Steps being taken to ensure power for all: Coal, Power min

Both Pradhan and power and coal minister Piyush Goyal after the meet at a press briefing said proactive measures being taken to ensure power for all. They added that power availability with stakeholders was also comprehensively reviewed.

What will come as music to the ears, the two ministers said they will try their best to keep energy costs affordable. Goyal said he has looked at all options including financing.

Goyal also said that banks will cooperate to ensure that stranded power plants be revived. He may also move the Cabinet on relief for gas-based power plants soon.

Reacting to the news, Ashok Khurana, DG, APP said it is very encouraging to hear the assurance given by the power minister and the specifics will now be worked out.

Issac George, director and CFO, GVK Power says is glad that banks will extend their support. He adds: “More important is the fact that these gas-based power projects which have been stranded for the last one and half years have got to start operating and pooling of gas is something that we are looking forward to so that even if it were to operate at 40 percent as was being proposed we personally believe that it will be a very good beginning for these gas-based projects to start generating.”

On gas pooling, P Uma Shankar, Former Power secretary said when this was discussed some time ago, the buyers, distribution companies at that time did not express any kind of enthusiasm for this, but given that the government is going to cap tariffs this might probably enthuse distribution companies far more than they were some time back.

Below is the verbatim transcript of Ashok Khurana and Issac George's interview

Q: Short on specifics, long on intent, that is the power minister. However, the only headline at this point in time is the power minister confirming our story that banks are likely to be brought onboard as far as relief package of some sort for stranded gas based power plants are concerned?

Khurana: It is very encouraging to hear the assurance given by the power minister and the specifics will now be worked out. If you recall we had met the secretary finance and he had formed their working group under the chairmanship of Santosh Nayyar. They have already given a broad recommendation and how the gas-based projects can be brought in operation and what concessions they could be given on the financial side. We hope those recommendations would form part of ministers recommendation to ministry of finance and then we will await the specifics which he was talking about and very positive step is the spinning reserve.

We have been asking the gas-based generation to be used as spinning reserve because at any given time it is the gas-based generation which can be ramped up very quickly and come handy for grid stability. All over the world you have about 15 percent or 20 percent of power reserved for spinning reserve. Once that is reserved you actually socialise the fixed cost and the marginal cost as minister has said you can provide the grid stability over there.

Q: This is probably music to your ears because as the power minister there saying that they are going to be moving the Reserve Bank of India (RBI) through the finance ministry to try and work out some sort of a relief package for stranded gas based projects. He hasn’t articulated the specific measures but we do have access to information where it could be increasing the moratorium, changing the loan tenure from 10 years to 25 years and so on and so forth, your first reactions?

George: Very positive if you ask me personally as far as the banks and financial institutions are concerned. However, more important is the fact that these gas-based power projects which have been stranded for the last one and half years have got to start operating and pooling of gas is something that we are looking forward to so that even if it were to operate at 40 percent as was being proposed we personally believe that it will be a very good beginning for these gas-based projects to start generating.

I am sure banks will lend support and they have been lending support in the past also and I believe that this is a step in the right direction.

Q: In terms of specific measures we understand that they are going to request various state governments as well as the finance ministry to bring some relief as far as VAT is concerned, CST, Octroi so on an so forth in order to really get this gas pooling mechanism to work. What is the likely impact of those measures going to be?

George: All the stakeholders in the entire process will have to take a cut. The central government which has initiated that they would reduce taxes, what they are talking about is having a ceiling for the price of cost of generation. They have also said that the developers should limit their fixed charges to 1.1. That is certainly doable and from our point of view I think we will be too happy to do it and that we feel could be a very positive step in the right direction.

Q: We had seen a swapping of gas in the state of Andhra Pradesh. I understand from my sources and something that I believe has been discussed with all stake holders that this might be needed for other states especially Gujarat swapping with Maharashtra, Goa and Karnataka. Do you think this is something that is going to go through and is it feasible? The argument being made is that they cannot supply the gas to Gujarat along the Gail pipeline and from Dabhol.

Khurana: Swapping of gas is beneficial to all the states. As on today, states must realise they are not getting any VAT from gas because no gas is flowing. It is basically only a molecular transfer over there. There is no idea of charging the same gas twice.

Shereen: What is this going to mean for stranded power projects and what is it also going to mean eventually as far as tariffs are concerned because the minister there pointing out that there is going to be in a sense a ceiling or a cap on power tarrifs?

Shankar: I would definitely agree with the other panellists that it appears to be quite encouraging the way things are being spelt out now. We don’t really have specifics but both the ministries and also the finance ministry would be working together to see that these stranded projects come on line again. I also saw there was a report submitted by Mr Santosh Nayyar. My feeling is that that report probably covers an entire set of projects, not only gas based projects; a lot of other projects have been stranded for various other reasons.

So, if Reserve Bank of India (RBI) and the banks would assist in the revival of these projects that would be a very great sign for the power sector. The minister had talked about using these gas based plants for peaking power. So, that will also mean an increase in tariffs and while he discussed the matter with all the stakeholders it will be very crucial for them to take on both the distribution companies of the state which will be ultimately using the power from the gas based plants because they would need to be brought onboard in terms of tariff and in terms of actually buying the path. You might provide them the gas but if the power is going to be scheduled it is not going to be of much use.

So it is extremely crucial that as he discussed with stakeholders he must specifically discuss with the distribution companies, the concerned state governments to see that they will take the power. That is very important.

Nayantara: What I understand from my sources is that one of the proposals for gas pooling is that a Distribution Company (DISCOM) is going to have to give a three month commitment for the kind of Liquefied natural gas (LNG) it is going to need on a take or pay basis. Is this feasible because the idea is for GAIL to be able to procure LNG more efficiently with that prior commitment?

Shankar: I recall that we went through this process at some point in time attempting to pool gas but the buyers, the distribution companies at that time did not express any kind of enthusiasm for this, but given that the government is going to cap tariffs this might probably enthuse distribution companies far more than they were some time back. So if that is the case then I suppose the power will be brought.

That is why I said you need to get the distribution companies to come onboard to accept the kind of tariffs that will work out and also provide a kind of arrangement for buying power for the next three months so that GAIL can go forward and organise LNG supplies. Otherwise the thing will not work. So, again I repeat it is extremely crucial that the minister discusses with the state governments and DISCOMs and buy them into this entire arrangement.