Gas policy tweak to help NTPC beat linkage clause in projects

The government may amend its gas allocation policy to get around the rule that state-owned companies cannot start project before securing fuel linkage allowing NTPC to start work  on its numerous stranded power plants. A proposal has been prepared by the power ministry for the approval of the empowered group of ministers (EGoM) on gas, a senior government official privy to the development said.

Several of NTPC’s proposed gas-based power projects are stranded because of a Department of Public Enterprise (DPE) guideline that says state-owned companies cannot order equipment and begin construction activities before securing fuel linkage for the projects.

Private developers can begin work even before getting gas linkage putting them ahead in terms of work done, a key consideration in gas linkage, putting the state-owned power developers at a disadvantage.“NTPC will be a major loser once government starts releasing gas for new projects based on the level of investments put in by companies and extent of work done on projects,” said an senior official of the NTPC.

Instead of reworking the guidelines that seem to discriminate against the state-owned companies, the government is trying to fix it through a tweak in the gas allocation policy.

Gas linkage for power projects promoted by the public sector companies would be assured if companies have secured other statutory clearances and secured land. Equipment and other project work will not be a consideration in their case.

The changes will enable NTPC to fast track work on new (including expansion projects at existing plants) gas based capacities to the tune of about 7,500 MW that already have requisite government clearances and work could be started almost immediately.

These are expansion projects of 1000 MW each at Badarpur, Auraiya, Faridabad and Dadri. Besides, NTPC has also proposed 2000 MW expansion project of Ratnagiri Gas and Power Pvt Ltd (RGPPL).

In addition, NTPC’s gas based capacity at Dadri could be further expanded if gas is available. NTPC has indicated initial gas requirement of 30 mmscmd for all the proposed new projects.

“NTPC is better placed to execute new gas-based projects as most of it would be coming in areas close to its running power plants where land and other facilities are already available. Release of gas linkage could really put these projects on fast track unlike several other private sector projects,” said an analyst dealing with the power sector.

The government has projected that gas availability will increase from present 142 mmscmd to 152 mmscmd by 2011-12 and further to 186 mmscmd. This is expected to release large quantities of gas for the power sector, and the change in policy would put NTPC projects to an advantage.