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Biomass-based power producers seek interest subvention

According to reports, biomass-based power producers have knocked on the doors of the Ministry of New and Renewable Energy for lobbying with the Ministry of Finance for a 2 per cent interest subvention for the loans taken by them.

The Indian Biomass Power Association had approached the Ministry of Finance with this (among others) request. However, last month the Ministry wrote back to the Association noting that it had considered the Association’s requests in consultation with the Reserve Bank of India.

“The need and justification for providing interest subvention for biomass power plants may be taken up with the nodal ministry, i.e., the Ministry of Non Conventional Energy Resources,” said the Finance Ministry’s letter to the Association.

India today has 2,665 MW of biomass power capacity but several plants are not in generation due to a number of reasons such as unremunerative prices for the electricity they produce and rising costs of fuel. Often, the fuel is not available at all. In addition, the biomass power producers have to contend with a plethora of charges and levies even though ‘biomass power’ is considered to be ‘green power’. For instance, in Tamil Nadu, the ‘scheduling’ and ‘system operation charges’ were hiked recently from Rs 27 to Rs 2,000 per MW, and from Rs 500 a day to Rs 2,000 a day, respectively. In addition, there is a 5 per cent electricity duty.

In view of this, the biomass producers have been asking for lower interest rates. The Association even wanted the government to fix interest rates on loans to biomass plants at 10 per cent, but this was rejected outright by the government on the grounds that interest rate fixing was up to the individual banks. The Ministry of Finance also said that the banks go by a ‘base rate’ below which they shall not lend.

However, biomass power producers have not given up hope. They have submitted a pre-budget memorandum to the Ministry of Finance in which they have sought waiver from Minimum Alternative Tax and exemption from customs and excise duty on power plant equipment.

Biomass is ‘base load’ and firm power and needs to be encouraged over other forms of renewable energy. It is also the least expensive. To set up 1 MW of capacity, it takes Rs 5.5 crore, against Rs 6.5 crore for wind and Rs 9 crore for solar. Each MW capacity of biomass produces 8.5 million units of electricity a year, against 2.4 mu for wind and 1.7 mu for solar, under good conditions.

One comment

  1. Remove AD and also the MNRE subsidy on capital investment in Biomass sector. Instead provide a low interest of 3 to 5% loan to the developer and put pressure on Biomass equipment manufacturer who are fooling the entire indian sector with a fictitious high price for a low tech item. Let this system stop and bring down the cost of equipment and hence remove the capital subsidy and pay interest subsidy over 12 years so that project developers can get subsidy only when they supply the defined power capacity to grid, else no subsidy. Thus, we can make the project developers to create good quality assets.

    The cost of raw material is increasing and is a cause for worry. let the government step in to make farmers who agree to supply raw material can’t take this as an opportunity instead supply at the costs agreed, otherwise remove the free power to the farmers, make them to pay income tax (today the rich agriculturists in Punjab own Mercdies Benz and yet pay not tax as Govt of India does not tax Farmers!! who are billionairs ) etc to bring them in the main stream… Farmers shall contribute to the nation’s power crisis by selling the biomass as they are getting too many subsidies at nations exchequer….Country First….shall be understood by raw material supplier (no hoarding of biomass or no supply by dictating the price even after prior price agreement or force them to agree on contract with prompt payment from the developers), equipment supplier(no fictitious costs pr pay back to developer to support capital subsidy) and also the Project developer (no AD no capital subsidy)

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