“It’ll Be Impossible To Sell Gas-Based Power”

Expensive gas-based power has few takers, says state-run NTPC chairman and managing director Arup Roy Choudhury, who feels it may be more viable to instead look at imp­orted coal. (NTPC has a 2005 lawsuit against Reliance to buy gas at $2.34/MMBTU). Exc­erpts from an interview with Lola Nayar:

What would be the impact of the gas price increase?

The proposed gas price increase will add Rs 2-2.5 per unit (of electricity). I don’t think it will find favour with state power distributors. Nobody is willing to pay Rs 6-7 per unit of power. States like Maharashtra, Gujarat, UP and Delhi have been refusing gas-based generation as fuel cost of gas (at variable cost) at present per unit is in the range of Rs 2.40-2.90. If at $4.2 per MMBTU we are finding it difficult to sell power to the state utilities, at the proposed price, it will be impossible to sell gas-based power. The rising cost of the dollar will also add to the burden of the beneficiaries significantly. In this scenario, imported coal power may well be cheaper option.

What does high gas price mean for NTPC?

Around 75 per cent of the power generation cost is the fuel cost. At the present cost of domestic gas, at $4.2 per MMBTU and prevailing regassified LNG (RLNG) prices, more than 3 billion units of power did not get requisitioned in the first quarter. If the gas price goes up further, I see no demand at that rate. At present, almost 1800-1900 MW gas-based power is not being requisitioned and we have put on hold our capacity addition of about 4000 MW in the gas-based power plants set for the 12th Plan.

Are you using rlng in your gas-based power plants?

Regassified lng is only being used for incremental peaking requirement of the beneficiaries since domestic gas and coal prices have increased. Therefore, RLNG consumption has reduced drastically. rlng is available but at not less than $16. Even at $10-11 per MMBTU, which some companies say they hope to get (from abroad) soon, it is impossible to generate power that will have off-takers under the present mechanism unless the state governments earmark it for peaking power. This does not look possible.