State-owned NTPCBSE 0.79 %, Essar Power, GMR and Tata PowerBSE 0.43 % will participate in two days auction for Rs 1,600 crore subsidy for buying costlier imported gas for running their power plants beginning tomorrow.

This is the third reverse e-auction for subsidy support for buying 10 million standard cubic meters per day of gas will be held on March 15 and 16.

"State-run MSTC Ltd will conduct third reverse e-auction to provide a total subsidy of Rs 1,600 crore for purchasing RLNG (R-Liquefied Natural Gas) imported by GAIL on March 15 and 16," a senior official told PTI.

"Earlier MSTC Ltd had planned to conduct the auction on March 15. But later the plan was changed and it was spread over two days. The auction will start at 2:00 PM and likely to be over in two or three hours on both days," official added.

"Earlier MSTC Ltd had planned to conduct the auction on March 15. But later the plan was changed and it was spread over two days. The auction will start at 2:00 PM and likely to be over in two or three hours on both days," official added.

While the auction of stranded gas-based power projects (SGP) will be held tomorrow, the domestic gas-based power projects (DGP) bid for the gas subsidy on Wednesday.

While the government will offer Rs 1,400 crore subsidy for SGPs, the DGPs will be offered Rs 200 crore to buy imported gas to run their plants.

A total of 10 MMSCMD of R-LNG will be imported to run SGPs as well as DGPs from April 1, 2016 to September 30, 2016. The expensive 8.9 MMSCMD of gas will be imported for SGPs whereas 1.1 MMSCMD will be allocated to DGPs for the six month period, as per the bid document.

This gas subsidy is being provided under the Power System Development Fund (PSDF), a scheme which was started by the government last year to revive the gas-based capacity of 24,150 MW including 14,305 MW of SGPs and 9,845 MW of DGPs.

The companies including NTPC, Essar, GMR, Lanco, GVK, Tata Power, Torrent Power, GSEC, RGPPL (Dabhol), CLP India. As many 31 SGPs and 24 DGPs will participate in the auction.

Every company will participate in auction for each plant separately to get gas subsidy for running the unit.

Earlier last year, the Centre had introduced a PSDF scheme for importing spot RLNG for the stranded gas and partly stranded gas-based plants selected through a reverse e-bidding process.

The scheme provides for financial support from PSDF. The outlay for the support from PSDF was fixed at Rs 7,500 crore (Rs 3,500 crore and Rs 4,000 crore for the year 2015-16 and 2016-17 respectively).

Auctions for the 1st phase (June 1 to September 30, 2015) of PSDF Support to gas-based power plants was held in the months of May 2015. A combined total of 10,270 MW plants were able to secure gas allocation. The entire process was completed in less than a month and gas supply by GAIL started on June 1, 2015.

Auctions for 2nd Phase (October 1, 2015 to March 31, 2016) were held in the month of September 2015 and helped in revival of gas-based generation plants with installed capacity of 11,717.72 MW. Total incremental electricity expected to be generated under phase II is 12,472.6 million units.

Power plants rarely use costly imported LNG as electricity produced from the fuel would cost much more than that from a domestic coal-fuelled plant or a domestic gas-fired plant