Sugar mills stare at losses after Centre's U-turn on policy

Sugar mills stare at losses after Centre's U-turn on policy

If cane dues were not enough, 28 sugar mills across the country are facing more financial losses due to a sudden change in policy with regards to cogeneration plants by the Centre. Buoyed by a 2014 policy that encouraged cogeneration plants, the mills had undertaken either expansion or setting up of green field cogeneration plants, only to be deemed ineligible by the end of 2018. In fact, a mill that had received central assistance has now been asked to refund the amount or face criminal action.

Generation of electricity from the fibrous mass left after extraction of juice from cane is seen as an added source of income by sugar mills. The electricity generated by burning the mass – bagasse – is used to generate electricity by firing boilers. The power is enough for the daily activities of the mills and the surplus electricity is evacuated to the state electricity distribution grid for a premium. Prior to the overflow of cheap solar power, this electricity was a major source of green energy for the state power companies. Since 1998, the central government has been actively promoting the scheme and till date, 375 sugar mills in the country have commissioned plants that generate a total of 7,000 MW of excess power to state grids. Industry sources estimate that 4,000 MW of power can be further exported from the sector.

In 2014, the Ministry of New and Renewable Energy had come up with a “scheme for promotion of biomass based co-generation in sugar mills and other sectors”. Under it, mills setting up such plants were eligible for central financial assistance (CFA). Initially, cooperative mills were eligible for a maximum assistance of Rs 6 crore and private mills were eligible for a maximum of Rs 1.5 crore. The total outlay for the scheme was around Rs 170 crore.

Subsequently, 28 mills from three states — Maharashtra, Karnataka and Uttar Pradesh – applied for the assistance. The cumulative installed capacity of the projects worked out to 648 MW with exportable surplus of 420 MW. There were 25 projects for expansion and three were green field projects.

While nine were from Maharashtra, 13 were from Karnataka and the rest from Uttar Pradesh. Mills had availed loans and work had commenced with several projects nearing completion. Sources said that till 2018, there was no movement in the Ministry of New and Renewable Energy about the projects. A project appraisal committee (PAC) of the ministry met in June-August 2018 and all projects were approved. However, in a sudden U-Turn on December 4, the ministry issued an office corrigendum that vacated the approval. According to it, expansion project applications before the notification were deemed ineligible for CFA. “Applications already received for capacity addition before notification of this scheme are not eligible for sanction of CFA,” a corrigendum read.

Sanjay Khatal, the managing director of Maharashtra State Cooperative Sugar Federation Limited, said they have apprised the ministry and the Prime Minister. “It is unfortunate and we hope that the ministry will reverse the decision,” he said.