UPDATE 1-Guangdong extends power subsidy to ease shortage

(Adds trade comment on fuel oil import, power shortage)

BEIJING, July 7 (Reuters) - Guangdong, China's manufacturing hub, has further raised subsidies to small oil-fired power plants and extended them to May and June to help avert summer shortages, one oil trading source said on Monday.

Local authorities have allowed some 30 small oil-fired plants in the province to charge 1.14 yuan ($0.17) for each kilowatt hour (KWH) of electricity generated for May and June, said the source with direct knowledge of the subsidy.

"The increase this time (for May and June) is another 0.08 yuan," said the source from Guangzhou, capital of Guangdong. The previous tariff was 1.06 yuan per KWH.

Guangdong, one of the Chinese regions facing a serious power crunch this summer, started subsidising generators last January by allowing them to charge higher-than-normal on-grid tariffs to cope with the soaring cost of fuel oil.

Power plants have complained that the government subsidy has come too slow and is still too small to make up for the heady growth of fuel oil prices, and have for months been forced to slash imported fuel oil in favour of relatively cheaper domestic substitutes.

Fuel oil traders said the new subsidies would hardly provide a cushion to the power plants with a price threshold of around $520-$530 a tonne, versus $760 for benchmark Singapore fuel oil prices FO180-SIN, which have risen 55 percent so far this year.

The subsidy would translate into about 400 yuan for each tonne of fuel oil prices, which are now priced at 6,200-6,300 yuan per tonne, traders estimated.

"This works out to be about 6 percent or so off the current price FOB (free-on-board) basis in China. It's really not enough, and it isn't going to change anything," a Singapore-based trader said.