Wednesday, February 12, 2014

Ministry proposes Rs. 6,000-crore subsidy for gas-based power plants

  • The Power Ministry has moved a note before the Cabinet Committee on Economic Affairs (CCEA) with a proposal for a Rs. 6,000-crore subsidy for distribution companies and a financial restructuring package to improve the viability and utilization of stranded gas-based power projects across the country
  • The subsidy component would compensate the State discoms to act as a buffer to allow them to buy power at a higher rate and sell it at lower rates to consumers
  • This support would be for the administered pricing mechanism gas-based plants which would be hit by the increase in the price of gas from April 2014
  • As for the financial restructuring package, the note proposes that in view of the financial stress being experienced by generating entities on account of lack of gas supply, the commercial operation date (COD) would be extended by one more year to allow companies restructuring of loan any time up to three years from COD, instead of two years, allowed at present
  • It also proposes a three-year moratorium (beyond the revised COD) on debt serving coupled with waiver of penal interest. Further, in case of stranded gas-based plants, it proposed to allow capitalization of interest during the proposed three-year moratorium.
  • Another proposal stated if that if the power projects were able to import natural gas and tie up consumers, then they would get an extra loan from the Power Finance Corporation as working capital as part of the financial relief
  • It also proposes full re-financing of rupee loan with external commercial borrowing (ECB) subject to an overall cap on borrowings and project companies hedging forex risk.

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