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Government plans new subsidy scheme for power sector

29 Oct 2019 Evaluate

In a bid to help power sector by preventing around Rs 1 lakh crore of debt from turning into non-performing assets, the government is in the final leg of drafting the new subsidy scheme that will allow stressed gas-based power projects to run their plants using a mix of domestic and imported gas. The new subsidy scheme will be based on a gas auction mechanism where electricity generating units quoting least government support to offer electricity to discoms at about Rs 4.50-5 a unit using fuel being offered to them by pooling domestic gas with LNG.

The new scheme will have a buffer of Rs 18,000 crore as subsidy may be created for supplementing the need to keep power tariff lower in the event of a spike in gas prices as the new scheme will avoid committing any subsidy to power producers with gas prices remaining soft in the international market

Under gas pooling, the price of fuel could be brought down which will allow electricity tariff to fall below Rs 6 a unit. The subsidy will arise if price of gas keeps electricity tariff higher than Rs 5 a unit. Such subsidy may either be paid directly to generators or the government may evolve a direct benefit transfer type of scheme, transferring the gap directly to power users.

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