Reintroduce gas subsidy scheme to revive gas power plants: APP
The Association of Power Producers (APP) ask for the reintroduction of the gas subsidy scheme and suggested a dedicated gas allocation or auction for the power industry and inclusion of natural gas under goods and services tax (GST) for a revival of the stressed gas power plant in the country.
According to media agency reports, the Association of Power Producers (APP) has insisted on the reintroduction of a gas subsidies scheme for the gas generation projects in the country which will help in the revival of the gas-based power segment.
In addition, the association has asked for a dedicated gas allocation or auction for the power industry along with the inclusion of natural gas under goods and services tax (GST) so as to maintain a tax of 5 percent across the country.
In this regard, the APP wrote a letter to the power ministry, requesting the introduction of a modified E-RLNG scheme so as to help improve the PLF of stressed gas based power generation plants in the country. As pointed out by the association, the gas-based power plants in the country are currently operating a very low PLF of around 22 percent due to a supply shortage of fuel.
The E-RLNG Scheme:
The E-RLNG scheme was introduced by the government in 2015 for the revival of stranded gas-based power plants. Considering the high price of the imported gas, the scheme recommended a haircut to be taken by all the stakeholders so as to make it competitive with other fuel sources.
It helped in the revival of PLF of many gas-based stranded power assets. However, the scheme was withdrawn after two years resulting in the return of uncertainty for gas-based power assets.
Need of the Hour:
Of the current installed capacity of 25 GW gas-based plants in India, around 12 GW are under stress. Where around 5.60 GW of these 12 GW of stressed plants were deprived of any gas supply in the last fiscal year 2019-20. While the 6.16 GW of gas plants of these 12 GW of stressed plants received the limited gas supplies in the last fiscal year.
Thus, in line with the prevailing market scenario where the gas prices are seeing upward trends globally, the reintroduction of the E-RLNG scheme with modification can help in supporting the gas-based power assets in the country while also be beneficial for the overall sector.
For this, APP has recommended the following modifications,
- 50 percent reduction on pipeline tariff charges,
- 75 percent reduction on marketing margin and
- 50 percent reduction on re-gasification charges
APP also advocated bringing natural gas under the ambit of GST. It argued that the VAT on domestic gas is entirely inconsistent with the tax on coal. For example, coal, contrary to gas, is taxed at 5 percent under the GST regime; while on the other hand, there is no input tax credit available for natural gas – as it is not covered by GST.
APP suggested that if natural gas is brought under the GST regime, it would help companies in setting off tax that they paid on input while also help in removing the cascading impact of taxes and will lead to a reduction in input cost.
