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SBI seeks government help to salvage Rs 1 lakh cr gas plants

In a letter to the finance ministry, SBI has sought an immediate policy intervention to revive gas-based plants worth about Rs 1 lakh crore from becoming non-performing assets. The bank has also sought bringing natural gas under the ambit of GST.

, ET Bureau|
Oct 22, 2019, 08.13 AM IST
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New Delhi: The country’s largest lender, State Bank of India, has sought immediate government intervention to salvage gas-based power plants with total capacity of nearly 25,000 megawatts and worth about Rs 1 lakh crore from becoming non-performing assets.

A senior government official said the ministries of finance and power were looking into the matter and a revival scheme was under discussion. Senior officials of the two ministries are likely to meet on Thursday to further discuss the issue.

In a letter to the finance ministry, SBI has sought a long-term policy intervention to revive gas-based plants, people in the know said. It has asked for financial support from collections of coal energy through the national clean energy and environment fund. It has sought also a ‘must-run’ status to gas-power stations, similar to renewable energy plants, and reimbursement of fixed costs from the clean-energy fund to power distribution companies that enter into long-term power purchase contracts with these gas-based facilities. The bank has also sought bringing natural gas under the ambit of goods and services tax. It said despite the full support from lenders to the projects, those were still in stress due to lack of locally produced fuel.


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The power ministry is working on a scheme proposing to run the gas-based power plants on imported LNG, to be made affordable through haircuts by central and state governments, power companies and gas transporters.

The proposed revival scheme is an extension of the previous rounds of subsidised gas auction schemes to power plants. However, this time, the ministry plans to aggregate power from these plants through reverse online auction and do away with the subsidy component. A gas aggregator is likely to be assigned and the subsidy component will arise only if the price of imported fuel increases. Giving power plants an option to sell power on power bourses is also being explored.

The proposed haircuts include waiver of state and central taxes on imported LNG, waiver of GST on re-gasification and transportation of the fuel, reduction of pipeline tariff charges and marketing margin by state-run gas transporter Gail. Electricity transmission charges for stranded gas-based projects are also proposed to be sacrificed. Power companies will not make any return on equity.

The government had launched the first e-regasified liquid natural gas (e-RLNG) scheme in March 2015 for two years. The scheme was discontinued after two bidding rounds where the power ministry received aggressive bids from companies. Power companies have been demanding the government restart the scheme as about 8,000 mw capacity is completely stranded while the rest is stressed.

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