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Biomass power plants in Tamil Nadu face cash crunch


According to reports, the Tamil Nadu Electricity Board (TNEB) owes biomass power producers nearly 50 crore – accumulated over the last eight months. The generators say the non-payment of dues has led to a cash crisis and will dampen further investment.

There are a total of 17 biomass power plants in the state, each with a capacity of 7-10MW. Nearly 130MW is contributed by independent biomass generators. As per the agreement they have with the state power utility, the payment for the power generated has to be done at the end of every month. But from November, they have not been getting any payment.

A senior TNEB official said they will be making the November 2010 payment to various independent power producers in three days. “We will pay the remaining amount in the coming months,” said the official.

Due to this the power producers say they are not able to purchase biomass feedstock. “Agri-waste including coconut stems and corn stalks are the main raw materials we use. We have to pay farmers within 10 days of delivery. We are not able to pay them now because of cash flow issues. The farmers may soon stop their supply,” said P Krishnakumar, a member of biomass power producers association.

The revenue from each plant is around Rs 1 crore per month. “Half of that is spent on raw materials and a major share of the remaining is spent on loans and salaries,” he said.

According to Tamil Nadu Energy Development Agency, the state has potential to generate 450MW of biomass power. “But due to the delay in payment, many are forced to shut down their plants. Potential investors are also not coming to start generation units due to this,” said Krishnakumar.

The association members also state that other state electricity regulatory commissions are increasing the tariff for biomass power generation. TN has extended the tariff till December. “The low tariff makes the plants unviable due to the increasing price of available biomass,” he said.

Many biomass power plant owners are opting out of the Power Purchase Agreement with the state power utility, sources said. “From July, the TNEB has asked us to either stop supplying power to private players within the state or cancel the PPA with the TNEB. Some plants which opted out are struggling now,” said a senior association member.


  1. Of all classes of energy/renewable energy generators, biomass must be the worst affected due to payment delays in TN.

    At what level of working capital lock in does the margin reduce to zero? any studies?

  2. G.Thirunavukkarasu

    Like to know where in Tamilnadu these biomass units are operating.Kindly let us know.

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