The subsidy policy is basically aimed at running some stranded gas-based pants and ensure a mechanism for debt servicing, so that these assets don’t become NPAs.

For instance, NTPC, which holds over 25% stake in Ratnagiri Gas & Power (RGPPL) which is entitled to subsidised gas, is unable to generate any return on its equity. NTPC, sources said, is scouting for clusters of consumers among industrial units that are currently purchasing more expensive power than the stressed project would be able to produce. The idea is to get spot RNLG for supplying power to these consumers, as long-term PPAs with states is impractical for RGPPL power when coal-based cheaper power is available to them.

The 1,967 MW RGPPL had been unable to generate power for over more than a year due to the paucity of cheaper domestic gas. The project got a breather recently as it won enough imported subsidised RLNG to run the plant at just over 25% plant load factor that would produce 500 MW, for which the railways has now been tied up as consumer.

“The pact with the railways will allow us to pay the lenders but we are planning to run the plant at a capacity of 500-700 MW more to make to get a reasonable return,” a senior NTPC official told FE on the condition of anonymity. He added that the NTPC would rely on buying RLNG at spot prices that is cheaper by $3-4/mmBtu than gas contracted through long-term contract.

The RLNG currently available in the spot market is priced at $7/mmBtu compared with $11-$12/mmBtu provided by GAIL. NTPC plans to use the RLNG terminal, owned and operated by GAIL, at the RGPPL plant to process the gas but wouldn’t purchase from GAIL

Despite the availability of subsidised gas that allows RGPPL to produce power at Rs 4.7 per unit, it has struggled to find buyers as its earlier customer, the government-run firm, refused to buy expensive power two years ago citing high tariff.

Last month, RGPPL roped in the railways to procure 500 MW from the project but under the conditions attached with subsidised RLNG, the company can use the proceeds only for servicing its debt with no return on equity.