Waiting To Be Tapped

Consider this. Thiru Arooran Sugars, a sugar factory in Tamil Nadu, supplies up to eight MW of power to the state electricity board. From the same state, Dharani Sugars, has a similar surplus on offer while Kothari Sugars and Chemicals can supply upto seven MW and Rajashree Sugars and Chemicals, around six MW. In Maharashtra, a handful of sugar cooperatives are following suit on a smaller scale with 1.5 MW of surplus power and in Uttar Pradesh, Dhampur Sugar and Agauta Sugar can supply four MW and 3.5 MW of power each.

Across the country, sugar mills are being tapped as alternative sources of power. And even though the supply from such mills is still a trickle, the government and policy makers are thrilled at the prospect. If all goes to plan, they expect sugar mills to crank out around 3,500 MW of power through cogeneration plants.

For the sugar mills, power could be an attractive source of income. But convincing them that it would indeed be so is proving to be an uphill task. Many of the old mills are reluctant to change. Besides no one wants to chase the state electricity boards (SEB), the main purchasers of power, for their dues. The SEBs are known to default heavily on payments.

However, as many in the industry and outside see it, sugar barons could end up earning more from power than sugar. And once the initial hurdles are passed, the sugar mills could turn into mini-power centres. Here is how and why.

A simple switch

For sugar mills, bagasse is the residue after extracting juice from cane stalks. Until a decade ago, sugar mills in India would simply burn it as waste. But over the years, bagasse has become a fuel for producing steam and electricity. The steam is used for driving turbines and the electricity generated, consumed in-house.

The mills could use bagasse to make paper. However, as S P Sahajpal, vice president of Desein Private Limited, a consultancy and turnkey contracting company working in the power industry, explains, the mills in Maharashtra and Gujarat do not have flowing water around to treat and dispose off their effluents. With stricter environmental regulations in place, bagasse-based paper mills are totally ruled out and cogeneration plants are in.

The task now is to convince the mills that much of the power they consume could in fact be sold at the marketplace. The mills can use the bagasse more efficiently to generate surplus power for other industries. For the state electricity boards, it would mean getting extra power with no extra investments. All that they would need to do is wheel the power from the factories and distribute it to their customers. Not only is it a cheaper alternative but also an environment friendly proposition. Says Dr B S K Naidu, executive director, Indian Renewable Energy Development Agency Limited (IREDA), The primary concern of the mills was to get rid of the bagasse. But now the energy conservation culture is being infused and they realise it is highly remunerative.

At last count, there were 455 sugar factories in the country with a cane-crushing capacity ranging from 1,250 tonne to 10,000 tonne per day (tcd). For every tonne of sugar cane crushed, 30 per cent baggase residue is generated. A 2,500 tcd unit can export around three to 12 MW power depending on the boiler pressure and kind of configuration while, those with more than 7,500 tcd, can export between nine and 30 mw. According to Dr Naidu, roughly 104 MW has been installed with help from IREDA which has sanctioned around Rs 100 crore, of which about Rs 45 crore has been disbursed.

The Asian Development Bank has agreed to put up US $100 million for renewable energy projects operated by IREDA. Of this bio-mass based cogeneration programmes will get US $20 million. The budgetary allocation for IREDA too has gone up from Rs 378.74 crore in 1996-97 to Rs 408.17 crore in 1997-98.

The problem is that Indian sugar mills are energy inefficient. Most mills use low pressure boilers (42 kg pressure), which do not exhaust the power potential of the plants. With an extra 10 to15 per cent investment, mills can go in for 63 kg boilers which achieve more heat content and energy. If IREDA can convince the mills of the need to switch over, it would be half the battle won. A 7.5 MW unit will need an investment of Rs 15 crore.

Convincing the industry

Conservative players in the industry are reluctant to change. Some mills have scented money and are moving towards more efficient generating machinery but the numbers are small.

IREDA finances upto 75 per cent of the project cost at 18 per cent interest for a 10-year loan. But to be eligible for this loan, the factory should not have accumulated losses and should show profits in the last year of operation.

Another reason why mills are holding out to IREDA is the fact

that the main power purchasers, the SEBs, are habitual defaulters. With National Thermal Power Corporation and National Hydroelectric Power Corporation having problems recovering dues, the smaller mills do not fancy their chances. Payments are simply not assured and we do not want to take a chance, says a north-based indus-trialist.

The buyback rate fixed by the ministry of non-conventional energy sources (MNES) is Rs 2.25 per kwh. But not all state governments stick to the norm. Punjab, for instance, buys at Rs 1.50 per kwh. While Tamil Nadu clears bills in around two months, Uttar Pradesh hands out letters of credit, which nobody is willing to accept.

While Karnataka is paying Rs 2.65 per unit, three years ago also, Maharashtra was buying power at Rs 2.25 per unit and in 1997 too, it is offering the same price, complains Jayant Patil, managing

director, Rajarambapu Patil SSK. The factory has got a captive cogeneration plant. It now has permission to set up another 25 MW plant, which will cost around Rs 65 crore. Patil believes that more plants will come up if the state increases its

purchase price.

Some states let mills sell power directly to the industry. According to MNES guidelines, they can sell to high tension line consumers within the state at mutually agreed rates. Only Madhya Pradesh and Punjab permit this. Maharashtra allows third-party sale only to sister concerns while in Uttar Pradesh, third-party sale must be within a radius of five km. All this makes it difficult for the mills to supply power to outsiders.

The mills face another problem: finding alternative fuel when sugar is not in season. Using any other fuel pushes up costs but the SEBs are not

willing to up the purchase price. Thats why a recent advertisement for an independent bagasee-based power project in Maharashtra didnt generate enthusiasm. This is not such a problem for mills with a longer crushing season. Mills in Tamil Nadu, for instance, have an average crushing season of eight-and-a-half to nine months against the other states, where it lasts for six to seven months.

Mills also have to get around the high moisture content in bagasse, which brings down efficiency. According to Sahajpal, bagasse has a moisture content of 51 to 53 per cent, which reduces the efficiency of the utility. One way of solving this problem, says Sahajpal, is by exposing bagasse to atmosphere for longer days but mills do not have that much storage space.

He hopes, along with policy makers and planners, that this will change. As the country struggles with power shortages and the lack of funds to set up new

capacities, sugar mills could step into the gap. And even though their contribution will not be much, it will be extremely

welcome in a country as short of power as India.