and Gujarat Industrial Power Corporation are also getting APM gas supplies.

Dabhol power plant has got gas linkage from the D6 block. Other power plants getting gas supplies from D6 are 366 mw Lanco Kondapalli expansion project and GMR Energy’s 220 mw Kakinada power plant in Andhra Pradesh,, 108 mw Rithala and 250 mw Bawana power project in Delhi and 374 mw Utran combined cycle power project in Gujarat.

State-owned companies like ONGC and Oil India Ltd (OIL) were losing money on sale of APM gas owing to non-revision of price since 2005.

The consumers are the ones who lose out the most from this decision by the government as consumers pay higher gas and electricity charges and with higher taxes. “I see power tariff for distribution companies rising by Rs 1 per unit due to rise in the price of natural gas sourced under government’s APM formula,” said NTPC MD RS Sharma.

Source- Financial Express

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