April 22, 2016

India open to long-term gas contracts at USD5/MMBtu

Aiming to secure gas from 24,000 MW of stranded power plants, India is open to signing long-term contracts for the fuel at USD 5 per MMBtu, Power Minister Piyush Goyal said.

Striking an optimistic note, Goyal also projected that the country’s growth rate will be in double digits by next year if not in this fiscal (2016-17), the caveat being that India needs a strong monsoon.

Speaking at the renewable energy investors round-table, co-hosted by industry bodies CII and USIBC here yesterday, the minister called upon gas producers to explore investment opportunities in the Indian market.

“India is willing to take gas for its gas-based power projects and sign long-term contracts of 10-15 years but this can be done at a fixed price of USD 5 per MMBtu as the power sector is a price-sensitive sector in the country,” he added.

With about 24,000 MW of stranded gas assets in the country, this is a huge and promising market as long as the prices are right and given the current Baltic index, he said adding: “I believe this is a viable proposition”. The minister, who also holds the portfolio for Renewable Energy and Coal, added India is currently exploring all means of gasification including coal bed methane.

Responding to investors’ queries on exchange rate volatility and the need to address the hedging issue, Goyal said: “I am open to an earlier proposal of linking the debt to a basket of currencies including the USD, the JPY or even options like inflation-linked tariffs to cover hedging risk.”

He, however, pointed out that the Indian Rupee has been relatively strong over a long term and will be one of the stronger currencies, given India’s growth potential.

Some important issues that were discussed during the course of his visit to the UK and US included need to address hedging currency volatility in tariffs, need for a stable and simplified policy and regulatory regime and standardised PPAs and equipment standardisation.

Talking about investment opportunities under the ‘Make in India’ initiative, Goyal said to incentivise manufacturing in solar sector, the government is exploring options of long-term power contracts and long-term land lease contract for manufacturers.

Goyal highlighted the opportunities for investment in India’s energy sector. He told them that India offers USD 1 trillion investment in different segments of energy sector. He said all sort of government help to investors is available “on phone call today”. State-run Energy Efficiency Services ltd (EESL) is now gearing up to set up overseas office in New York in the near future.

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