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ix) The Central Commission in the 2012 Regulations has fixed fuel price of Rs. 2315 for FY 2012-13 with escalation at 5% p.a. or as per the Fuel Price Indexation Mechanism as specified at the option of the Developer. The method used for fixing fuel price is media of price fixed by the State Commission, suggestion of the Ministry of New & Renewable Energy and equivalent landed cost of coal.

x) We notice that the biomass fuel market is unregulated and unorganized and its price fluctuates depending on the demand and supply position. Besides power generation, Biomass fuel is used in various industries for heating purposes. Therefore, it would be reasonable to fix the price of biomass fuel on the basis of equivalent heat rate for the landed cost of coal for industrial use in the state. However, coal from the subsidiaries of Coal India Ltd. against Appeal nos. 150, 166, 168, 172, 173 of 2011 and 9, 18,26, 29, and 38 of 2012 linkage made by Govt. of India is available only to the thermal power stations and some large industries. Most of the industries have to procure power through e-auction from Coal India or through import at prices much higher than the rate at which coal is available to the state owned thermal power stations through linkage from Coal India's subsidiaries. The Biomass fuel is an alternate fuel for some of the industries. Therefore, it would not be correct to compute the price of biomass fuel only on the basis of equivalent heat value of domestic coal taken by the state owned coal based thermal power stations where coal is mainly procured from Coal India's subsidiaries through linkage. Thus, we are not convinced by the argument of learned Sr. counsel for the licensees that price of Rs. 1000/- for 2004-05 is reasonable based on price of Rs. 1301 for 2009-10 fixed by the Central Commission on equivalent heat basis of domestic coal available to thermal power stations after applying 5% deflation factor. We do not find any infirmity in the price of Rs. 1300/- per MT fixed by the Chairman and Member-Finance, which has been revised keeping in view the increasing trend of price of biomass fuel in the market.

xi) We also do not find any infirmity in fixation of price escalation of 6% keeping in view the procurement of biomass fuel in an un-regulated and unorganized market, the fluctuations in price of biomass fuel due to demand of biomass fuel by competing industries and supply or availability of Appeal nos. 150, 166, 168, 172, 173 of 2011 and 9, 18,26, 29, and 38 of 2012 biomass fuel. We are not convinced by the contention of the licensees that the annual escalation should be fixed based on the actual cost indices, namely WPI and CPI, as the biomass fuel is sold in the unregulated market and depends on the supply from various agricultural sources and demand by the biomass based generators and other industries where biomass fuel is used in furnaces, boilers, etc., for heating and its price is not dependent on WPI/CPI indices. We are not convinced by the argument of Ld. Counsel for the Developers that escalation should be fixed at 9% so as to have linear price rise from Rs. 1300/- for 2004-05 to Rs. 2000/- fixed by the State Commission for 2009-10. In our view determination of biomass fuel at Rs. 2000/- for 2009-10 by order dated 31.3.2009 was an independent exercise and should not be linked to calculate the annual price escalation for the FY 2004-09 especially as the prices of biomass fuel fluctuates with demand and supply position in the market in different seasons. The Developers have also not produced any data of the actual price of biomass procured by them during the period 2004-09 in order to establish their claim for a rate and annual escalation higher than allowed in the orders of the Chairman and Member-Finance.

ix) The CEA Report further records as under:

"Maximum variation is noticed in the case of power plants using woody biomass, cotton stalk, chilly stalk, agricultural residues etc. Biomass is stored in open and hence is affected by the climate changes. As the biomass gets dried up a certain weight percentage will get lost due to loss of moisture, degradation due to weather changes, Appeal nos. 150, 166, 168, 172, 173 of 2011 and 9, 18,26, 29, and 38 of 2012 degradation due to pests and loss during strong winds. This woody biomass and agricultural residues such as cotton stalk, chilly stalk, mustard stalk etc. is generally stored in the power station premises for a longer duration generally varying from 3 to 6 months or even more. In addition the volatile content in the fuel will also get reduced affecting the calorific value. Thus there is quantitative and qualitative degradation of the biomass. Even though the power plant operators are claiming that such losses is as high as 30%, it is presumed that such high losses cannot take place in a period of 4-5 months of storage of biomass. The maximum variation on account of various losses can therefore be safely assumed to be about 5% only. Accordingly, the heat rate is calculated as below:

Appeal nos. 150, 166, 168, 172, 173 of 2011 and 9, 18,26, 29, and 38 of 2012

v) There is a case for providing adequate incentive to the biomass based projects beyond the generation at threshold PLF to incentivise them to generate additional power which is very much needed and to cover the various risks experienced by them and to cover the additional costs involved in enhancing availability of the plant and PLF. We agree with the order of Member-Finance that incentive of 25 paise/kWh is not adequate and should be increased to 35 paise/kWh to cover the various risks experienced by them and to meet the additional costs for enhancing availability of the plant and PLF. The Control Period of 2004-09 is already over but there is need to provide adequate incentive to the biomass based plants to maximize their generation above the threshold PLF in future. The State Commission is directed to consider increasing the incentive adequately in future to incentivise the biomass generators to maximize generation by procuring adequate quantity of biomass fuels and improving the availability of the plants which would also involve additional expenditure. The additional generation by the biomass plants will help in reducing the shortage and requirement for procurement of power in short term at high cost by the distribution licensees besides achieving other benefits for use of non-conventional source of energy. The State Commission for future may also consider a single part tariff for biomass based projects on the lines of the Central Commission's Appeal nos. 150, 166, 168, 172, 173 of 2011 and 9, 18,26, 29, and 38 of 2012 Regulations for providing adequate incentive for maximization of generation from the biomass based plants.