Co-generation plants are non-starters

Maharashtra government's plans to tap sugar factories as an alternative source of power to fight the huge power deficit, to the tune of 5,000-6,000 Mw, are proving to be non-starters due to the rising prices of steel and coal.

Last year, Maharashtra government launched the Urjankur Nidhi (fund) of Rs 418 crore with much fanfare in association with the Infrastructure Leasing and Financial Services (IL&FS) to tap the state's unconventional energy resources to overcome the huge power deficit.

A major aim of the fund was to help sugar co-operatives in the state to set up co-generation plants based on bagasse (biomass of the sugarcane after sugar extraction process) during the crushing season.

However, since most of the sugar co-operatives are cash-strapped. A scheme was devised under which 100 per cent finance was to be provided from fund to these projects. The 20 per cent in form of equity and rest as debt.

Under the scheme of things, a special purpose vehicle (SPV) was to be created who would own the plant, Sugar factories had to only provide land for the plant and bagasse on which they were to get royalty.

Now, after 12 years, when financial institutes have fully recovered their costs, plant was to be handed over to sugar co-operative by the SPV.

The fund managers found the proposals of 16 sugar co-operatives viable as they had the potential to generate the 350-400 Mw of power.

However, in the last one year price of steel has gone up almost 20 per cent, making, the sale of power to Maharashtra State Electricity Distribution Company Ltd (MSEDCL) at Rs 3.05 unviable.

The rates decided by the Maharashtra Electricity Regulatory Commission (MERC) for power generated by co-generation units was unviable, said state's minister for non-conventional energy Vinay Kore.

The steel component in the co-generation plant is almost 60 per cent and the cost of commissioning such a plant is almost equivalent to any thermal plant, around Rs 4.5 crore to Rs 5 crore per Mw.

Now we are considering to move a petition before the MERC asking to raise the price of power generated by the co-generation units.