The power ministry has requested the government to support gas-based plants through an appropriate subsidy mechanism as they would have to pay double for natural gas prices from the start of April this year.

In a note prepared for the Cabinet Committee on Economic Affairs (CCEA), the power ministry sought a subsidy of around Rs 6,000 crore for gas-based plants in the next two years.

The ministry said in the note, "Gas based power stations would need to be supported by the government through an appropriate subsidy mechanism. Subsidy to state discoms has been proposed for the difference in actual tariff and Rs 5/unit for Rs 2014-15 and Rs 5.50 for 2015-16."

The indicative subsidy to be borne by government would be nearly Rs 3,621 crore and Rs 2,056 crore in FY2014-15 and FY2015-16, respectively.

The prices for all domestically produced gas, including shale and coal bed methane, are all set to jump from current $4 per million metric British thermal units (mmBtu) to $8.4 mmBtu on 1st of April this year. Currently, power production using blended imported coal costs around Rs 3.45 per unit. But, the hike in the natural gas prices will likely push the cost of power production to beyond Rs 5 per unit.

The power ministry has also sought three-year moratorium and waiver of penal interest for power projects running on low plant load factor as they are already struggling due to shortage of natural gas in the country.