Monday Musings: A bitter-sweet tale of Maharashtra’s cogeneration journey

PUNE Maharashtra’s road towards cogeneration started in 2007 when the state government made an effort to encourage sugar mills to set up power plants using sugarcane waste. The announcement came as a major respite when Maharashtra was reeling under a massive power shortage.

Most parts of rural Maharashtra were facing eight to sixteen hours of power shortage during summer when the demand for electricity consumption is high. The farmers were getting only two to three hours of power – that too during the night – for watering the farms.

The days were difficult as industries had become wary of setting up new projects.

That’s when the government announced financial help for sugar mills to set up plants. The plants were funded through five per cent from shareholders of the factory, 5 per cent (non-refundable) from the state government, 30 per cent from the sugar development fund and 60 per cent from other financial agencies.

To meet the 5,000-MW daily power shortage, the government then passed a resolution in February 2008 to support cogeneration projects expected to generate 1,200 MW of power by 2011. The cogeneration was mainly based on Bagasse, a residue of crushed sugarcane used to create steam in the mills, and can also be used to turn turbo generator blades to produce electricity. The government initially identified 55 mills based on their audit reports.

Within a couple of years when cooperative and private mills started producing power, the powerful sugar lobby in the state – then mostly controlled by politicians in Congress and Nationalist Congress Party (NCP) – tweaked the rule. Those in power and who were sugar barons amended the law towards the end of 2009 to allow them to sell 50 per cent of the electricity their sugar factories produce in the open market anywhere in India. This was a departure from the original draft of the policy which had mandated cogeneration plants to sell the electricity within the state to power utilities.

The remaining 50 per cent of electricity too was also not to be cheaper as the Maharashtra Electricity Regulatory Commission on the demand from the sugar lobby hiked the power tariff by 57 per cent from ₹3.05 to ₹4.79 which in the subsequent years had gone up to ₹6.60 per cent. Yet mills preferred to sell in the open market where rates were even higher during peak hours. Income from the by-products helped boost the mills’ profitability as the price of sugarcane and sugar is controlled by the government.

For citizens, they paid to set up a power plant in sugar factories of the state but there was little they gained. Interestingly, there was little noise from those in opposition as powerful politicians controlling the sugar mills had also benefited from the policy.

Around 15 years later as the overall power generation in the state and country has improved significantly, the cogeneration story has come full circle in 2023. As reported by HT last week, many sugar mills are now producing power just enough to meet their own demands. Instead, they are utilizing the resources to set up distilleries for producing ethanol. From only 2 mills in 2007, a total of 122 sugar mills in Maharashtra were involved in co-generation till recently with 62 out of the 122 being cooperative factories and the remaining private factories.

The mills are ready to sell the power to public- utility Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) even today, but at higher rates and the sugar commissionerate is pressing for it. The MSEDCL on the other hand wants these mills to sell the power at cheaper rates given that most of these factories have already recovered their money for setting up of plants and now they require only operational costs. If the mills have their way, it will be consumers’ loss as power purchased by the public utility at higher rates will ultimately be recovered from consumers.

Sugarcane, it would seem, has sweetened the lives of many politicians in Maharashtra, but it has left a bitter taste for citizens.