New Delhi :  The Power Ministry has initiated the process of sourcing gas for fuel-starved power projects and has proposed Rs 6,000 crore subsidy for distribution companies so that they can sell electricity at lower rates to consumers.

However, power plants running on gas from Reliance Industries’ KG-D6 basin will have to wait for the fuel as any additional gas from those fields has been reserved for the beleaguered Dabhol project in Maharashtra till March 2015.

According to sources, the Ministry of Power has circulated a Cabinet note on the issue of gas availability to the fuel-starved power projects.

The note, which was circulated by the ministry last week, states that the Central government will give subsidy to the electricity distribution companies for buying expensive power and selling it at a discount. This support will be for the APM (administered pricing mechanism) gas-based plants which will be hit by price increase from April, 2014.

The subsidy will enable the discoms to sell power at Rs 5 per unit by getting the government subsidy for two years. “The subsidy cost to the government in FY’15 will be Rs 3,500 crore, and Rs 2,500 crore in FY’16,” a Power Ministry official said, adding that the subsidies will be given to state-owned discoms.

The Power Ministry has proposed that any additional gas after meeting the requirement of the urea plants will be given to Ratnagiri Gas and Power Private Ltd.

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Free Press Journal