'Biomass units will become unviable'

The Biomass Energy Developers Association (BEDA) is considering filing a review petition with the Andhra Pradesh Electricity Regulatory Commission (APERC), over its recent decision to considerably reduce the existing tariffs for biomass power.

The APERC had in its decision introduced a two-part tariff for biomass and bagasse co-generation power projects on the basis of fixed cost and variable cost as has been in the case of big power projects.

While the fixed cost will come down each year, the variable cost goes up each year based on the escalation formula followed by the regulator.

Addressing a press conference in the city, U Veerendra Kumar, secretary of BEDA, told newspersons that the 30-odd biomass plants in the state would become unviable if power purchase rates were reduced.

"At Rs 3.38 per unit that APTransco was paying us, we were only breaking even and covering our debt exposures. Any further reduction will definitely make operations unviable. We are ready to hand over the units to the government and let them run it, if they think it is viable. Let them pay back the investments we made," he said.

Taking into consideration that many of the NCE projects in the state were commissioned in 2000-01 and are now in the third year of operation, the unit price for power to be purchased by the APTransco from the biomass power plant would be Rs 2.80 paise against the current uniform rate of Rs 3.48 paise, as per the APERC order.

As per the tariffs applicable to the plants which are supposed to be in the first year of operation, the new prices would be Rs 2.88 paise for biomass power.

The fixed cost is linked to the year of the commissioning of the plant and it progressively comes down with the age of the plant. The variable cost has been fixed for the next five years with an annual escalation clause based on costs of operation and maintenance and fuel costs. The APERC though has allowed continuation of a five per cent escalation for the projects based on municipal waste.

"How can the APERC fix the variable cost for the next five years. Additionally, we create employment in the rural sector and every plant gives about 150 persons direct employment and indirect employment to 500 people. Apart from this, the farmers get an incremental price for paddy and we are spending close to Rs 75 lakh a month in rural areas towards purchase of biomass fuels, thereby boosting the rural economy," he said.

The main problem that units face, according to BEDA, was that the price of rice husk, the main raw material, had gone up from Rs 200 per tonne three years back to Rs 1,500 per tonne at present. "Because of the prolonged drought, fuel costs have gone up abnormally," Kumar said.

APERC has not taken into consideration the advantages that the biomass units bring to the rural economy and this downward price revision will impact everyone, BEDA members claimed.

Among the other important features of the APERC order are a fixed cost coverage will now be available up to the threshold levels of PLF (plant load factor) for co-generation, biomass and mini-hydel projects.

The tariff for projects based on industrial waste will be on par with the tariff for biomass-based projects. APTransco has also proposed to purchase 1,070 mu power from biomass projects for 2004-05.