March 17, 2016

PSDF scheme aims at providing fair chance to all

After scrapping the auction for stranded gas based power project for subsidy to buy expensive R-LNG, Power Minister Piyush Goyal said that the PSDF scheme is aimed at providing fair opportunity to all. 

“The objective (of gas auction under PSDF) is that everybody must get fair opportunity,” Goyal told reporters on the sidelines of a function to release a report “Scaling Up Private Investment in Rooftop Solar”. 

The auction for the 8 mmscmd gas is now scheduled for Sunday for which technical bids will be received on Saturday. There will be no auction for DGPs because only two bidders applied. 

Bidders will be allowed to quote negative subsidy. It means that these power plants will pay premium for buying this gas which was to be supplied on subsidy. 

When asked about the incentives to these power plants in absence of subsidy component under the auction, Goyal refrained from divulging more detail saying “I know as much as you know. The empowered committee will decide on this.” 

Yesterday, the Empowered Pool Management Committee (EPMC), the nodal authority for this auction had decided to scrap the auction for stranded gas-based power projects (SGP) held on Tuesday in backdrop of bids hitting zero (subsidy) within minutes of the start of bidding. 

However, a senior official said that the incentives other than subsidy, like waiver of levies, lower transportation cost and assured supplied for a period of six month under the auction will attract the power plants to bid for gas under this auction. 

There are some market experts who feel that the auction may get tepid response if government does not add sweetener to the offers under this auction as these plants have anyway an option to buy gas from open market. 

This gas subsidy is being provided under Power System Development Fund (PSDF), a scheme which was started by the government last year to revive the gas-based capacity of 24,150 mw, including 14,305 mw of SGPs and 9,845 mw of Domestic Gas Power projects (DGP) getting sub-optimal supplies of fuel. 

The PSDF outlay for the support from PSDF was fixed at Rs 7,500 crore (Rs 3,500 crore and Rs 4,000 crore for the year 2015-16 and 2016-17 respectively). 

Auctions for the 1st phase (June 1 to September 30, 2015) of PSDF Support to gas-based power plants was held in the months of May 2015. A combined total of 10,270 MW plants were able to secure gas allocation. The entire process was completed in less than a month and gas supply by GAIL started on June 1, 2015. 

Auctions for 2nd Phase (October 1, 2015 to March 31, 2016) were held in the month of September 2015 and helped in revival of gas-based generation plants with installed capacity of 11,717.72 MW. Total incremental electricity expected to be generated under phase II is 12,472.6 million units. 

The plants rarely use costly imported gas as power produced from R-LNG costs much more than that from a domestic coal-fired plant or a domestic gas-fired plant. 

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