Gas price hike threat looms over Indian power sector

Gas price hike threat looms over Indian power sectorNew Delhi: The light bulb in Komal’s room flickers and dies, preventing the 17 year-old from studying for high-school exams as she strives for an education that can help her escape the squalor of a slum in New Delhi.
Komal, who goes by one name, is one of the hundreds of millions in India suffering outages that can last hours a day even in parts of the national capital. The cuts may yet deepen, as a government plan to double the price of natural gas from 1 April to boost production risks making a fuel, which accounts for about one-tenth power-generation capacity, too costly.
“Gas power is extremely sensitive to gas prices,” N.N. Misra, operations director at state-run NTPC Ltd, the nation’s biggest power generator, said in a 14 February interview. “We’re currently running our plants at 35% capacity. It is anyone’s guess what will happen if the price doubles.”
India’s aim is to spur more output from Reliance Industries Ltd, operator of the country’s biggest natural gas field, and lure explorers such as Exxon Mobil Corp. by raising prices closer to global rates. The risk is that indebted electricity distributors will demand more coal-fired power instead, even as the country struggles to mine enough of the fuel and nations from China to the US seek cleaner gas-based power.
India in June approved a new formula for calculating the price of gas, which will take it to about $8.4 per million British thermal units from $4.2. The tariff would remain lower than the benchmark import price in the spot market of more than $16. That import rate was at about $8 in 2009.

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