New Delhi: E-auction for allocation of imported regasified liquefied natural gas (RLNG) under the power ministry’s scheme for gas-based power plants is set to begin on Tuesday, the government announced.

“E-auction process for Power System Development Fund (PSDF) support under the Scheme for Utilization of the Stranded Gas-based Generation Capacity will start Tuesday, 12th May at 11 a.m.,” the power ministry said in a statement here on Monday.

On May 12, the reverse e-auction will be held for stranded gas-based power plants and on May 13, the reverse e-auction for plants receiving some domestic gas and running at sub-optimal levels, it added.

Imported RLNG will be made available at a reduced price under the scheme. Besides, the reverse bidding process will determine a tariff subsidy, which will be released to power plants through the PSDF.

The Cabinet Committee on Economic Affairs (CCEA) in March allowed gas imports by way of e-auctions for 31 gas-based power units, with a capacity of 14,000 MW, lying idle for lack of feed stock.

“The additional generation would help light up many unconnected households in the country, besides benefiting the public at large, including farmers and poorer sections of the society who have limited access to electricity,” the CCEA communique had said.

“This decision will also help improve grid stability and safety, as gas-based plants are ideal for being used as spinning reserve, and for meeting peaking power requirements, as they can be started and shut down at very short notice,” it said.

Power and Coal Minister Piyush Goyal told reporters that GAIL and GSPL (Gujarat State Petronet Ltd) will be permitted to import gas by purchasing on a spot basis from the international market and supply to companies, who can bid for this gas depending on their requirements.

“The bidding process will be reverse bidding, where companies can bid for this gas for up to 30 percent of their plant load factor (PLF),” he added.

Explaining the reverse bidding to keep down power tariffs, Goyal said: “We could start the bidding at around Rs.5.50 a unit and then see if we can go lower depending on the international gas prices.”

The need for this intervention has arisen because discovery of natural gas in the Krishna-Godavari basin, notably from the blocks awarded to Reliance Industries, had raised expectation of considerable increase in the availability of domestic gas in the country.

Accordingly, a large number of gas-based plants were set up by developers, some with firm allocation and others with expected allocation. But the supply of domestic gas to them started declining since 2012 and stopped from March 2013.

Since then, these plants have either stopped operating or being under-utilized.

Out of 24,150 MW gas-grid-connected power generation capacity in the country, 14,305 MW of capacity has currently no supply of domestic gas and may be considered as stranded.

“This represents an investment of over Rs.60,000 crore which is at the threshold of becoming non-performing assets. The balance capacity of 9,845 MW involving an investment of over Rs.40,000 crore is also working at a sub-optimal level,” CCEA said.

Rating agency CRISIL said in a statement on Monday that the success of the scheme will hinge on the ability of power plants that are allocated the imported RLNG to find buyers for their electricity.

“That’s because, as per the scheme, the net sale price of electricity to distribution companies (discoms) has been fixed in the Rs.4.7 to Rs.5.5 per unit band, well above current average prices in a market plagued by low demand,” it said.

“It is also higher than the average Rs.3.5 to Rs.4.5 per unit that discoms paid last fiscal,” CRISIL added.