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13. If the average calorific value of biomass is taken at 3,300 Kcal/Kg, the Station Heat Rate works out to 4488 Kcal/Kwh. At the same rate, with the average calorific value of fuel 15 of 57 (Bagasse with 50% moisture content) in respect of co- generation plant the SHR comes to 2,250 Kcal/Kg. Then, at that rate, the specific fuel consumption would be Rs. 1.99 kg per KWh. The State Commission by its tariff order has fixed the specific fuel consumption at 1.6 kgs/KWH based on sugar season operation which is similar to a biomass based power plant, as such the same operational parameter will hold good for the co-generation plants. The expert opinion rendered by Professor P.J. Paul, Chief Programme Executive, ABETS attached to Indian Institute of Science, Bangalore provided the same information both in respect of biomass as well as co- generation units. Some plants in the State of Karnataka have been installed with highly efficient equipments supplied by Indian and foreign manufacturers, like BHEL, Shin Nippon, Triveni, etc.

conventional Energy Sources' Projects; held discussions with manufacturers of plant-equipment (M/s Thermax; BHEL, Triveni); consultants (M/s Avant Grade), ASCI Hyderabad and Indian Renewable Energy Development Agency (IREDA), etc. and had made visits to the selected plants before recommending norms for biomass-based power plants. The approach adopted is fairly scientific and will promote generation of electricity from biomass. As already noted, it is the mandate of the Act of 2003 more particularly Section 86(1)(e) of the Act of 2003 read with Section 61(h) thereof and Preamble 33 of 57 thereto and the various policy guidelines to promote generation of electricity from renewable sources of energy including biomass. The appropriate Commission is bound to give effect to the statutory direction of the Act of 2003 to promote generation of electricity from renewable sources of energy. We find that this spirit of legislation is being defeated while regulating electricity purchase and procurement process of distribution licensees including the price at which the electricity is procured from the generating companies using renewable sources of energy, including biomass. Appropriate Commission is also directed to notify a set of Regulations specifying terms and conditions for the tariff determination of Non-Conventional Sources in compliance to the Section 61 of Electricity Act-2003. Where the Power Purchase Agreements (PPAs) between the distribution licensees and generating companies utilizing renewable sources of energy are in conformity with MNES guidelines or various policy guidelines as detailed above, the agreements are not required to be tinkered with but where the agreements are one sided and are not in consonance with the MNES guidelines or aforesaid policy guidelines and the terms thereof do not promote generation of electricity from renewable sources of energy, it is the bounden duty of the appropriate 34 of 57 Commission to invoke the provisions of Section 86(1)(e) to issue appropriate directions with a view to promote generation of electricity from renewable sources of energy. This call for re-opening of the power purchase and wheeling agreements by the Commission for suitable amendments in keeping with the provisions of Section 86 (1) (e) of Electricity Act-2003. Keeping in view the principle that the generation of electricity from renewable sources of energy needs to be promoted, we accept these operational norms as recommended by the CEA's report as basic norms and the Appropriate Commission to act upon them subject to minor adjustments relating to the local site conditions and further refinement after operational data of 5 years operation of biomass plants in the state aggregating to 100 MW is available. The following normative figures as recommended by CEA be adopted:

(iii) Then the Aapellant produced the certificate of a Chartered Accountant of Sri Chamundeswari Sugar Ltd. which determined the capital cost per MW at Rs. 502.5 lakhs. Reference has been made by both the parties to the fixation of capital cost by Andhra Pradesh Regulatory Commission and Kerala Regulatory Commission. Now the submission of the learned counsel for the appellant is that the cost fixed by Andhra Pradesh at Rs. 3.25 crores per MW was the cost determined in the year 2004 and it is unwise to borrow such figure which is not recent in origin. As regards the Kerala cost, it has been submitted that the Kerala figure is not even a recent past 40 of 57 because during the last 10 years preceding the determination of tariff fixation by the Karnataka State Commission there has not been any cogeneration units for generation through biomass in Kerala. It is true that Andhra Pradesh and Kerala have their figures at Rs. 3 crores plus but neither of these have calculated the cost with reference to the cost of the components with respect to any cogeneration plant set up recently in any of the said two states. As against the project cost of Andhra Pradesh and Kerala, evidence to the contrary is in abundance which equally cannot be ignored and it is not that the evidence that is produced here was not tendered before the Commission at the time of hearing. It is not our purpose to say what exactly should be the project cost for the sugar factories generating electricity through biomass. We can only point out whether the project cost fixed by the Commission is a true reflection of the ground 41 of 57 realities. Now, Sri Chamundeswari Sugar Ltd. which has 26 MW turbine generator was set up on 30th September, 2008 at the cost of Rs. 520.5 lakhs per mega watt, while GMR Industries Ltd. which was set up in the year 2007 for 24 MW power shows the project cost at Rs. 4.62 crores per mega watt. Again, Bannari Amman Sugar Ltd. situated in Tamil Nadu has set up 28.80 MW power unit assessed their cost at Rs. 4.57 crores per MW excluding the cost of evacuation which is borne by Tamil Nadu Electricity Board. Again, the appellant submitted the case of Alagawadi Beereshwar plant to show that there the project cost was more than Rs 5.38 crores per MW. If we look at the statement of object and reason of Central Electricity Regulatory Commission (Terms and conditions for Tariff Determination for Renewable Energy Sources) Regulations, 2009 we find that for the first year of the control period 2009-10 the normative capital cost for non-fossil 42 of 57 fuel based cogeneration project has been specified at Rs. 4.45 crores which excludes the cost of power evacuation facility. Instead of considering these materials what seems to have prevailed with the Commission is the cost fixation of Andhra Pradesh and Kerala which is quite age old fixation. The argument of the learned counsel for the Appellant that actual project cost must be taken into consideration instead of fixation by escalation percentage cannot be disputed. The matter of the fact is that the State Commission's tariff determination as was done in the year 2004 was almost similar to Andhra Pradesh which also did the same exercise in 2004 and the State Commission by percentile increase put the figure at Rs. 3.65 crores per MW. If we go between the lines of the Commission's order we find that the Commission took note of its earlier project cost of Rs. 3.00 crores per MW and after having taken into account of the data of Kerala, Andhra 43 of 57 Pradesh, Tamil Nadu and the claim of the stake holders the Commission preferred to put a percentile increase upon earlier project cost of Rs. 3.00 per MW so as to arrive at the figure of Rs. 3.65 crore per mega watt. We fail to understand why the Commission did not go into the details of the material and examine the same analytically as were available before it. The learned counsel for the appellant takes us to an order dated January 11, 2010 passed by the Maharashtra Electricity Regulatory Commission in Case no. 123 of 2008 wherein the State Commission after taking into consideration the order passed by the CERC made provisional fixation of tariff at Rs. 4.79 per unit. There a submission was made by the Cogeneration Association of India at Pune that project cost increased to Rs. 4.5 crore per MW or higher than that and wholesale price inflation index for fuel, power, light and lubricant, rose by 35% from 44 of 57 239.20 in the financial year 2002-03 to 324.00 in the financial year 2006-07. This submission was taken duly note of by the Maharashtra State Electricity Regulatory Commission (MERC). Against this, the escalation of cost considered by the State Commission appears to be 4.33% as compared to the original cost of Rs. 3.00 crore which was fixed in the year 2004. The legitimate question has arisen whether the said percentile increase corresponds to the reality which includes the correct inflation rate. According to the appellant they have got the price index data from the office of the Economic Advisor, Ministry of Commerce and Industry, Government of India showing the average inflation for the commodities like ACSR conductor, switch gear, material handling equipments, steel and cement at 65.74%. We do not know whether this paper was shown to the State Commission at the time of hearing. However, investment cost has to be 45 of 57 linked to escalation indices for major inputs such as steel and cement. A cogeneration plant set up by one M/s Rajsri Sugar, according to the Appellant, indicated that the capital cost of the project in January, 2009 is Rs. 5.00 crore per MW. Taking a total view of the matter it appears to us that the State Commission has not gone into the depth of the matter; and instead fixed project cost by percentile increase having due regard to its own determination for the year 2004-05 which was almost similar to Andhra Pradesh and Kerala. It is for the State Commission to again consider whether the said percentile increase was after taking into consideration of all the materials placed by the appellant. Regulation 35 of the CERC Regulations 2009 provides in detail capital cost indexation mechanism in the case of biomass power project for adjustment in capital cost over the control period with the changes in wholesale price index 46 of 57 for steel and electrical machinery. The State Commission's impugned order is too cryptic to give berth to all the materials and evidence as were produced before the Commission. The Commission opined that its fixation at Rs. 3.65 crores per mega watt is reasonable, but no reason has been assigned to show how its order on this count is, according to the Commission, reasonable. In the circumstances we are of the view that the matter needs a review, re-look and revisit with regard to such material and others as might be placed before the Commission once again when we remit the matter to it for such reconsideration.

32. As regards fuel cost escalation nothing much has to be said except saying that subject to determination of the fuel cost truly reflecting the position in the market escalation at 5% has not been objected to.

33. With respect to fuel consumption which is equally assiduously canvassed by the learned Advocate for the Appellant, the Commission has fixed Rs.1.60 per Kg. per unit. It appears that the Commission retained the same figure as it earlier fixed. It noted the fuel consumption approved by the Tamil Nadu Electricity Regulatory Commission and Andhra 53 of 57 Pradesh Electricity Regulatory Commission at Rs. 1.67 and Rs. 1.60 respectively. It also noted the station heat rate of 3600 kCal/kWh approved by the CERC which works out at 1.60 kg./unit. According to the appellant if the average calorific value is taken as 3300 kCal/kg. the station heat rate works out to 4488 kCal./kWh and at the same rate the average calorific value of fuel (bagasse with 50% moisture contents) for a cogeneration plant comes 2250 kCal./Kg. and the specific fuel consumption accordingly comes to 1.99 kg/kWh which is arrived at by dividing the station heat rate by calorific value of fuel with 50% moisture content. According to the appellant, the State Commission by its tariff order has fixed the specific fuel consumption at 1.6 kg/kWh based on non-sugar operation (no process steam) which is similar to a biomass based power plant, as such the same operation parameter must hold good for cogeneration plant also. The figure of 1.99 kg./kWh as has been put forward by the appellant is actually the report of a technical consultant named M/s. TESCOL Engineers Pvt. Ltd., Bangalore, dated 08.02.2010 in the form of a letter dated 08.02.2010 addressed 54 of 57 by the Director of the said concern to the appellant. According to this report, with average calorific value of fuel as 3300 kCal./kg. the fuel consumption is fixed at 1.36 kg. which is multiplied by the biomass calorific value of 3300 kCal/kg. to arrive at the station heat rate at 4488 kCal./unit which when divided by 2250 i.e. the calorific value of bagasse with 50% moisture we get a figure of 1.99 kg/kWh as specific fuel consumption for cogeneration plant. This report further refers to the expert opinion render by Prof. P.J. Paul. Chief Programme Executive, AVETS attached to Indian Institute of Science Bangalore, who provided the said TECSOL, the information both in respect of biomass as well as cogeneration unit. The TECSOL is finally of the opinion that for biomass / cogeneration plant having no supply of process steam and with bagasse with 50% moisture as fuel the specific fuel consumption will be in the range of 1.82 to 2.0 kg./kWh. We do not think that the Commission has committed any material irregularities in fixing fuel consumption at Rs. 1.60 per kg. per unit. The CERC gas specified station heat rate of 3600 K. Cal/unit and colorific value of 2250 K. Cal / Kg. Thus for the 55 of 57 CERC, the fuel consumption per unit works out to 1.60 Kg. / unit. The same has been the fixation of the State Commission. The assumption of the appellant are too much off the mark, and we do not find any cogent reason to interfere with the fixation.