State power boards incur fixed cost of Rs 3,500 crore (Rs 35 billion).
About 5,000 Mw of gas-based electricity generation capacity, built at a cost of about Rs 20,000 crore (Rs 200 billion), is lying idle due to the shortage of gas in the country.
The state electricity boards prefer incurring fixed cost - of as much as Rs 3,500 crore (Rs 35 billion) -- on these plants over running them on naphtha.
For example, to generate 1 Mw of power at 80 per cent efficiency, the fixed cost is between 0.85 paise and Re 1 per unit or Rs 70 lakhs (Rs 7 million) annually.
Thus, for a 400-Mw power plant, it would be as high as Rs 280 crore (Rs 2.8 billion) annually. Fixed cost includes the return on equity, operating, maintenance and interest cost, among other costs.
However, based on gas price of $6.2 per mmBtu and naphtha price at $105 per barrel at an exchange rate of Rs 43, fuel required for the generation of 1 Mw of power for gas-based plant will be 0.0048 mmcmd of gas as compared to 1.58 million kg of naphtha.
The cost differential will work out to around Rs 1.6 crore (Rs 16 million) for gas-based power plant against Rs 6.3 crore (Rs 63 million) annually for naphtha-based power plant.
"This (keeping power plants idle) works out cheaper than buying naphtha," said P K Reddy, executive director, Andhra Pradesh Power Development Company Ltd. The state of Andhra Pradesh has around four power plants, including Gautami Power project BSES Andhra Power, with capacity of 1,000 Mw lying idle in want of gas.
"We are awaiting the K-G Basin gas at our four power plants in Andhra Pradesh. The plants have been commissioned and left. We will be generating an annual fixed cost of Rs 500 crore (Rs 5 billion) on these plants for the next 10 years", Reddy said.
When the plant is idle, the entire fixed cost and 14 per cent return of equity of the plant is recovered from the state electricity boards or consumers.
"This happens as the only alternative fuel for the gas plant is naphtha, which causes the fuel cost to more than double, compared to gas.
Thus, due to huge cost differentials, the state electricity boards prefer to bear the fixed cost of idle plants and buy cheaper power from other sources," said a Mumbai-based analyst from a research firm.
At state-run Maha GENCO's (Maharashtra State Power Generation Company), plant in Uran, around 200 Mw of capacity is lying idle with the company bearing a fixed cost of around 140 crore (Rs 1.4 billion).
The plant gets an erratic supply of 1 mmcmd gas to run the plant.
"The additional gas from the K-G basin will enable the recovery of the fixed and variable costs through higher capacity utilisation and power generation," said a Mumbai-based analyst. The government has already announced the allocation of 18.7 mmcmd of gas from K-G basin to 13.4 Gw of power projects.
"This capacity is enough to wipe out the power deficit in the state of Maharashtra, alone.
India currently has a gas-based installed capacity of 13.4 Gw, which operates at an average plant load factor of 46 per cent, based on administered price mechanism for gas and spot purchases.
While 1.1 Gw of capacities have not yet been commissioned due to gas supply shortage, another 1 Gw operating on liquid fuel can change over to gas.
All these plants, say analysts, could potentially operate at 90 per cent PLF with supply of around 76 mmcmd. At present, 37.5 mmcmd gas is available.