A Parliamentary panel has asked the oil ministry to explain "in lucid terms", zero gas production from KG D6, noting that the estimated 80 mmscmd output from the gas block led to setting up of gas-based power plants which are stranded now due to no fuel supply.
"The Ministry of Petroleum & Natural Gas should come out with the reasons, in the lucid terms, for zero production of gas from KG D6 as the estimated production of 80 mmscmd that was envisaged earlier and the steps taken by the Government against those who are responsible for this gross miscalculation about the production of gas from KG D6 which has put the reliability of the Ministry at stake," said the Parliamentary Standing Committee on Energy in its 42nd report on /Non-Performing Assets in Gas based Power Plants.
The committee also recommends that the banks/lenders (to these stranded gas projects) should own responsibility and work towards finding the appropriate solution in the national interest. It pointed out that the ministry owes the responsibility for superfluous projections regarding the production of gas from KG D6 and the banks for unrealistic lending of public money. It said that instead of ensuring how these stranded power plants can be efficiently utilized, there is an air of despondency and increasing clamour to send these plants to NCLT.
The Committee said that it is dismayed to note that State Bank of India, the largest lender in the county, does not have any solution regarding these stranded plants and wants to write off the investment made in these gas-based plants. In the opinion of the Committee, such an attitude of the lenders reflects that they just want to shrug off the responsibility of this crisis by referring the stressed plants to the NCLT.
According to the report, out of total gas-based power generation capacity of 24,867 MW, as much as 14,305 MW is stranded due to a shortage of domestic gas supply and competitive tariff scenario. There are 31 stranded gas-based power plants which include one power plant of Central Sector (1967 MW), six power plants of State Sector (2665.30 MW) and 24 power plants of Private Sector (9673 MW).
The committee noted that these power plants were planned with the expectation of a considerable increase in the volume of domestic gas production, particularly from the KG D6 field. But the projections regarding the availability of domestic gas have turned out to be terribly wrong as the production from KG D6 field has reduced drastically to zero supply for power sector since March 2013.
The Committee was of the view that since these gas-based power plants were set up on the basis of the government's assurance regarding supply of gas, it becomes incumbent upon the Government to help them come out of stress.
The peak flow of the gas from KG D6 was expected to be about 80 MMSCMD by the end of the year 2009 and to increase further in subsequent years. But the production from KG D6 started declining from 55.35 MMSCMD in 2010-11 to 5.5 MMSCMD in 2017-18 and today the production is as good as nil, the panel noted. As many as 30 numbers of gas-based power plants with a capacity of 14,504 MW were allocated gas from KG D6 on firm basis but without any commitment regarding the supply of gas.
On the gas policy flip-flop, the panel recommends that some consistency and predictability should be maintained in policy making so as to avoid giving sudden shocks to the stakeholders concerned. Also, any policy/guidelines with respect to the change in allocation of gas should be prospective and it should not impact the existing users.
The panel also recommends that the ministry should focus on building LNG re-gasification terminals at the east coast of the country in a time bound manner as it would cost less for the industries/plants at the eastern side to source gas from east coast terminals than piping the fuel across the country from the West coast.
The panel said that the government should rethink its plan of introducing free market pricing for natural gas as an attempt to gain at the cost of consumers will be counter-productive and may not be in the public interest. It also said that any proposal for removal of Power Sector from the priority allocation should also be reconsidered.
The Committee recommends that natural gas should be brought under GST so that the taxes get rationalized and gas becomes cheaper and affordable. It suggests that the government should come up with a scheme like E-Bid RLNG Scheme to support these stranded plants in the intervening period with necessary exemptions, waivers and desired modifications. It also pitched for the financial support/subsidies required for the scheme may be sourced from Power System Development Fund/National Clean Energy Fund or Budgetary Grants.
It said that the power produced under the scheme may be used for bundling with other low-cost power as has been done by the NTPC earlier and the RLNG may be pooled with the domestic gas through an aggregator such as the GAIL, so as to achieve a reasonable price. It also suggested that financial support should be extended to gas-based power projects from NCEF (national clean energy fund) for their sustainability as natural gas is also a clean energy source.
(With inputs from agencies.)