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Aggressive Bid For Government Gas Subsidy May Question The Viability Of Project In Long Run

Power producers, including GMR, Torrent, GVK and Lanco Infratech, today put in aggressive bids at the auction for government subsidy to be used for buying imported natural gas to restart their stranded electricity generating plants.

Source: ET

SNP Insights

Ferocious bid for government subsidy on imported gas, to revive the fate of the stranded generating units, the power producer may question the viability of the project in the long run. Generating electricity at the capped tariff of INR 5.5 including subsidy seems to be unrealistic for the realisation of cost and profit at the given PLF of 30-35%. And going by the economics invloved, this would lead to the gap of around INR 1 to 1.3, in order to recover operating cost, service debt and profit.