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Power Ministry moves draft note to CCEA for Rs 11,000 crore payout to subsidise costlier power

12 Sep 2013 Evaluate

Concerned over the scarcity of gas for power plants and rising gas prices, the power ministry has moved a draft note to Cabinet Committee on Economic Affairs (CCEA) with a proposal of about Rs 11,000 crore payout to subsidise costlier power.The proposal is for averaging the price of cheaper domestic gas with costlier imported liquid gas or LNG to have a uniform rate for all gas-based electricity generation stations and the Power ministry has urged the CCEA to consider the approved pricing formula of natural gas.

Earlier, in June, the government had approved the pricing of all domestically produced gas at an average of international hub rates and cost of imported LNG. Such averaging pricing will raise the effective gas price to $11.43 per million British thermal unit (mmBtu) from $4.2 per mmBtu, leading to cost of electricity generation of Rs 10.47 per unit. The power ministry has argued that such a high cost of electricity cannot be absorbed by consumers and so the government should subsidise any cost over and above Rs 5.50 per unit.

India’s total installed power generation capacity is 225,793 MW, of which 18,714 MW or nearly 8 percent, is gas-based. At present, power plants in the country get just 17.25 million standard cubic metres per day of gas from domestic fields as against an allocation of 71.29 mmscmd on account of declining gas supplies from Reliance Industries' eastern offshore KG-D6 fields. However, in August, the Empowered Group of Ministers (EGoM) decided that any surplus natural gas left after meeting the needs of urea plants would be supplied to fuel-starved electricity generating stations.

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