Govt may introduce new gas auction policy for stranded power plants

The government is contemplating it it would continue with the current policy of auction of imported regasified liquefied natural gas (RLNG) or it will work on a new formula.

Talking to media at the sidelines of an industry event here, power secretary PK Pujari said in two three months the government would decide if it would continue with the gas auction policy for stranded power plants or it would formulate a new policy.

"Our psdf gas scheme was for 2 years. It is finishing in March 2017. So at the moment we are looking at various options to come out with a policy for all the gas power plants, which is about 25000 MW of capacity," Pujari said.

"Whether we will do it with psdf support or not is not very clear. But we are looking at options, where we can get the gas without psdf support, provide assured gas at reasonable price. Of course it depends what is ultimate tariff that works out at the power. So these options we are examining along with gas suppliers. So may be in the next 2-3 months we will finalise the option and then take a call whether we continue with psdf or we switch over to another," he added.

The current policy is set to lapse in March 2017.So far, there have been two successful rounds of auctions where companies including GMR, GVK, Lanco, Dabhol power plants have secured RLNG.The auction process involves reverse bid of the subsidy amount that the government provides through through the Power System Development Fund (PSDF).

However, the third round of auctions were canceled after the participating companies decided to forgo the subsidy.The companies quoted negative bids which led to technical glitch in the system as it was not designed to operate on negative bids.

Consequently, the third round got canceled. The government said it would reschedule bidding after fixing the glitch in the bidding system. In the first round of auctions in June 2015, 14 gas-based power plants with a cumulative capacity of 8,100 Mw had bid.

The gas auction policy was introduced in 2015 under which every stakeholder in the supply chain would have to forego a part of their returns on operations. While the central government would give up the service tax it levies on gas sourcing, the power plant operators would forego return on equity.