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Appeal no. 93 of 2012

ii) Whether the State Commission has wrongly fixed the average Gross Calorific Value of biomass fuel?

iii) Has the State Commission correctly decided the Station Heat Rate for biomass projects?

iv) Whether the State Commission has erred in fixing the pre-tax Return on Equity of 16%?

v) Whether the State Commission has fixed an unviable price of the biomass fuel?

14. The fifth issue is regarding the price of biomass fuel. 14.1 According to the Appellant, the State Commission has fixed the price of biomass fuel ignoring suggestions of the State Energy Department, Central Commission's Tariff Regulations and the suggestions of the New and Renewable Energy Department of the State Government. 14.2 Ld. Counsel for the State Commission would make the following reply:

Appeal no. 93 of 2012 "The sale and transportation of biomass is an unorganized sector and the prices are influenced by the various local factors. There is no established mechanism to know the real price of biomass and the generation from biomass is yet to take off in a big way in the State and there is no reliable past data on cost. The State Commission obtained data of biomass cost in various districts in the State through Madhya Padesh Urja Vikas Nigam Ltd. and Department of New and Renewable Energy of the State. The data varied from Rs. 1000 per MT to 4500 per MT. On the basis of the data available, the State Commission considered the average cost ignoring the higher cost and considered it appropriate to take it as Rs. 2100 per MT for the purpose of determination of tariff. The fuel price determination by the Commission will be valid till 31.3.20012 and the price for the subsequent year shall be determined in the month of March preceding the FY 2013-14".

14.5 It is noticed that biomass fuel market is unregulated and unorganized and its price fluctuated depending on the demands and supply position. Besides power generation, biomass fuel is used in various industries for other industrial purposes as a substitute of coal. Therefore, it would be reasonable to consider the landed cost of coal for industrial use in the State on equivalent heat basis while deciding the price of biomass fuel. However, coal from the subsidiaries of Coal India Limited against Appeal no. 93 of 2012 linkage granted by the Government of India is available only to the thermal stations and some large industries such as Steel Plants. Most of the industries have to procure coal at market price which is higher than the rate at which coal is available to the State thermal stations through linkage from Coal India Subsidiaries. The biomass fuel is an alternative fuel for some of the industries. Therefore, it may not be correct to fix the price of biomass fuel only on the basis of the equivalent heat value of domestic coal taken by the State owned coal based thermal power stations where coal is procured from coal companies through linkages provided by the Central Government.

14.6 The Central Commission in its 2012 Tariff Regulations has fixed the price of fuel for 'Other States' which includes Madhya Pradesh as Rs. 2476 per MT. In the statement of object and reasons for the 2012 Tariff Regulations, the Central Commission has stated that New and Renewable Energy Department of Madhya Appeal no. 93 of 2012 Pradesh submitted the average rate for biomass fuel price in Madhya Pradesh as Rs. 2864 per MT for FY 2012-13 based on the information from the District Collectors and MD, M.P. Urja Vikas Nigam. However, in the absence of any detailed analysis on average biomass price arrived based on district-wise study carried out by the Government, the Commission decided to bring them in the Other States category. The basis used by the Central Commission for the purpose of normative price for biomass fuel for the FY 2012-13 is data for 8 States taking the median value of equivalent heat value approach for landed cost of coal for the thermal power station of respective States, State Commission's specified biomass norms escalated with 5% to bring at FY 2012- 2013 as well as the Ministry of New and Renewable Energy recommended prices with Indian Institute of Science suggested weightage of different biomass for different States. For Other States, the average of eight States' norms has been considered. The price decided for Appeal no. 93 of 2012 other States which includes Madhya Pradesh is Rs. 2476 per MT.