Bagasse-generated power from UP sugar mills dropped to six-year low in FY24

Sources attribute the slump in power production from bagasse to govt's reluctance to revise tariff rates

Once billed as a big source of alternative revenue for the sugar sector, the share of bagasse-generated electricity slumped to 41 per cent of the total power generated from renewable energy (RE) sources in Uttar Pradesh (UP) in FY24, the lowest in six years.

 

According to data sourced from the Central Electricity Authority (CEA), sugar mills generated around 2923.56 million units of power from bagasse in FY24. In FY19, it comprised around 76 per cent. Since FY19, the total power generated through cogeneration in the state has dropped by almost 32.3 per cent.

 

Bagasse is a by-product of sugarcane and it is burnt in a boiler to produce steam, which is then used for generating electricity. Electricity from bagasse is considered a renewable source of energy.

 

In Uttar Pradesh, around 44 sugar mills out of the 122 have cogeneration facilities from bagasse, most of them in the private sector. Over the last 10-15 years, sugar companies have deployed around Rs 7,000-8,000 crore towards cogeneration. Sugar companies have a total installed capacity of around 2,000 megawatts from cogeneration facilities. However, they only produce around 600-700 megawatts.

 

Sources attributed the drop in power production from bagasse to the government’s reluctance to revise the price at which it purchases this power from sugar companies.

 

According to top industry sources, sugar companies earlier supplied power produced through cogeneration at a rate of Rs 5 per unit. However, in 2019, this was lowered to Rs 3.8 per unit. 

 

Earlier, the government had fixed the power purchase rate from cogeneration, assuming a bagasse price of Rs 2,100 per quintal. When the rates were lowered, the bagasse price was assumed at Rs 1,100 per quintal.

 

“At present, bagasse is sold in the open market at around Rs 2,700-2,800 per quintal, but our power rates are fixed at a price which assumes the bagasse rate at Rs 1,100 per quintal. Therefore, what we are demanding is that the government at least brings back the price at which it earlier used to buy power from us,” a senior official from a UP-based sugar mill told Business Standard.

 

He said whatever power was produced was being largely used for self-consumption by sugar mills as selling to the government was unprofitable.

 

“This has put at stake the huge investments made by the sugar companies for cogen power,” the official said.

 

“The irony is the government is willing to purchase power from the open market at a rate of Rs 8-12 per unit but is not willing to pay us a price which is just Rs 5 per unit,” the official added.

 

According to official data, UP produced around 157,873 million units of power in FY24, of which the share of renewable energy was just around 5 per cent. In March 2024, out of the 433 million units of RE produced in the state, bagasse and similar based-sources comprised just around 2.4 per cent, the data showed.