Rupee-hit power producers seek stable gas prices now

NEW DELHI: Indian power producers have asked the oil ministry to ensure stability in natural gas prices so that plants generating electricity from the fuel remain viable.

The Association of Power Producers, which represents top companies including Tata Power and Reliance Power, has taken up the issue with Petroleum Minister Jaipal Reddy and argued that gas prices have already soared because of the rupee's depreciation as gas is priced in dollars.

Reliance Industries and its partner BP are seeking higher prices of natural gas to justify investments in deep-sea fields but the oil ministry has so far maintained that gas prices cannot be revised before 2014, as per the decision of an Empowered Group of Ministers.

Power producers are struggling because of severe shortage of coal and natural gas, which has forced many plants to run at sub-optimal capacity or idle. Top industrialists led by Ratan Tata and Anil Ambani had earlier approached the prime minister's office and persuaded the government to direct state-run Coal India to promise coal supplies.

"It is to be noted that the biggest challenge before power project developers today is to secure adequate and appropriately priced fuel to keep the power costs affordable. Since retail price of power is regulated, the issue of absorption of increase in power cost due to fuel cost escalation needs to always kept in mind," Association of Power Producers Director General Ashok Khurana said in a letter to Petroleum Minister Jaipal Reddy.

Khurana said that the rupee depreciation has made gas more costly and raised the price of power by 35% since 2007, hurting the economics of distribution companies.

"Therefore, we would like to reiterate that to meet the country's agenda of inclusive growth and power for all, it is imperative that the power prices be kept at a minimum and therefore any proposed increase in fuel prices be considered in the context of its consolidated impact to the power sector before any decision is taken in this regard," he said in the letter to the oil minister.