The sugar sector’s power woes in Maharashtra seem to have come to an end with the state’s power minister Chandrashekhar Bawankule agreeing to fix the entry-level tariff from cogen units at Rs 5 per unit. The minister said that power purchase agreements (PPAs) would soon be signed with the mills and millers will have to be prepared for competitive bidding. Last month, the Maharashtra Electricity Regulatory Commission (MERC) had ruled in favour of the Maharashtra State Electricity Distribution Co that has fixed an entry level tariff of Rs 4 per unit in the tendering process for cogen units. Maharashtra State Cooperative Sugar Factories Federation ( MSCSFF) and the Cogeneration Association of India had earlier expressed reservations and decided to approach chief minister Devendra Fadnavis to resolve the issue of PPAs of cogen units. Senior officials of the federation pointed out that MERC had earlier approved a tariff of Rs 6.33 per unit for cogenerated power for the 2017-18 period and therefore should reconsider this as the entry-level tariff for the current season. However, now the base power purchase rate has been fixed at Rs 5 per unit.
Earlier, MSEDCL had fixed Rs 4 per unit as the entry-level tariff for purchase of 100 MW in a phased manner from cogen units in the state and also recommended irreversible bidding, which could lower the power purchase costs. “As per the terms and conditions for the bidding process, the EMD (earnest money deposit) was fixed at Rs 10 per MW and a performance guarantee of Rs 20 lakh per MW was decided by MSEDCL. Clearance certificates were required from Maharashtra Energy Development Agency (MEDA) and copies of the crushing licences as well,” the official said. The official said that when the petition came up for hearing with MERC, MSEDCL agreed to withdraw the petition with modifications following objections raised by the federation and the cogen association.
The sugar sector had opposed the petition on the grounds that when there were no PPAs in place and at an entry level tariff of Rs 4 per unit, the economics of the cogen sector would be affected in a negative manner since cogen units are not in a position to pay Rs 100 crore as EMD and Rs 200 crore as performance guarantee. According to people in the industry, finance institutions that were funding cogen projects were not ready to release funds unless PPAs were signed. After a meeting between CM Fadnavis and Nationalist Congress Party (NCP) Chief Sharad Pawar, also the chairman of Vasantdada Sugar Institute (VSI), the CM had agreed to direct MEDA to issue clearance certificates. In the revised petition, MSEDCL reduced the EMD to Rs 1 lakh per MW and performance guarantee money to Rs 5 lakh per MW but left the entry-level tariff untouched, officials of the federation said.
The industry has been stating that it is unfair to apply same conditions and parameters of solar energy to cogen power since these are separate sectors. Industry sources revealed that PPAs have been pending for a while with the government showing reluctance on power purchase from cogen when it is available at rates as low as Rs 2.70 per unit to Rs 3.10 per unit. PPAs were earlier signed at the rate of 6.71 per unit keeping farmer interests in mind. This time however, the government has not been keen to continue with the high rates.