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Interaction | December 2015

Revision of tariff in many states has made biomass attractive

Lt. Col Monish Ahuja, Managing Director, Bermaco Ltd.

What areas of the segment is your company involved in?
Punjab Renewable Energy Systems Pvt. Ltd. (PRESPL) was formed under aegis of Bermaco Group in March, 2011 and is a well established player in the clean energy space and performs various activities relating to development and maintenance of energy plantation, biomass aggregation and supply chain anagement for IPPs, and process industries viz. breweries, ply board industries, downstream oil companies etc. that are involved in captive power generation and extraction of bio-fuels. Being one of the largest biomass aggregation and supply company in India in the organised sector, it currently handles nearly 1,000 MT per day of various biomasses such paddy straw, cane trash, maize cob, bagasse, cotton stalk, mustard residue, soya husk, Juliflora and biomass briquettes etc. in the states of Maharashtra, Punjab and Karnataka. In short span of 4 years, PRESPL has served more than 15 biomass power and process plants and has supplied more than 300,000 MT of various biomasses which has offset about 1,720,000 of CO2 generation.

What is your current order book and order backlog? Do you have any plans for expansions?
In a short span of 4 years, the company has grown from a start up to a Rs 180 million turnover company and has closed its first round of PE investment from Zurich based Impact PE- responsAbility. This is a big force multiplier to support biomass IPPs, process industry boilers, cogeneration plants and other industry using biomass as a feedstock. The volume of feedstock supplied to biomass power plants and process plants in increasing year on year. Last financial year, PRESPL has aggregated and supplied biomass to more than 15 nos. of operating biomass power plants and process industries. We are now expanding into other national and international territories such as Gujarat, Bihar, Andhra Pradesh, Indonesia, Mozambique, Tanzania etc. as well as manufacturing of value added biomass products such as briquettes, pellets etc.

How much growth do you expect in the sector?
Biomass power in the country has been growing at CAGR of about 19 per cent since 2006 (MNRE). Out of total biomass power installed capacity of 4,000 MW, about 1,365 MW is power generated from various agri-residues while about 2,648 MW has been generated from bagasse-based cogeneration in the country. With revision of tariff in many states such as Bihar, Haryana, Punjab, Rajasthan, Maharashtra etc., many developers are finding it attractive to go ahead with setting up of biomass based power plants in various states.

What are the difficulties you face in implementing this process?
The various difficulties faced by the developers in setting up the project are as following:
Non uniform norms for determination of tariff for procurement of power from biomass based power plants across various states. CERC has announced new tariff determination regulations for biomass power plants on 15th May, 2014. However, many SERCs still do not follow CERC norms and follow their own norms which result in low tariff and unviable operations of biomass power plants. Also, irregular tariff revision particularly of variable component of tariff has also worsened the situation.
There are policy incentives for biomass power by both Central and State Governments. However, due to highly bureaucratic and lengthy procedures, the benefits of incentives such as capital subsidy or providing land for dedicated energy plantation are not actually available to the biomass power plants.
Due to default by many operating biomass power plants, banks/ FIs are reluctant to provide debt financing to the new projects. Even if banks/FIs are ready to finance some projects, interest rate charged are exorbitant in the range of 13% to 15% resulting in stressed financials of any biomass power plant.
Before setting up any biomass power plant, a detailed biomass resource assessment in done in catchment area around proposed site. Once the plant´s operations start and biomass drawl begins, local farmers/ traders realize the true value of biomass resulting in hoarding and price escalation of biomass leading to unviable plant´s operations. Also, there is requirement of separate manpower and machinery to collect, process and transport biomass to the power plant.

This can be only overcome by either going for dedicated energy plantation in waste land or entering into long term fuel supply agreements with specialized biomass supply and processing companies such as Punjab Renewable Energy Systems Pvt. Ltd. (PRESPL). PRESPL has proposed to develop alternate source of Biomass Fuel to biomass based IPPs/CPPs. PRESPL has made strategic tie-ups with Biotech companies to develop special plant species that can be grown in ´Cultivable Waste Land´ and ´Fallow Land´. PRESPL has done Energy Plantation for Punjab Biomass Power Ltd., Oleander Farms Pvt. Ltd. and Tata Power Ltd. PRESPL is optimizing fuel purchasing through analysis, processes, technology and integrated networking. PRESPL has been investing regularly in people, processes and technology to solve fuel management challenges of biomass based power plants. PRESPL is supplying about 1000 MT of various biomasses such as paddy straw, cotton stalk, maize cob, cane trash, mustard residue etc. on daily basis to various power plants in Maharashtra, Karnataka and Punjab.

What according to you is the potential of this field in India?
Potential of power generation from various agri-residues is about 17,000 MW in the country. But, GoI has to provide following incentives or do policy modifications to bring significant investment in the biomass sector:
Interest rate sub-vention by 2-3 per cent to bring the cost of debt funding to about 10 per cent or less in order which will make projects feasible in long term.
Higher subsidy in form of generation based incentive (GBI) which will incentivise the project on achieving high PLF and improve project returns significantly.
Debt restructuring of old projects, particularly those who have been declared as NPAs or are on verge on becoming one.
Providing wastelands to biomass power plants to develop captive energy plantation so that projects can meet at-least 20-30 per cent of their fuel requirement from captive plantation.

Do you think the segment is behind wind or solar in terms of attracting investors?
Yes, due to practical difficulties as discussed above, not many developers are taking interest in the biomass sector. But nevertheless, many big players such as Tata Power, Reliance Industries Ltd. etc. are planning to enter biomass sector as it has great potential as well as high socio-economic impact particularly on rural economy.

Do you think that government promises and policies enable this segment?
Only few states like Rajasthan and Madhya Pradesh are having policy for allocation of government waste lands for captive energy plantation for operating biomass power plants. Inspite of having policy, none of the projects in these states have been able to develop energy plantation. There are lot of policy and bureaucratic hurdles such as identification of suitable wasteland, getting no objection certificate from local community (which is biggest hurdle) and long and tedious procedure for allocation of land which considerably delays the project. Even for projects where land is allocated, the development work can only be done by Gram Panchayat/joint forest management (JFM) committees with funding from MNREGA scheme. Unfortunately, Gram Panchayat/JFMs are unwilling to work for any private developer. Banks/ FIs do not provide debt for these projects as there is no precedence and they view it as highly risky business. Until and unless the Centre and states provide required policy and financial incentives for this sector, energy plantation cannot reach a significant quantum in India.

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