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.