Govt cancels gas subsidy auction

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The government scrapped the tender to give out subsidy to stranded gas-based power projects to buy imported R-LNG after bids hit zero (subsidy) within minutes of the start yesterday.

"The main reason for this aggressive bidding by many players like GMR, Lanco, GVK and Gama, which secured gas supply under auction within minutes by quoting zero subsidy was assured supplies, waiver of central sales tax and low transportation cost," a senior official said.

"In a way, this is good that now firms don't want subsidy due to low price of gas in the international market. The auction will be conducted afresh on Sunday." Referring to stranded gas projects (SGP) e-auction held yesterday, a power ministry statement said, "Within 27 seconds of the initiation of process, the financial bids at Rs zero only per unit were received from bidders and within the next 8 minutes available e-bid RLNG (7.12 mmscmd) was provisionally allocated to bidders by the electronic system." Since it is provided in the tender that the per unit power system development fund (PSDF or gas subsidy) support should be greater than or equal to Rs zero per unit, the system did not have an option for bidding below that level.

Thus, the bidders did not get an opportunity to bid below that mark as there was no option for the same, which prevented them from bettering their bid, it added.

As per statement, the sufficient competition was not generated in the SGP tender and it may be possible to generate further competition among the bidders by allowing them to go for negative support (subsidy) bids.

The bids were started at a base of Rs 0.41 subsidy support by SGPs to secure a total gas supply of 7.12 mmscmd for six months till September 30, 2016.

The ministry also said that the Nodal Authority has annulled the tender process gas subsidy support for domestic gas projects (DGPs) getting sub-optimal supply under the third round due to insufficiency of technically qualified bidders.

Therefore, the 'Available e-bid RLNG' (1.1 mmscmd) earmarked under the DGP tender will be provided to SGPs. This DGP auction for gas subsidy was scheduled for today.

All the bidders of the eligible gas-based plants shall be eligible to file the technical bid under the SGP Tender Document as per the new timelines, it said.

The bidders shall be free to bid for Per Unit PSDF support in the financial bid in negative numbers, it added.

This gas subsidy is being provided under 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 DGPs.