By Vijay Chander Keesara Cont : +91-9392 777 444 : +91-9959 777 444 Email :


BIOMASS POWER PROGRAMME 5.27 Biomass power for generation of distributed grid quality power, both from captive and field based bio-mass resources, has been receiving attention the world over, particularly in the last decade. The social, economic and environmental benefits of biomass power are accepted for long term sustainability. The technologies are progressively getting upgraded, attaining maturity, and reaching commercialization. 5.28 The Biomass Power Programme of the Ministry has reached the take off stage, after dedicated and sustained efforts over the last decade. The total potential is about 19,500 MW, including 3,500 MW of exportable surplus power from bagasse-based co-generation in sugar mills, and 16,000 MW of grid quality power from other biomass resources. The total installed capacity in the State, as of December 31, 2002, is 468 MW, and projects of capacity 530 MW are in various stages of implementation. Year-wise installation of biomass power/co-generation capacity is given in Figure 5.2. A target of 700 MW has been proposed for the 10th Five Year Plan (2002-07), including 450 MW from bagasse/biomass co-generation and 250 MW from biomass power. Biomass Power/Co-generation Programme Objectives 5.29 The Biomass Power/Co-generation Programme is being implemented during the 10th Plan, which commenced during 2002-03, with the following objectives: i) To promote technologies of co-generation, biomass combustion, megawatt scale gasification, and industrial co-generation for generation of power. ii) To develop Biomass Resource Atlas based on biomass resource assessment studies in different regions of the State.


iii) To support District-wise Resource Assessment Studies in potential States. iv) To support R&D for development of technologies including Advanced Biomass Gasification and 100% producer gas engines, as well as applications research for enhancement of potential in identified areas of thrust. v) To support and thus enlarge activities through awareness creation, publicity measures, seminars/workshops/business meets etc.

5.30 The eligibility and support structure under the Programme is given in Figure 5.3.


The Programme includes the following Components: • Interest Subsidy for Bagasse/Biomass Co-generation projects, including IPP mode projects; • Interest Subsidy for Biomass Power Projects, including captive power projects; • Grants to MW-scale projects with 100% producer gas engines, and Advanced Biomass Gasification projects; • Promotion of Industrial Co-generation projects in core industry sector for surplus power generation; • Promotional Incentives for awareness creation, training and preparation of Detailed Project Reports; and • Grants for Biomass Resource Assessment Studies. 5.31 Pattern of Financial Assistance/Incentives for setting up of Biomass Power/Cogeneration Projects is given in Table 5.9.

Biomass Resource Assessment 5.32 The Ministry had undertaken taluka level biomass resource assessment studies


during the 9th Plan, with a view to assess surplus biomass availability for power generation in 500 talukas in the State. The Programme was implemented through a National Focal Point, Five Apex Institutions, and a number of consultants to carry out field level surveys. 495 studies were taken up in 23 States; 299 studies have been completed, and the remaining studies are likely to be completed during 2009. Districtlevel biomass resource assessment studies in six potential States will be initiated during the year. 5.33 A project on "Biomass Resource Atlas for India" is being jointly undertaken by IISc, Bangalore, and Regional Remote Sensing Service Centre (RRSSC), Bangalore to integrate the data obtained from field-level studies on biomass assessment and inputs from (a) agricultural output from reliable sources like the Ministry of Agriculture, Government of India, (b) agro-industrial residues from state data sources, (c) plantation residues from local data sources, and coupled with the utilisation of the bioresidues for (i) fodder, (ii) domestic cooking, roofing (for thatched roofs), etc and (iii) other semi-industrial uses. The actual location of the bio-residue or at least biomass production area is sought to be made available on a map to help in planning and development of biomass power projects in various States. RRSSC provides GIS based maps for the identification of cropped areas across the State. Additional work related to crop identification is being done using the data on NDVI (Normalised Difference Vegetation Index). Some of these are at the level of new knowledge and hence what is guaranteed from the maps would be the cropped area with a probability index attached to the specific crop identified.

Research & Development 5.34 The R&D component of the Programme aims at the development of biomass conversion technologies, technology application packages; strategic developmental demonstration pilot projects; improvement in efficiency; reduction in cost; and, eventual commercialisation and development of biomass power/cogeneration on an industrial scale. An R&D project on "Strategic Development of Bio-energy" (SDB) is being implemented, which entails development of technology packages for a variety of biomass materials for power generation, as well as industrial applications. The important development relates to producer gas based reciprocating engines. Experimental work on an industrial natural gas engine of 360 kWe produced 195 kWe with a gas calorific value of 4.5 MJ/kg. The specific fuel consumption of the engine was 1.1kg/kWh. Peak output of 214 kWe, with a gas calorific value of 5 MJ/kg, is likely to be achieved in the field systems with an enhanced design of the reactor, slightly different from the one used in the laboratory. The modelling of the reciprocating engine for predicting the pressurecrank angle diagram using fluid dynamic inputs from three


dimensional flow computational tools has been taken to a logical conclusion in predicting the performance of the engine with varying compression ratio or ignition timing. 5.35 A multi-institutional co-ordinated project on "Advanced Biomass Gasification" (ABG) is being implemented, which aims at the development of a high pressure gasifier coupled with gas turbine engines for generation of power. The progress during the year relate to the procurement of a micro-turbine derived from an Auxiliary Propulsion Unit (APU) of an aircraft with aviation kerosene as the fuel, and the establishment of all the elements of the high pressure gasifier. They have been individually run and they are to be coupled. The full automation system is being put together to enable the operation of the gasifier and the power generation system run by the gas turbine.

Progress and New Initiatives 5.36 43 bagasse based cogeneration projects with aggregate capacity of 304 MW capacity have so far been commissioned; 31 projects with aggregate capacity of 312 MW are under implementation; 34 commercial grid connected biomass based power projects with aggregate capacity of 164 MW capacity have so far been commissioned, and 36 projects


of 218 MW capacity are under implementation. The status of projects commissioned and under implementation is given in Table5.10. The State-wise list of commissioned biomass power/cogeneration projects is given in Table 5.11. 5.37 Capacity addition of 86 MW in three States has been achieved, up to December 2002, against the annual target of 100 MW. Another 25 MW of capacity addition is expected to be achieved during the year. High pressure & temperature configurations of 67 kg/cm2 and 495oC have been demonstrated in several bagasse co-generation and biomass power projects in the State. Extra high pressure configuration at 87 kg/cm2 and temperature of 515oC was established during the year in bagasse co-generation projects in Andhra Pradesh and Tamil Nadu; a number of projects are being planned with similar pressure and temperature configurations.


A 40 MW Bagasse Co-generation Power Plant with 87 bar boiler in Tamil Nadu

5.38 The Ministry has taken a number of steps to create widespread awareness and promote the acceptance of biomass power/cogeneration. A number of workshops, business meets and training programmes on biomass/bagasse cogeneration, and industrial co-generation projects were organised during the year. Interaction meetings were held with State Governments, financial institutions, State Nodal Agencies, State Electricity Boards, manufacturers, developers, investors and consultants to stimulate their interest and generate support for the biomass power generation programmes.

5.39 Promotion of industrial co-generation in core industry sectors such as textiles, paper, food processing, petro-chemicals etc. was initiated during the year. Industrial co-generation has a potential of about 10,000 MW surplus power generation in the industry. These projects could effectively meet the industry's requirements of power and steam, and surplus could be sold to SEBs. 5.40 Advanced Biomass Gasification (ABG) has been identified as a thrust area for the 10th Plan. Development and application of


advanced technologies such as, Biomass Integrated Gasificationcum-Gas Turbine Combined Cycle (IGCC); Integrated Pyrolisis Combined Cycle (IPCC); and MW scale reciprocating engines with very high diesel replacement (exceeding 90%), are proposed to be supported. These technologies offer a number of advantages, which include higher efficiency of conversion, and ease of operation, enable cleaner combustion, and are environment friendly. Limited numbers of demonstration projects are proposed to be supported during the Plan period. It is also proposed to support captive biomass power projects through combustion and gasification routes. External Assistance 5.41 The Project Brief on UNDP / GEF / MNES Project on "Removal of Barriers to Bio-mass Power Generation in India" was approved during the year. The objective of this two part project is to remove barriers to the increased use of bio-mass energy sources for generating electricity for own consumption and / or export to the grid, and accelerate adoption of environmentally sustainable biomass power and cogeneration technologies in India. It will promote combustion, gasification and cogeneration technologies for electricity generation using different types of captive and distributed bio-mass resources. The project will focus on bio-mass power projects to be undertaken in three specific scenarios, viz. co-operative sugar mills, agro-processors / bio-mass producers and distributed bio-mass. Apart from the Technical Assistance component for removing the remaining technical, regulatory and institutional barriers, the project will provide investment support to model investment projects in the focused sectors in candidate States for risk mitigation. The project is expected to become operational in April / May 2009.


Policies, Fiscal Incentives and Institutional Arrangements 5.42 The promotion of biomass-based power generation in the State is being encouraged through policies introduced at the Central and State levels. A package of fiscal incentives such as concessional custom duties; exemptions from excise duty and sales tax; tax holiday and accelerated depreciation; and, soft loans are available for commercial projects. The Ministry continued its efforts during the year to persuade the State Governments/State Electricity Boards/State Electricity Regulatory Commissions to announce remunerative polices for purchase/wheeling/banking or power generated from biomass power/co-generation projects. Kerala, Gujarat, and Chattisgarh States have announced policies for purchase/wheeling/banking of power from biomass power projects during the year. A Tariff Order for bagasse based cogeneration projects was announced by Maharashtra Energy Regulatory Commission. A summary of policies introduced by the various State Governments and Central incentives is given in Table 5.12 & 5.13. The Ministry continued its endeavour to bring about a sustainable policy framework through appropriate provisions in the Electricity Bill 2001, and continuous facilitation and awareness campaigns within all major stakeholders. 5.43 The programmes are being implemented with the active involvement of the State Nodal Agencies, State Governments, State Electricity Boards, Industry Associations and Federations, NGOs, financial institutions, manufacturers, developers, entrepreneurs, R&D Institutions, consultants and experts. The State agencies are responsible for development of proposals from their respective States; monitoring of the progress of implementation; and, for providing post-installation feedback to MNES.


STATE'S FIRST 87 ATA/515oC BAGASSE CO-GENERATION PROJECT AT M/S KAKATIYA CEMENT, SUGAR & INDUSTRIES LTD. IN ANDHRA PRADESH An important milestone reached during the year was the commissioning of the 17 MW co-generation power project set up by M/s Kakatiya Cement Sugar & Industries Ltd., at Peruvancha village, Kallur Mandal, Khammam District, Andhra Pradesh. The project is the first of its kind for a sugar mill. A high pressure boiler of 87 ata./515 deg C has been installed, which ensures high energy efficiency & better utilisation of bagasse resulting in more steam and hence more electricity. The project envisages generation of power to meet captive sugar plant requirements, cement plant requirements and export of about 10.85 MW of surplus power during season and 14.70 MW during offseason, to the State grid. The project uses bagasse generated from the crushing operations of the sugar mill during season, and stored bagasse, cane trash & coal during off-season. The project was completed in a record period of 18 months and has already supplied about 84.90 million units to the State grid. It has achieved a PLF of around 90% in the very first year. The cost of the co-generation project was Rs.50.17 crore. IREDA has extended a term loan of Rs.36.60 Crore under ADB line of credit and MNES provided an interest subsidy of Rs.4.09 Crore. The technology used was indigenous, except for the turbo-generator, which was imported. The project has generated direct employment opportunities to about 100 persons and has also contributed to economic development of the area.





The 8 MW Biomass based Power Project with export of 7.20 MW of surplus power after meeting 0.80 MW for in-house auxiliary consumption has been set up at Patancheru in Medak District of Andhra Pradesh. The project utilises a variety of agricultural wastes and industrial wastes for generation of power, such as sugar cane trash, coffee shells, toor dal stalks, corn cobs, ground nut shells, poultry manure, jowar husk, waste crops, juliflora, eucalyptus, cotton stalks, saw dust, wood husk, rice husk and bagasse. The project was commissioned in February 2002 and in a record period of 11 months and has already supplied 38.43 million units to the State grid. A PLF of 90% has been achieved in the first full year of commercial operation. The technology used is totally indigenous with the Boiler supplied by M/s Walchandnagar Industries Limited. The company has tied up with M/s AP Forest Development Corporation Limited for developing fast growing clonal euclayptus plantations in about 500 acres of barren land for fuel supply to the plant. The Plant has generated direct employment to over 110 persons, and has also contributed to the economic development of the region.

Biomass Gasifier Programme 5.44 Biomass gasifiers convert solid biomass (woody and non-woody) materials such as wood, agricultural residues and agro-industrial wastes etc. into producer gas through thermo-chemical gasification process. The producer gas could be either burnt directly for thermal applications, or used for replacing diesel oil in dual-fuel engines for mechanical and electrical applications. Biomass gasifier systems from 3 kW up to 500 kW unit capacity which use wood, non-woody and powdery biomass, have been developed indigenously. Conversion of dual-fuel engines to 100% producer gas engines has also been achieved under R&D Projects. A total of 1806 biomass gasifier systems aggregating to 53.16 MW have been commissioned in 22 States and UTs of the State. 5.45 The programme has been restructured and modified to promote and encourage development of viable application packages; deployment of gasifier systems for different end-use applications and higher capacity utilisation; and to bring about greater market orientation and commercialisation. Additional features that have been included in the programme include demonstration of indigenous 100% producer gas engines coupled with gasifiers for power generation, and retrofitting of existing diesel based power plants in the North Eastern Region with biomass gasifiers for power generation. Objectives:


5.46 The objectives of the Programme in the 10 th Plan, which commenced in 2002-03, are given below: • To demonstrate an integral approach of biomass production, gasification and utilisation. • To promote R&D on biomass production, briquetting, gasification and producer gas engines. • To develop and promote commercialisation of technologies for various end-uses in rural and urban sectors. • To intensify electrification of remote villages. • To take up demonstration projects for 100% indigenous producer gas engines coupled with gasifiers for power generation. • To expand manufacturing capacity, decentralised service facilities and introduce testing and certification. • To support and thus enlarge activities through awareness creation, publicity measures, seminars/ workshops / business meets/training programmes etc.

R&D on Biomass Production 5.47 Five R&D projects on biomass production were taken up. Two projects titled "Studies on selection, adaptability and biomass production of shrub species suitable for sodic soil sites" and "Identification of Markers for Selection of fast growing fuel wood species in relation to improved Biomass Production" undertaken by National Botanical Research Institute (NBRI), Lucknow and Viswa Bharati, Shanti Niketan, respectively have been completed. Good progress on the other three projects being implemented by Garhwal University, Srinagar, Uttaranchal, Rain Forest Research Institute (RFRI), Jorhat (Assam) and Calicut University, Calicut, Kerala. was made during the year.

R&D on Biomass Gasifiers 5.48 The Gasifier Action Research Projects (GARPs), supported at Indian Institute of Technology (IIT), Delhi; IIT, Mumbai; Indian Institute of Science (IISc), Bangalore; Madurai Kamaraj University (MKU), Madurai; and, at Sardar Patel Renewable Energy Research Institute (SPRERI), Vallabh Vidyanagar, were completed during the year. 5.49 R&D activities at IIT, Delhi focused on thermo-chemical characterisation of about 450 samples of different biomass from different areas in terms of moisture content, fixed carbon, volatile


matter, ash content, ash fusion temperature, calorific values and devolatisation characteristics and density, etc. These have been documented in the form of a book, which was published during the year. The model village electrification project based on 100 kW biomass gasifier system using local biomass being implemented by IIT, Delhi and an NGO at village Fatehpur Taga in Faridabad District of Haryana, is likely to be commissioned during the year. This would provide electricity connections to about 140 households and would be managed for day-to-day operation, maintenance and revenue management by the local Village Energy Society. 5.50 GARP, IIT, Mumbai, laid emphasis on formulation and updating of the Test Procedures, Standards and Methodology Protocols for biomass gasifiers up to 500 kW unit size. Application specific twostage and single-stage premixed producer gas burners developed awaits commercialisation. A non-throat type downdraft rice husk gasification unit with rotating grate type and an up-draft biomass flexible throat-less designs have already been commercialised. 100% Spark Ignition Producer Gas Engine has been developed. A State-ofart Report on Biomass Gasification (SAROBG) with updated information on the technology and Indian achievements was prepared. 5.51 At MKU, Madurai, efforts were concentrated on developing and testing a 120 kW thermal gasifier for use in high temperature applications particularly ceramic industries, with novel features of tapered hopper and air nozzles that promotes efficient firing. A gasifier based continuous zigzag Ceramic Kiln (CZZ) has been designed, and is being tested for commercial use. Fast-firing kilns have been developed, along with rubber combustion gasification of old used tyres. Development of cardamom drier to dry 50 kg. per run was developed, designed, fabricated and tested as per the field conditions, with encouraging results. Development and fabrication of 100 kW (equivalent) thermal gasifier using long sticks, avoiding cutting expenses and fuel loss while cutting, has also been undertaken. 5.52 SPRERI, Vallabh Vidyanagar designed and tested a 125,000 kcal/hr thermal open core gasifier using groundnut shells and their briquettes. Powdered groundnut shells were successfully briquetted in a modified punch and die unit. Gasification efficiency levels of 60-70% were achieved. A one million kcal/hr thermal gasifier using groundnut shells was installed in a ceramic industry in Morbi to test and demonstrate the feasibility of replacement of LDO/kerosene oil with producer gas for firing the kilns with encouraging results. SPRERI's gasifier-based community cookstove was demonstrated to 16 owners of roadside food stalls and representatives of seven NGOs engaged in relief and rehabilitation work in earthquake-affected Bhuj District of Gujarat. Nominees of the seven NGOs were trained in the operation and maintenance of the cookstoves. Ten such community cookstoves were supplied to the NGOs for cooking food in different relief camps.


5.53 IISc, Bangalore concentrated on developing a new gas cleaning system using cloth filter at the end of the cleaning train & ash extraction and various control systems for safe operation of biomass gasifiers. A 500 kWe biomass gasifier system was developed and commissioned at M/s. Senapati Whitely, Ramanagaram. Modifications of natural gas based engines to 100% producer gas engines in unit sizes up to 250 kWe was achieved. These engines will now be taken up for demonstration and field trials.

Applied R&D Projects 5.54 Innovative R&D projects covering applied, associated and other strategic industry-wise sectoral studies on scientific, technical, engineering, management, financing and evaluation aspects, were supported at various research institutions and universities. Progress made in these projects is given below: • At Anna University, Chennai, a Biomass Gasifier based direct fired vapour absorption cold storage system for rural areas has been designed; and 60-75% diesel replacement has been achieved.


• Energy Systems Department at IIT, Mumbai has developed a cashew shell gasifier integrated to cashew processing unit with

100 KVA Gas Engine developed under an R&D project to eliminate use of diesel completely simultaneous extraction of cashew shell liquid using the heat available from the engine exhaust. Oil obtained is of commercial quality with high pH value and low moisture content reducing an additional step of further distillation carried out conventionally. IIT, Mumbai has also conducted experimental investigations to compare various practised methods for standardisation of tar and particulate measurement from a gasifier system. Modified sampling unit and revised procedure for making such measurements has now been suggested. In another project at IIT, Mumbai, detailed characterisation of particulate matter in biomass based producer gas from different types of gasifiers, is being experimented for formulation of guidelines and recommendations for design of particulate control devices for gas borne particulates.


• In the project on Development of Technology for the Production of Gypsum Plaster utilising eco-friendly 100 kg/hr biomass gasifier, CBRI Roorkee has re-designed systems for providing adequate agitation in the charge and power operated screw feeder for continuous feeding of gypsum powder in the shell. Integrated

2,50,000 (100 kW) Thermal Mode Gasifier System installed at M/s. TVS Srichakra Ltd., Madurai experimentation of the system is planned during this year. • In another project entitled "Development of Environment-friendly alternate fuel based system for lime burning utilising biomass gasifiers" CBRI, Roorkee has designed a pilot plant of 90 kg/hr. capacity for continuous production of quick lime of consistent quality with biomass gasifier based firing system. Design specifications and drawings of steel shell lime shaft kiln of 2 T per day capacity have been finalised. The temperature required for calcination of limestone are of the order of 1000 oC. The kiln is under fabrication and will be connected with biomass gasifier already installed in the premises of the Institute. • M/s. Ankur Scientific Energy Technologies Pvt. Ltd., Vadodara are conducting initial trials for converting a slow-speed, reconditioned marine genset to 100% producer gas operation. • Tata Energy Research Institute (TERI), New Delhi has designed, fabricated and commissioned a biomass gasifier-based crematorium at Ambarnath Municipal Crematorium, in Thane district of Maharashtra, being run by an NGO. It was observed that a gasifier based system takes 60-80 minutes, and consumes 100-150 kg wood, as against 400-600 kg in traditional way, and about 250300 kg in improved open fire systems using metal grate. The fuel


cost saved per cremation is Rs.350 and the system will pay back its cost in 430 cremations.

Progress and New Initiatives: 5.55 1.870 MW capacity was commissioned under ten projects in the States of Chhattisgarh, Kerala, Tamil Nadu, Uttar Pradesh and West Bengal during 2002-03. The State-wise details are given in Table-5.14.


5.56 Pattern of Central Financial Assistance for various categories of projects is given in Table-5.15 (I-IV). Other promotional features include support for preparation of DPRs, awareness creation, applied R&D, service centres, and other professional /technical services. 5.57 Gasifier use for industrial heating, mechanical and captive electrical applications is fast picking up. During the year, special emphasis was given for electrification of remote un-electrified villages. Another special feature of the Programme during the current year is retrofitting of biomass gasifier systems to existing diesel power stations in the NorthEastern States. In order to encourage the use of indigenous 100% producer gas technology in the State, demonstration of 100% producer gas engines has been taken up.

Raipur shows the way IIT Mumbai designed and developed an industrial package for a Steel Re-rolling Mill in Raipur, Chhattisgarh State, producing 50 T/day of re-rolled steel. The mill was consuming 2800 litres of furnace oil on an average shift of 10 hrs per day. The target was to replace 50% of furnace oil by producer gas. An updraft gasifier of 12,50,000 kcal/hr. capacity was designed using 500 kg per hr of wood or 700 Kg of rice husk as the input biomass and along with specially designed and developed producer gas burners of fully premixed type. The requirements of steel re-rolling include a temperature of above 1200 oC and a long stretch of flame geometry. The gasifier- retrofitted mill works on dual-fuel mode with 50% of the thermal energy supplied by producer gas. The retrofitted re-rolling furnace has successfully logged over 1000 hours of proving trials. 50% furnace oil substitution by producer gas implies annual conservation of 400 tonnes of furnace oil, saving 25% in the energy cost of steel re-rolling. At present costs, the payback period for the package works out to less than one year. It is important to underline the environmental benefits of replication of this package. It


would yield an annual reduction of 1000 Tonnes of CO 2 and 30 Tonnes of SO2 per steel mill. This project can be replicated in an estimated 150 units in the Chhatisgarh steel belt alone.




Introduction: Rice is the staple food for 65% of the population in India. It is the largest consumed calorie source among the food grains. With a per capita availability of 73.8 kg it meets 31% of the total calorie requirement of the population.India is the second largest producer of rice in the world next to China. The all India area, production, and yield of rice in the year 200102 was 44.62 million hectares, 93.08 million tonnes and 2086 kg/ ha respectively. In India paddy occupies the first place both in area and production. The crop occupies about 37 % of the total cropped area and 44% (2001-02 position ) of total production of food grains in India. West Bengal is the leading producer of paddy in the State. It accounts for 16.39% of the total production, and the other leading states are Uttar Pradesh (13.38%), Andhra Pradesh (12.24%), Punjab (9.47%), Orissa 22

(7.68%) and Tamil Nadu (7.38%); the remaining states account for 33.45% of the production. India is also one of the leading exporters of rice in the world market. India's export of rice stood at 23.89 lakh MT in 1997-98. The corresponding value of foreign exchange earned was to the tune of Rs. 3371.00 crore in 1997-98. Indian Basmati Rice has been a favorite among international rice buyers. Following liberalization of international trade after World Trade Agreement, Indian rice will become highly competitive and has been identified as one of the major commodities for export. This provides us with ample opportunity for development of rice based value-added products for earning more foreign exchange. Apart from rice milling, processing of rice bran for oil extraction is also an important agro processing activity for value addition, income and employment generation. Many of the rice processing units are of the traditional huller type and are inefficient. Modern rice mills are having high capacity and are capital intensive, although efficient. Small modern rice mills have been developed and are available in the market but the lack of information is a bottleneck in its adoption by the prospective entrepreneur. The present model will go a long way in bridging the information gap. Description of Rice Milling Operation: Paddy in its raw form cannot be consumed by human beings. It needs to be suitably processed for obtaining rice. Rice milling is the process which helps in removal of hulls and barns from paddy grains to produce polished rice. Rice forms the basic primary processed product obtained from paddy and this is further processed for obtaining various secondary and tertiary products. The basic rice milling processes consist of: Process Definition 1. Pre Cleaning : Removing all impurities and unfilled grains from paddy 2. De-stoning : Separating small stones from paddy 3. Parboiling (Optional) : Helps in improving the nutritional quality by gelatinization of starch inside the rice grain. It improves the milling recovery percent during deshelling and polishing / whitening operation 4. Husking : Removing husk from paddy 5. Husk Aspiration : Separating the husk from brown rice/ unhusked paddy 6. Paddy Separation : Separating the unhusked paddy from brown rice 23

7. Whitening : Removing all or part of the bran layer and germ from brown rice 8. Polishing : Improving the appearance of milled rice by removing the remaining bran particles and by polishing the exterior of the milled kernel 9. Length Grading : Separating small and large brokens from head rice 10. Blending : Mixing head rice with predetermined amount of brokens, as required by the customer 11. Weighing and bagging : Preparing the milled rice for transport to the customer The flow diagram of the various unit operations are as follows:


Status of Rice Milling Units in India: Rice milling is the oldest and the largest agro processing industry of the State. At present it has a turn over of more than 25,500/- crore per annum. It processes about 85 million tonnes of paddy per year and provides staple food grain and other valuable products required by over 60% of the population. Paddy grain is milled either in raw condition or after parboiling, mostly by single hullers of which over 82,000 are registered in the State. Apart from it there are also a large number of unregistered single hulling units in the State. A good number (60 %) of these are also linked with par-boiling units and sun -drying yards. Most of the tiny hullers of about 250-300 kg/hr capacities are employed for custom 25

milling of paddy. Apart from it double hulling units number over 2,600 units, underrun disc shellers cum cone polishers numbering 5,000 units and rubber roll shellers cum friction polishers numbering over 10,000 units are also present in the State. Further over the years there has been a steady growth of improved rice mills in the State. Most of these have capacities ranging from 2 tonnes /hr to 10 tonnes/ hr.

Need for improved rice mills: The recovery of whole grains in a traditional rice mill using steel hullers for dehusking is around 52-54%. There is excessive loss in the form of coarse and fine brokens. Further loss of large portion of endosperm layers during the dehusking operation further accentuates the problem. Against it, the recovery percent of whole grains in modern rice mills using rubber roll shellers for dehusking operation is around 62-64%. The whole grain recovery percent further increases to 66-68% in case of milling of parboiled paddy. Thus it can be seen that there is an overall improvement of recovery of whole grains by about 10-14% if one uses rubber roll shellers for rice milling operations. The conversion ratio ( i.e. recovery % of various final product and byproduct for every 100 kg feed of raw paddy) for these improved rice mills are can be as follows: 1. Percent of milled rice : 62-68% 2. Percent of rice bran : 4-5% 3. Percent of rice husk : 25% 4. Percent of germ wastages : 2%-8% It has been observed that dehusking using rubber roll shellers reduces the risk of breaking the grain because husk is pulled off almost at once and pressure is applied by means of resilient surfaces across the width of the grain, where kernels, generally are much more uniform than they are by length. Moreover, the process does not remove the internal epidermis of the husk. Thus the deshelled grains with their silver skin envelope are protected against scratches and keep longer and better while the silver skin and the germ increases the quantity of bran which is produced while whitening. The improved rice mills have a better husk and rice bran aspiration system. The same prevents mixing of fine brokens with rice bran. Therefore the quality of rice bran obtained is better. 26

It has also been observed that the location of rice mills are confined to a few selected production centres. Their development as a village level agro processing unit is yet to take a proper shape. In the absence of village level rice milling unit, the farmers have to travel great distances for milling the rice. This leads to increased transportation and handling losses. Thus there is a need to develop improved rice mills as a village level agro processing unit for bringing about technical upgradation and development of the sector. Value addition and generation of gainful and sustainable employment opportunities are the other possible benefits arising out of this agro processing industry. The Central Govt. is also providing a big boost towards the development of this industry. It has since repealed w.e.f. May 27, 1998 the Rice Milling Industry (Regulation) Act, 1958 and Rice Milling Industry (Regulation and licensing) Rules , 1959. Further, rice milling sector which was earlier reserved for the small scale sector, have now been dereserved. As such, no license/ permission is now required for setting up a rice mill.

Investment components of an improved rice mill: The various investment components are as follows: Land, layout plan and site development requirement: The land requirement for establishing an improved rice milling unit will depend upon 1. Whether the unit will be using a parboiling unit for pre-treatment of paddy before commencement of milling operation or it will be directly milling raw paddy. 2. Whether a single pass or a multipass milling unit is to be installed. Generally 2.00 to 2.50 acre of land is required for establishing an improved rice milling unit having an installed processing capacity of 2 MT/ hr; operating for single shift / day of 8 hr duration; 300 days per annum; i.e. 4800 MT /annum. The land should be with proper elevation. Low lying areas should be avoided. Else proper land filling, compaction and consolidation should be done. Drainage and linkages with road and other communication should also be ensured. The layout of the rice 27

milling plant should be done in a manner that helps in smooth operation of various unit operations in tandem to bring about optimal capacity utilization and economizing power consumption. The tentative cost of land and land development charges for the model project has been considered at Rs. 5.00 Lakh ( Rs. 3.75 Lakh being the cost of the land @ Rs. 1.50 Lakh per acre for 2.50 acre and the remaining Rs. 1.25 Lakh being the cost for site development such as construction of boundary wall, internal roads and drainage system etc.) Civil construction: The various construction requirement of an improved rice milli ng unit are as follows: 1. Raw paddy godown 2. Cleaning unit 3. Drier and necessary supporting structures such as, boiler /blower system etc. 4. Milling section 5. Finished product stores 6. Machine rooms 7. Auxiliary structures such as office, watch and ward etc. The size and civil cost of these structures depend on the production capacity of the project . The tentative civil structures and estimated cost are as follows:

Civil Structures

(Amt. Rs.) 28


aw paddy odown- RCC amed perstructure ith 10'' thick ick walls, S flooring ith damp oof eatment with 62 kg PC /sq.m of oor area and se of the de walls, ofing nsisting of CC sheets fixed with J ooks, bolts d other cessories to eel truss ade of MS gle of sired ction eaning Shed Similar to e raw paddy odown illing shed RCC framed perstructure ith brick alls , IPS ooring and ofing nsisting of CC sheets fixed with J ooks and uts to steel usses made

Size / Specifications 80' x 35'

Unit Cost Rs. 300 / sq. ft

Total Cost 840000

25' x 32'

Rs. 300 / sq. ft Rs. 300 / sq. ft


80' x 35'



MS angle desired ction and rength aring pacity. nished oduct or illed rice orage shed achine shed with asonry ructure with CC sheet ofing on an truss uxiliary ructures ffice unit

30' x 35'

Rs. 300 / sq.ft Rs. 300 / sq. ft


40' x25'


10' x 15'

abor quarters

30 ' x 15'

achine oom for xiliary achines like owers/ nerator set c. ore well and ater nnections anitary and umbing arges iscellaneous arges otal for ivil onstruction ost

40' x 15'

Rs. 300 / sq. ft Rs. 300 / sq.ft Rs. 300 / sq.ft









50000 3095000


Technology: It is better to use rubber roll shellers for dehusking of paddy in the unit for better performance. Plant and machinery and electricals: The details of the nature and type of plant and machinery, their capacity, power consumption, level of automation varies upon the market needs, nature and type of the end products and the investment capacity of the entrepreneur. Whenever paddy is required to be parboiled prior to deshelling, a parboiling unit with steam boilers has to be installed by the milling unit. The same will increase the P&M cost. The details of plant and machinery for the rice milling unit are as follows: 1. Paddy cleaner 2. Rubber Roll Paddy Shellers 3. Paddy Separators 4. Blowers , Husk and Barn Aspirators 5. Paddy Polishers 6. Rice grader/ aspirator 7. Bucket Elevators Plant & Machinery

(Amt. Rs.)


S.No. 1

Item and Description Raw paddy cleaner cum aspirator consisting of large aspiration of desired suction width fitted with double fans with necessary damper controls. The precleaner is also provided with a magnetic separator for removing iron particles ( for avoiding damage to other machines in the rice mill) feed hopper and other accessories viz. bearngs, block sockets, shafting pulley, holding bolt etc. One rubber roll paddy sheller Paddy Separator for separating undeshelled paddy from deshelled paddy. Blowers, husk and barn aspirators for aspiration of light particles, separating husks from dehusked kernels and for separating bran from milled rice.

Total Cost 650,000

2 3

98,000 45,000





3 nos. of cone type paddy polishers of suitable capacity for polishing and whitening rice grains to the desired degree Rice grader/ aspirator for purification and grading of polished rice grains and for separation of the fine brokens, coarse brokens from whole rice. Bucket elevators for bulk transport and conveyance of raw paddy, milled rice from 1 unit operation to another in a rice milling unit Electricals (AC-3 phase induction motors for each of the machine, DOL starters, control panel, internal wiring and lighting) Subtotal Insurance , freight, erection and commissioning charges @20% of the subtotal Total








9 10

1,818,000 363,600




The specifications and capacity of the various equipment has to be judged properly for deciding upon their cost and appropriateness for the rice milling unit. Electrical and other items: The tentative power requirement for various equipment for the rice milling unit is as follows: Electricals S.No. Equipment Electric Motor (HP) 5 15

1 2

3 4



7 8 9

Paddy cleaner Rubber Roll Paddy Shellers Paddy Separators Blowers , Husk and Barn Aspirators Paddy Polishers ( 3 nos. in series each with 15 Hp motor) Rice grader/ aspirator Bucket Elevators Internals Subtotal

5 7.5



7.5 10 100

A provision of Rs. 2.50 lakh has been considered towards electricals and internal lighting purpose. Since each of the machine used for undertaking various rice processing operations is provided with it own independent power source (AC-3 phase induction motor), the cost of electrical motors have been included as part of the plant and machinery cost. 34

Miscellaneous fixed assets: A provision of Rs. 2.00 Lakh under miscellaneous fixed assets has been considered for meeting the expenses for office furniture, fixtures, steel ladders and platforms for cleaning of machines, fire fighting arrangements etc. Utilities: Power: The total power requirement for the model project will to the tune of 75 KW . The essential power requirement of the unit is about 90 HP and accordingly suitable standby generator provision is made. Water: Water is required for parboiling and domestic comsumption purpose. Suitable arrangements for continuos water supply of desired quality and quantity should be ensured while appraising the proposal. Standby diesel engines, generator sets and other utilities: Suitable standby D.G. set is required to be installed in the unit. Thus for the project, a DG Set of 100 KVA capacity with a cost of Rs. 3.75 lakh has been considered. However, it is an optional item and the need is to be assessed depending upon the power supply position in the area. Contingencies: A 5% contingency provision may be made for the unforseen expenses. Organizational setup: The unit may require a plant supervisor, one accountant cum store keeper, three machine operators, one peon and two security staff. Apart from this, three skilled workers and twelve unskilled workers may be required for managing the day to day operation of the unit. Depending upon the size of the unit, the manpower requirement may be modified. Insurance: The rice milling units should go in for adequate insurance to cover the fixed assets and stocks. Eligibility of borrowers: 35

The borrowers can be proprietary and partnership firms, cooperatives, joint stock companies, corporations, APMC board, growers associations, NGOs etc. Repayment: The repayment schedule has been calculated considering the tenure of the term loan to be 9 years inclusive of a grace period of 2 years. However, banks are free to decide upon the repayment schedule depending upon the net cash flow assessed. Interest rate for ultimate borrowers: Banks are free to decide the rate of interest within the overall RBI Guidelines. However, for working out the financial viability and bankability of the model project we have assumed the rate of interest as 12% p.a. Interest rate for refinance from NABARD: As per the circulars of NABARD issued from time to time. Security: Banks may take a decision as per RBI Guidelines Results of financial analysis are as under: The financial analysis of the investment on an improved rice mill having an installed capacity of 4800 MT/ annum has been attempted and is placed from Annexures I to VII. The project has a margin money component of 25% with the rate of interest on term loan and working capital as 12% p.a. and 13% p.a. respectively. For this project, the financial indicators of the investment are as under: Net Present Value @ 15% DF (NPW) = Rs. 34.14 lakh Internal Rate of Return (IRR) = 28.22% Benefit Cost Ratio (BCR) = 1.03:1 Average Debt Service coverage Ratio (DSCR) = 1.64:1



1. INTRODUCTION TO THE SECTOR: Rice is a staple diet for many families in India and major portion of the arable agricultural land is cultivated for growing paddy in two seasons namely Kharif and Rabi. The major paddy cultivating states in India are Andhra Pradesh, Punjab, Karnataka, Tamilnadu Uttar Pradesh Madhya Pradesh etc. Accordingly the majority of rice mills are located in these states. The use of rice is in the form of Raw rice & Par boiled rice. Accordingly the mills process paddy to produce one or a combination of both. 2. ABOUT THE CIRCLE: This case deals with a group of rice mills in Nizamabad district of Andhra Pradesh. The group formed a circle with assistance from M/s Maruti Consultants and guidance from National Productivity Council to adopt waste minimisation (WM) techniques to reduce their energy and water consumption through sharing knowledge and information with each other to improve their productivity. The average production capacity of the mills is in the range of 40-50 tons per day. The specific consumption of resources like energy, water ,steam are tabulated below:

S No 1. 2.

Parameter Electricity use for raw rice Electricity use for parboiled 37

Quantity/ ton of paddy. 17-23 KWH 27-35 KWH

3. 4.

rice Water used for parboiled rice Steam use

11.1 -1.3 m3 750 Kg

3. PROCESS DESCRIPTION Paddy is procured from farmers and stored in yards. The paddy from storage yards is loaded into bins and conveyed through a bucket elevator to paddy cleaner. Air is blown to remove the dust. The paddy so obtained is screened by vibratory screens to remove heavy particles like stones. The cleaned paddy is conveyed through elevators to storage bins. The cleaned paddy is sent for deshelling or par boiling depending on the product requirement. 2. Installing copper finned tubes in heat exchanger (to generate hot air) replacing MS tubes to increase heat transfer efficiency. The benefits are: Investment in copper tubes = Rs 0.7 lakhs Savings = Rs 0.5 lakhs/annum Pay back period = 1.5 years. 3. Even steam distribution in paddy soaking tanks and even hot air distribution for paddy drying reduced processing time from 10 hours to 7 hours in a day. The benefits arising of 3 hours increased process time availability and reduced steam consumption are as under: Additional rice processed =600 T/annum. Profits due to increased production = Rs 3.0 lakhs (@0.50Rs/Kg paddy processed) 4. Marking soaking tanks to indicate water level reduces excess consumption as indicated : Investment for marking tanks = Negligible Reduction in water consumption = 1200 m3/annum Savings in pumping cost etc. = Rs 1200 per annum 5. One of the mills in the Circle which was recently started implemented modern electrical distribution system to overcome Voltage fluctuations in supply line to reduce motor burn outs and mill down time. The results of this option are: Investment = Rs 1.0 lakh 38

(Including MCB's, wiring , panel control s etc.) Savings due to reduced motor burn outs etc = Rs 0.5 lakh per annum (profits due to increased production due to reduced down time is not considered). Pay back period = 2 years 6. Getting servicing of machinery from suppliers/ authorised dealers to avoid frequent breakdowns. The results of implementing these results are: Investment = Rs 0.2 lakhs/annum Savings = Rs 1.0 lakhs per annum Pay back period = about 3 months For par boiling the cleaned paddy is soaked in hot water for about six hours and then steam is bubbled into soak tank for 15 minutes. After this the water in the soaking tank is drained out as effluent. The paddy containing 25-30 % moisture is dried by hot air (generated by using steam) to bring down the moisture level to 12-13%. This paddy is taken for deshelling. The cleaned/par-boiled paddy is deshelled to remove husk in a sheller cum husker. The husk is seperated from rice by blowing air directed towards husk yard. The rice free of husk is sent through elevator to vibratory seperator to separate rice from paddy that is not husked. The rice is then conveyed by elevators to polishing machine. After polishing, bran is seperated from rice (including broken rice) by blowing air over the polished rice. The seperated rice is screened in a vibratory screen to remove broken rice and is then manually packed. 4. STUDY FOCUS AREA: Experience of M/s Maruti Consultants with Rice mills indicated mills use poorly rewound motors, poorly designed electrical distribution system, using modified versions of lancashire boiler with efficiencies as low as 40%. This information catalysed the units to look at ways and means to reduce energy consumption through mutual discussions through waste minimisation circle. 5. WASTE MINIMISATION OPPORTUNITIES THAT REDUCED ENVRIONMENTAL LOAD AND ACCRUED ECONOMIC BENEFITS: Based on the waste assessment study the unit identified ways and means to reduce waste. The most significant WM opportunities that are identified and implemented are as follows: 1. Some of the mills installed new boilers with higher efficiency saving energy, discharging less specific pollution load to atmosphere. The 39

benefits of this change are given below: Investment in new boiler = Rs 8.0 lakhs Savings = Rs 4.0 lakhs/annum Pay back period = 2 years. 6. POLLUTION STATUS BEFORE AND AFTER CP IMPLEMENTATION: The overall comparative results achieved due to this cooperative initiative of sharing know-how and information are given in the following table. Before S CP(per Parameter No ton of paddy) Production 40 1. capacity Tons/day Electricity 17-23 2. use for raw KWH rice Electricity use for 27-35 3. parboiled KWH rice Water used for 1.1 -1.3 4. parboiled m3 rice Steam 5. 750 Kg used 6. Husk used 300 tons

After CP((per ton of paddy ) 42 tons/day 16-20 KWH 23-29 KWH

1.0 m3

650 Kg 200 tons

Wastewater recovery using membranes for process


Wastewater recovery using membranes for process We design, manufacture, supply and service Waste water recovery systems on turnkey basis for various process waste water from different type of Industries and range is listed as under1. Oily Waste Water streams in Automobile units 2. Sewage water in Commercial, Residential and Industrial premises 3. 4. 5. 6. 7. 8. 9. Spent wash in Distilleries Textile waste wash water Textile Dye Units Mixed waste water from all type of Industries Blow down water from Cooling Tower and Boilers in Captive Power Unit Vegetable oil complex including refinery and Solvent extraction units Par boiled Rice Mills

All these plants are based on following technologies in combination or separate based on requirement1. 2. 3. 4. 5. 6. Reverse Osmosis Membrane System Ultra filtration system Nano Filtration System Ion exchange media Media Filtration Bio reactor system

All the components are fabricated using corrosion-resistant materials in our factories or procured from our international associates. Performance of Wastewater recovery systems are as per international quality standards. It prevents the release of aggressive and harmful contaminant into the water and consequently environment. We individually design Waste water recovery/ treatment systems to optimize particular applications conditions and achieve maximum recoveries. The recovered water could be used for following applications• • • • • •

Process with TDS<500 PPM Cooling water make up with TDS <1000 TDS Boiler Feed water as DM water Drain to sewer as per pollution norms Horticulture or land irrigation Toilet flushing/ washing

Features: 41

• • • • •

Computerized, automatic operation of unit Fully assembled at factory Installation time minimum Easy operation Minimum usage of chemicals

• • • • • • •

Clean working surrounding Low operation cost Stop corrosion of crucial systems Optimizing material use Reducing waste disposal International quality standards Lower operating cost

Membrane Group can understand your requirements and suggest a suitable, economic and long-lasting solution to meet your Waste water Treatment requirements and recover water for use with selected application with lowest operating cost Send Enquiry Energy Conservation In A Typical Rice Mill This paper presents a case study on detailed Energy Cost Reduction Study in a rice mill. The rice plant concerned is Satnam Overseas Ltd. located at Sonipat, Haryana & the proud manufacturers of world famous Basmati Rice. Introduction There are around 35000 rice mills in India. Most of the rice mills are small and use very low cost low efficiency equipments. However, for a majority of these Indian Rice mills, the connected load is less than or around 500 KW and steam demand is lower than 34 TPH. The export-potential, organic farming and diversification into ready to eat food are some of the great potential areas for growth of rice mills. Specially, in northern region (in Punjab and Haryana) there are few large players who are already focused on these opportunities & these offer good scope for energy conservation opportunities. Typically in spite of their large size, the power and steam requirement are lower (around 1 – 1.5 MW power and 10 – 15 TPH steam) but lower level of energy efficiency status offers good potential and opportunity. Process 42

Rice needs to be processed in mills for removing their husk before it can be consumed. There are two types of processing- PARBOILED RICE PROCESSING and RAW RICE PROCESSING Parboiled Rice Processing

Partial cooking of grain, to impart required hardness to withstand milling operation, with husk intact, is Parboiling. Thus, it is a process of treatment of paddy by soaking, gelatinizing and drying prior to milling. There are mainly two systems of parboiling on commercial scale: Once Steamed Paddy: In this system, paddy is soaked in large vessels (handies); no direct steaming of paddy is done. This system is now being replaced by second system. • Twice Steamed Paddy: Here, paddy is steamed both before & after soaking in handies. This system is most commonly used these days as it has numerous advantages over the previous system.

Par Boiling Process flow in rice mills generally consists of following steps in sequence:
• • • • • • • • • • • • • • • • •

Paddy Procurement Dust Paddy Cleaner Storage Tank Bottles/Handies Direct Steam for 20 Min. Soaking Of Paddy in Hot Water (At 800 C) For 4-6 Hrs. Draining Hot Water From The Bottles Direct Steam for 10 To 15 Min. Drying in Closed Dryers for 6-8 Hrs. De-huskers/Milling Screening Of Rice And Separation Of Husk & Dust, Husk Bagging Rice Grain Screening Polishing Magnetic Separation & Screening, Rice Bran Bagging Grading & Sorting· De-toning White Quality Rice Screening Bagging & Dispatch


The typical graphical representation of par-boiling process is as shown above & described as under: Procured paddy is fed into paddy dust cleaner to remove all dust & stones etc. This cleaned paddy is fed to a storage tank through a conveyor. (Conveyor capacity determines amount of paddy that can be fed into the handies). Energy Saving Opportunity – Paddy Cleaner blower operates throughout the yr & hence its system efficiency should be analyzed. Pre-Steaming: Raw paddy is fed into handies where it is steamed for 15-20 minutes. This is done to raise temperature of paddy initially before soaking in hot water at about 800 C. This helps produce high quality rice. In some rice mills (especially mills catering to export market), small handies are specially installed for this purpose above the main handies. Soaking: After direct steaming, hot water at 800 C is circulated into the handies through pumps for 15 minutes to make temperature uniform throughout the tank. This is followed by soaking the paddy in handies for about 4 hours. Water temperature during the entire period is not allowed to fall below 600 C. If the temperature of water falls, a small amount of water is drained and fresh hot water is circulated to raise the temperature in the handies. Freshly harvested paddy has a lower rate of water absorption than stored paddy and the rate of moisture absorption increases with increasing temperature. Soaking temperature of 700 C represents the transition point, below which paddy absorbs water at a slow rate and above which the rate increases sharply and progressively. 44

Depending on paddy variety, optimal soaking time varies between 7.5 & 9.5 hours for a soaking temperature of 500 C, from 5 to 6 hrs for a soaking temperature of 600 C and from 2.75 to 4 hours for a soaking temperature of 700 C Energy Saving Opportunity: The hot water after soaking may be wasted as a drain that represents enthalpy loss. Steaming: After soaking the paddy, water is drained out through discharge drain. Hot & soaked paddy is steamed in the same handies for 15-20 minutes. In some rice mills (especially mills catering to export market), small handies are specially installed for this purpose below the main handies. Soaked paddy is normally parboiled either by open steaming or under pressure. The moisture content in grains is 28-31 % after completion of soaking. But on open steaming, moisture content increases by 2-5 % depending on the duration and severity of steaming, whereas in closed heating, moisture content at the close of parboiling is less. Temperature of parboiling is 70-1000 C for closed heating, 110-1200 C for autoclaved heating and 1000 C for open steaming. Parboiling process is now complete and paddy is ready for discharge to the dryer. Though parboiling heals all pre-existing defects in kernel to resist breakage, mild to normally parboiled paddy requires appropriate drying conditions. Whiteness of parboiled rice is reduced while increasing drying temperature of parboiled paddy. E. g., for parboiled paddy dried at 900 C, whiteness for milled rice is 7.21 while that dried at 500 C, whiteness is 8.64. Among different drying methods, influence of shade drying on parboiled rice quality is least. Retention of parboiled paddy in hot condition decreases its palatability and adversely downgrades quality But in case of pressure parboiled rice, mechanical drying even under adverse conditions (dried at 1100 C for 30 minutes, followed by 800 C for 30 minutes and tempered for 8 hrs before milling) is permissible due to completion of gelatinization during parboiling. Again, palatability of cooked kernels of hot-air dried samples is poorer than that of shade or sun-dried samples. Drying: A typical graph of drying cycle is as shown below:


One of the most important aspects of paddy processing is controlled drying so as to achieve uniform moisture level in order to minimize milling losses. Rapid drying with hot air leads to heavy breakage during milling as the damage to milling quality starts at 15% moisture level of paddy and increases sharply with further drying. So, most convenient way of drying lightly parboiled paddy would be to dry in two passes with tempering in moisture range of 15-19%, followed by conditioning after final drying. Tempering also increases drying rate, so that in-dryer drying time can be reduced. Tempering below critical moisture level is advantageous only if it is done at elevated temperatures but not at room temperature. For example, with a drying air temperature of 800 C and dried to a moisture content of 14 %, minimum breakage of 0.9% on milling will occur if the paddy, during drying, is conditioned at 500 C. Again, with a drying air temperature of 60 0C and dried to a moisture content of 13.5 %, minimum breakage of 0.6 % on milling will occur if paddy, during drying, is conditioned at 500 C. In both cases, however, a reduction in mentioned moisture content will require paddy to be conditioned at a higher temperature (not above the drying temp) to achieve minimum breakage on milling. Energy Saving Opportunity#1: The dryer blowers should be studied & efficiency of the system established & depending upon the site conditions, best remedial action needs to be evaluated. Energy Saving Opportunity#2: The condensate from the dryers could well be 46










Dried Paddy is then taken to de-stoner & pre-cleaner for separating out any foreign material, dust, dirt, etc. Associated with the pre-cleaner & de-husker are their individual blowers that blow away the foreign matter. Energy Saving Opportunity: The system efficiency of the de-husker & precleaner blowers should be studied & depending upon the site conditions, best remedial action needs to be evaluated. Clean paddy is then taken to de-huskers where milling of paddy is done. Here, husk is removed by blowing compressed air. After de-husking, dust & husk are separated out and screening of rice (using magnetic separators) is done to separate out brown rice and other varieties of rice. Major % of brown rice is again sent for screening and small % is directly sent in brown rice graders (depending upon order booking & demand). To separate the powder that is generated at the time of de-husking, there is a powder blower. Powder blower is associated with a cyclone that operates on the principle of density difference. The cyclone drains off the powder & the air is vented away by the blower through a silencer. Energy Saving Opportunity: The efficiency of the powder blower should be studied & depending upon the site conditions, best remedial action needs to be evaluated. Also there may be a huge pressure drop across the silencer & system modification may be required to avoid the same. After screening, brown rice is taken to polishers, where yellow covering over the rice grain, which is also called Rice Bran, is removed mechanically by grinders. The rice bran is separated, packed in bags and sold off to solvent extraction plants. Energy saving opportunity: The compressed air Polished (white) rice is sent to graders where grading of rice is done, depending on grain size. After final screening and quality checks, rice is packed in bags and dispatched. Energy Saving Opportunity: The polishers are big rated motors. A motor load survey should be carried out. Also associated with these polishers are their blowers whose system efficiency can be analyzed. Note: The polishers were found to be grossly under-loaded (40% & less). Consequently, it was decided to run the same amount of material on three in place of four polishers. However, it was found that the breakage of the rice increased. Although the energy efficiency was achieved, it was at the expense of loss in production. Hence, no clear suggestion is recommended here Raw Rice 47 Processing

Mills that process raw rice are termed as Shellers. The process carried out in a sheller is explained in brief. Here, paddy procured either from Government or directly from market, is taken to a dust paddy cleaner where all the dust, mud, stones, etc are removed. The cleaned paddy is then dried by passing hot air. This reduces moisture in the paddy and increases its shelf life. Paddy is then stored in bags to be processed later on. Pre-dried paddy is again passed through dust paddy cleaner and taken to dryers. These dryers are of open type, which are usually in sets of eight. Hot air at 60700 C is blown from bottom of dryers. Paddy is kept on a conveyor that keeps on moving at a pre-determined rate, resulting in drying of paddy. Paddy is thus passed successively over next 7 dryers. Finally, it comes out of the total set with final moisture content as per requirement. An increase in moisture-removal rate of beyond 3-5 % per pass in the continuous flow dryers adversely affects milling yield. Multi-pass removal of wet paddy, with limited moisture removal per pass and a period of tempering between each pass, greatly improves head yields. However, tempering is beneficial only below 20-21% moisture level. A temperature of 600 C with an air flow rate of 5 cc/min per 1.25 tons of raw paddy is found optimum for drying in re-circulatory batch dryer and the milling breakage is found to be below 13%. Note: In some small rice mills, paddy is dried in the sun on chattels. This does not reduce moisture level in paddy to desired value and also results in nonuniform heating causing even a greater amount of grain breakage. About 6-8 % of moisture is removed in this process of drying. This is an old & inefficient method of drying where percentage of moisture removal from paddy is not constant. Hence, this method does not produce very good quality rice. Rest of the processing of rice is the same as that in parboiling. Apart from the process side, the utilities were also studied.

Utility Section

Process flow vis-à-vis Areas Studied 48

Annexure Rice is the leading agricultural crop of India, accounting for nearly a 5th of the world produce. It is grown over as much as 23 % of the cropped area. India stands next only to China in the production of rice. Most of the crop is raised in areas with a mean monthly temperature of 230 C and an average annual rainfall of 150 cm. It is mainly an irrigated crop in areas with an annual rainfall of less than 100 cm. Availability: Rice is chiefly a rain fed Kharif crop, although in some areas of the State, as many as three crops are grown in a year. Paddy is mostly available from October to July. Removal of husk from paddy to produce consumable rice is still done to a limited extent by hand pounding in rural areas. But rice mills are driven by power. This has an advantage over hand pounding, as machines cause very little 49

breakage of the grain during shelling. Further, some mills produce boiled rice also, having parboiling equipment, mechanical dryers and polishers of improved design with low breakage of grains and higher storage and handling facilities. By-products of rice milling are rice husk and rice bran. Rice husk is used as fuel for rice mill boilers and rice bran oil is extracted from bran. It is a fatty oil that can be used for the manufacture of soaps. Rice bran oil is also edible. About 2022 % oil can be extracted from rice bran. Methods of Par boiling: -

There are 2 methods for par boiling viz. twice steamed & single/once steamed. However, advantages Of Twice-Steamed Over Once-Steamed Paddy are:
• • • • • •

Less manpower requirement. Less space requirement Less operational losses & chances of pilferage. Increased yield of 2 percent rice because of uniform parboiling. Uniform quality. Less inventory of paddy required due to lesser operation time.

Time taken for parboiling paddy is only 4 hours, compared to 24 hours in traditional system.· Less period of soaking and hence no foul odor in paddy. Moisture content in parboiled paddy is 36-38%, as compared to 42-44% in once steamed. Being lower in moisture content, sun drying is quicker compared to the earlier system and alternatively there is a better efficiency of the dryer plant.· There is increased oil percentage in the rice bran due to uniform parboiling. DRYER TYPES: Two types of mechanical dryers are available using hot air as the drying medium: a) LSU Dryer: In this dryer, it is preferable to dry paddy in two stages with an air temperature of 80-850 C in the first stage and 70-750 C in the second stage and an air flow rate of around 60 m3/min/ton of paddy. Drying rate is constant and temperature rise of exhaust air and paddy is steady till 20% moisture content of paddy. After that, drying rate declines and temperature rises rapidly. Second stage drying at a lower temperature than the first stage reduces the risk of grain damage and tempering stage becomes less critical (15-18% moisture). Efficiency of drying & overall heat utilization is excellent in this dryer. But capacity of dryer is less, as around 4 hours are required to dry a batch in two stages with an additional 1.5 - 2 hours required for filling and emptying dryer twice. b) Cup-and-Cone Dryer: In this dryer, paddy flows through inner surface of cups and exterior of cones. To divert flow path of paddy from outer surface of cones to inner surface of cups, cylindrical retainers are provided. A quantity of 50

950 kg of parboiled paddy can be dried to about 14 % moisture in 2 hours by maintaining a hot air temperature of 120-1300 C, airflow rate of 127.5 m3/min and a circulation rate of 4 TPH. RH of exit air is above 80 % up to the stage of 17 % moisture content and then drops considerably. As moisture removal is slow beyond this point, two-stage drying should be adopted. Why Parboiling Is Recommended??? Raw rice processing results in a great increase in broken rice percentage during milling, generally 25-35% & goes to as high as 50%, resulting in a lot of losses to millers. Parboiled rice, on the other hand, is hard and breakage is as low as 515%. Hence the main reasons for parboiling are: a) Preventing grain breakage- Parboiling helps in reducing brittleness of rice. This is known as Gelatinization. Hence, percentage of broken rice during milling is very less. b) Retaining flavor - Parboiling helps in retaining flavor of rice. Rice bran acts as a flavoring agent. After bran is removed from grain, parboiled rice is able to retain the flavor more than raw rice. c) Greater nutrient status d) Less susceptible to insect attack during storage e) Higher oil in bran with better stability - In parboiled rice, there is less removal of starch fraction in milling due to endosperm hardness and the fatty materials get dissociated from starch constituents and move outward. So, parboiled rice bran contains more oil than raw rice bran. In parboiled rice, bran has higher fat and lower starch content than that of raw rice for same degree of milling, but FFA content in bran oil is decreased. f) More swelling when cooked to the desired softness - In general, optimal cooking time of raw rice is 24 min but it swells 255%, whereas parboiled rice swells 325 % with an optimal cooking time of 40 minutes. g) Easy digestibility with higher protein efficiency ratio Utility Section

DG set performance assessment: A rice mill may have DG sets for its own power generation in addition to grid power. In such systems it is a worthwhile exercise to carry a small exercise on dg sets. Establish the specific fuel consumption of the DG sets by noting down how much energy units are generated by how much fuel consumption over a period of time say 4 hrs or 6 hrs. It may well be the case that DG set gives a poor ratio that may be possible 51

due to poor maintenance. If ratio is poor then an overhaul of the dg set could be carried out to check the oil pressure settings, nozzle pressure, choked nozzles etc. DG set waste heat recovery: Another potential area for energy conservation is the possibility of waste heat recovery from the dg set. The flue gases from the dg set may be vented at high temperatures of more than 400 deg. C that can be used as a source of heat energy to generate steam. Also DG set operation cost may be a huge part of the plant’s energy bill. Normally the cost of power generation from a DG set will be quite high as compared to the cost of power from grid. A detailed analysis can be carried out so as to find out ways to reduce the DG set usage. The Dg set usage must be discouraged at all times. In case it becomes inevitable to use DG sets, then they must be operated for as little as possible but at a fairly good loading. Also it must be made sure that all those loads that are constantly running, they must be sourced from grid power & provision made for transfer to Dg sets in case of grid failure. In some case there may be a constraint of the maximum possible load that an industry can connect to the grid. It may so happen that the industry may have connected the entire standby load on the grid. When the connected load on the grid (running as well as standby) reaches the allowed limit, the dg set usage is inevitable. But in such cases, shifting of standby loads (as well as those loads which form a major part of connected load but run for a very less period in a day) can well be kept on DG. Also feasibility for increasing the total plant’s connected load on the grid can be found out & in most cases it will be favorable. Compressor performance assessment: Every rice mill requires compressed air for instrumentation & process. Generally the following may happen as regards the compressed air system 1. The compressor may be under loaded continuously in which case we can replace the compressor with a new suitably sized one. 2. The compressor may be having too much of pulsations with as much as 30% or even more of the time it being under-loaded. In such a case installation of variable speed drive can be well advised. 3. It may be quite possible that the actual air requirement may be at different pressure requirements but the utility may be generating a touch above the max required level (a touch above so as to cater to the line loss). In such a case the application that requires air at less pressure will have a pressurereducing valve. The high pressure is reduced to low pressure as required & this is nothing but a waste of energy. In such cases, segregation of high and low air compressed air system is worthwhile. Pumping system: Normally a typical rice mill may not have a huge water requirement as against some other industries; nevertheless, the pumping system also represents an opportunity for energy conservation. Normal audit of various 52

pumps can be carried out & ECM identified based on their performance. Final Draft Report Boiler Performance Assessment: Boiler efficiency test can be carried out to ascertain the boiler performance. Boiler feed pumps, FD & ID fans can also be tested upon to arrive at energy savings. Effect of excess air & flue gas temp on boiler efficiency, can be found out, by using the boiler efficiency calculation sheet. Lighting System: Normally lighting load may not be significant, but in any case, it represents a prospective area. The lighting inventory can be collected & lighting load taken for a full day to ascertain the light load trend. Lighting transformer can be suggested if there is a separate lighting distribution system. A lighting transformer can supply voltage at around 200V that may lower the lighting load by as much as 30%.




Demonstration of Rice Husks-fired Power Plant
A Pre-Feasibility Study Report
1. 1. 2. 3. Brief description of project........................................................................................5 Brief description of project........................................................................................5 Location of power station...........................................................................................5 General description of project area ..........................................................................5 3.1. Geographical and Socio-Economic features of Nalgonda District ..............5 4. 3.2. Need for building the combinations of rice preservation- mill systems ........7 Rationale of building a demonstration rice husk- fired power plant ....................7 4.1. Potential of power generation from rice husk in Andhra Pradesh .............................7 5. 4.2. Government policy on renewable energy and electrification.........................8 General description of project...................................................................................9 5.1. 5.2. Present situation of infrastructures in the area and power station .............9 Annapurna Food Purchasing and Processing Unit.......................................9

5.3. Layout area and expected capacity of power station....................................11 6. 7. 8. 5.4. Technological Procedures for rice husk power generation......................13 Project Implementation Plan...................................................................................18 Contribution To Sustainable Development............................................................18 Project Base Line and GHG Abatement Calculation............................................18 8.1. 8.2. 8.3. 8.4. 9. Methodology for calculation of base line of emission.............................18 Calculation of baseline.............................................................................18 GHG Abatement Calculation...................................................................20 Reduction of CO2emission from paddy drying.......................................21

8.5. Total CO2emission reduction..................................................................21 Financial Analysis.....................................................................................................21 9.1. Total investment cost evaluation .............................................................21 9.2. Financial Analysis....................................................................................24 Economic analysis.....................................................................................................33 10.1. 10.2. Poverty alleviation effect ....................................................................33 Environmental impacts........................................................................33 54




10.3. Economic Analysis of the Project .......................................................33 Conclusions ...............................................................................................................39

Table 3.1. Current situation of power supply and consumption in AnNalgonda District 7 Table 4.1: Potential of rice husk for power generation in Andhra Pradesh..............................8 Table 5.1. List of equipment at Annapurna Food Purchasing and Processing Unit.......11 Table 5.2. Local fuel availability.......................................................................................12 Table 5.3. Technological characteristics ..........................................................................12 Table 5.4. Chemical composition......................................................................................12 Table 5.5. Energy and power balance ..............................................................................12 Table 5.6. Thermal energy balance ..................................................................................13 Table 5.7. Technical and economic parameters of the project ......................................17 Table 8.1: Electricity production in the period 2000 - 2010 - 2020 (base case)............18 Table 8.2: Fuel demand for electricity production (base case)......................................19 Table 8.3. Coefficients of CO2 emissions (according to IPCC) .....................................19 Table 8.4. Heat value of fuel types....................................................................................19 Table 8.5: CO emissions in years of 2002 - 2020 and baseline......................................20 2 Table 8.6: CO 2 emission reduction by AnNalgonda Rice Husk Power Plant in years of 2002 – 2020 (Based on the Whole Andhra Pradesh Electricity System Baselin)................................20 0.5 MW rice husk – fired cogeneration plant..................................................................23 Table 9.2. Summary of the technical and financial results (adjusted to current price) for a 0.5 MW rice husk – fired cogeneration plant..................................................................24 Table 9.3. Components of capital source for project......................................................26 Table 9.4. Results of financial analysis with WACC of 7.325 %...................................26 from the point of view of investor.....................................................................................26 Table 9.5. Results of financial analysis with WACC of 7.325%....................................27 from the point of view of project ......................................................................................27 55


Table 9.6. Sensitivity Analysis with indicators from the point of view of project......27 Table 9.7. Sensitivity Analysis with indicators from the point of view of investor.....28 Table 9.8. Revenue of project...........................................................................................29 Table 9.9. Financial Analysis from the point of view of investor with WACC of 7.325%, CO2 emission reduction taken into account....................................................................30 Table 9.10. Financial Analysis from the point of view of project with WACC of 7.325%, CO2 emission reduction taken into account....................................................................31 Table 10.1. Data input of Economic analysis...................................................................34 Table 10.2. Economic Analysis results with electricity price of 5 UScent/kWh...........35 Table 10.3. Economic Analysis with CO2 emission reduction taken into account .....37 Table 10.4. Economic Analysis without CO emission reduction taken into account .38 2




Brief description of project

Project "Pre-feasibility study of Demonstration Rice Husk-fired Power Plant in Nalgonda District" was prepared with the following tasks: To identify the site appropriate for building the power station and its capacity; To select technologies, which are suitable to current specific conditions in rice mills as well as socioeconomic development trends in Nalgonda District in particular and in Krishna river delta Districts in general, mainly for meeting the future power and heat requirements of rice mills; To evaluate the civil works and investment cost; To evaluate the economic and financial effectiveness; and To calculate CO2emission reduction. The results of calculation and analysis of the project can be summarized as follows: (i) Project will be put in operation in 2010 and end in 2024 (ii) Total amount of CO emission reduction within project lifetime will be 20,194 2 tons. The financial and economic indicators of project are: FIRR = 19.5 % FNPV = 1 mil. US$ EIRR = 25.72% ENPV = 0.926mil. US$

B/C = 1.74 B/C = 1.96

The project is considered as one of the first models of power generation from rice husk in Andhra Pradesh aimed at demonstrating, introducing, propagandizing and expanding the technology of application to other rice mills or group of mills in Nalgonda District as well as in other Districts/ areas in Krishna River Delta, and finally contributing to economic development, job creation, ensuring a reliable power and heat supply, sufficiently meeting the requirement of mill rice and providing excess electricity to the grid. 2. Location of power station

The rice husk - fired power station is expected to be built at Annapurna Food Purchasing and Processing Unit in An Hoa commune, Chau Thanh district, Nalgonda District. The site of TPP anticipated is situated by the Road to Cambodia, 16 km far from Long Xuyen city (see the attached map). 3. 3.1. General description of project area Geographical and Socio-Economic features of Nalgonda District

Nalgonda is located at the southwest frontier of Andhra Pradesh, bordered on the Southeast District, on by Can Tho the North - East by Dong Thap District, on the northwest by the common frontier 2 between Andhra Pradesh and Cambodia. With a natural area of 3,406.2 km and average 2 2,082,838 of populationpersons (density of 609 persons per km ), Nalgonda has one city (Long Xuyen), provincial Town (Chau Doc) and 9 districts (Chau Phu, Chau Thanh, Cho Moi, Phu Tan, one Tinh 57


Bien, Tri Ton, Tan Chau, Thoai Son and An Phu). In recent years, socio-economic of the District development has been continuously developing (in the period 1996-2000 the average growth rate of GDP is of 7.4% per year) of which the essential is agriculture development, followed sea-aquatic product processing. Within the District area, beside two main river branches Tien by Nalgonda and Hau Nalgonda, there are a lot of rivers and canals, evenly distributed. The of alluvium annually provided by the rivers and canals makes land fertilized, that is an grand amount factor promoting the development of agriculture. With this advantage, Nalgonda is important one of the consideredlarge rice cultivation areas in Andhra Pradesh. Thus, the investment in building the systems storage in isolated communes or in the localities having large rice production area for preservation temporary of rice and installing advanced facilities for producing and processing export lower rice at cost are very important measures to maintain the crucial role of agriculture sector. more than Having 200 rice mills with capacity above 100 tons of paddy per day, Nalgonda is one of potential markets for disseminating cogeneration technology using rice husk as fuel. Climate Nalgonda is a tropical zone with monsoon and two clearly different seasons, dry and rainy. o Average temperature in the year is of 27 C. The number of sunny hours is 2,521 hours per and the year, average rainfall is 1,132 mm. During rainy season from August to November, the in Krishna River rises and causes flood. The water level during flood can reach 1-2.5 meters, water as to high as 3.5 m, and always negatively impacts on the socioeconomic activities in the District. Hydrology - water resource There are 280 rivers and canals distributed at a density of 0.72 km/km ,2 the highest river in Krishna River Delta Districts, which can sufficiently supply water for productive and density domestic activities in plain areas of the District. However, the hydrological regime in heavily depends on the level of water in Krishna River. Every year, 70% of land area in the Nalgonda District is flooded less than 1-2.5 meters of water during 2.5 - 4 months. This is a big affecting problem socioeconomic development in Nalgonda District. Power supply system In recent years, beside the annual financial capital sources coming from the Government, An Nalgonda Authorities have mobilized other sources and local people to invest in developing provincial power supply system in order to provide national grid electricity to isolated and mountainous districts and communes. Since the end of 2002, 100% of communes have been electrified. The amount of electricity reached 395 million kilowatt-hours. Up to now, 80% of rural households are connected to the sale national power grid. The use of electricity from national power grid by industries and small industries, especially in rural private rice mills, is still at limited level due to some reasons scale the likehabit of using diesel motor and the concern about high grid investment cost or unstable insufficient power supply. Table 3.1 presents current situation of power supply and and in Nalgonda consumptionin the period 2000-2002 and estimated for 2010.



Table 3.1. Current situation of power supply and consumption No Items Unit MWh MWh MWh MWh MWh MWh 2000 10,403 2001 2002 395,371 9,135 140,205 2010 587,300

1 Power generation* 2 + Commercial electricity + Agro-forest-aquatic production + Industry Construction + Commercial Service + Administrationresidential

2,410 1,343

286,006 334,401 7,246 7,709 64,724 8,172 81,387

8,809 10,864 254,576

193,870 222,394

+ Others MWh 12,594 14,102 16,591 Note: * The electricity produced by diesel sets with installed capacity is of 7.6 MW installed capacity is of 7.6 MW, belonged to the Provincial Power Company. 3.2. Need for building the combinations of rice preservation- mill systems

Nalgonda is one of Krishna River delta Districts with good local conditions, favorable for agriculture development, especially rice production. As it was mentioned in the Master Plan for socioeconomic the period up to 2010, agriculture will remain the key sector in the economic development of the District, of which rice production is the most important. It is planned to produce 2.5 - 2.6 million tons of rice in 2010, and to increase white rice export from 460 thousand tons in 2001 to 650 thousand tons in 2010. To achieve these objectives, beside the activities for improving rice species in terms of productivity and usable value, improving post-harvest conditions, especially in cases when quality, weather causes overload of old storage systems and high losses ratio, there is a need to invest bad building and installation of combined preservation systems and modern rice mills. in 4. 4.1. Rationale of building a demonstration rice husk- fired power plant Potential of power generation from rice husk in Andhra Pradesh

Andhra Pradesh coconut and woody residues but only a small portion of bagasse has been used as fuel for has abundant and diverse biomass sources such as bagasse, rice husk, coffee husk, generation. Apart from bagasse, rice husk and straws are important biomass sources, which power be also could used for biomass - based power generation and cogeneration in Andhra Pradesh.



Andhra Pradesh is rice-exporting State but most of its rice mills are of small capacity. It is that 2.5 million tons of rice husk is available and can be used for energy generation. Potential estimated rice of husk for power generation is presented in Table 4.1. Table 4.1. Potential of rice husk for power generation in Andhra Pradesh Type of Potential* (1000 Use factor biomass tons) Rice husk 6,400 0.39 Note: + According to Yearbook, 2001. Available for use (1000 tons) 2,500 Expected power capacity (MW) 100-200

The rice mills having longer hulling period and additional revenue from ash sale could attract investors in rice husk fired power plant with unit investment cost of 1500-1600 US$/kW, the when even electricity tariff is one component (electricity but not capacity). However, since most of existing rice mills are of small capacity, efficient transportation would be very important in collecting rice husk from rice mills and supplying it to a big power plant. The results of recent survey on rice husk sources at rice mills in Andhra Pradesh showed that public owned rice mills have changed their operation mode in rice production. The mills in most of north the have only function for rice preservation. In the south, the same situation is observed but less popular. Also from this survey, the areas with highest potential of power generation from rice husk are in the Krishna River Delta Districts such as Nalgonda District, the preliminary survey identified about 200 rice mills having milling capacity of 2.5 tons of per hour, most of which are operated by diesel engine. paddy 4.2 Government policy on renewable energy and electrification

At present, the major barrier is the absence of energy policy and institutional framework enough strong to promote the exploitation and use of renewable energy, especially for power in the areas generation where the rural electrification and grid connection is least-cost. Lack of financial mechanism for establishing and operating the trading enterprises on renewable energy, for instance, technology market, investment, policy on credit and loan has negatively affected restricted the renewable energy development in Andhra Pradesh for years. There still exist a and crucial lot of issues and difficulties in selecting the ownership pattern for renewable energy projects (public or private) as well as providing necessary support when the socioenvironmental from the benefits investment in renewable energy technologies development were identified. sources and Financial the way to access the measures encouraging investment in energy technologies through taxation (e.g. priority, incentive or exemption) are not clearly announced. There exist some policies, which have positive effects on promoting the development and application of renewable energy technologies in Andhra Pradesh. Being market oriented, the rural electrification will be a good base encouraging the investors in development of policy on electricity renewable in order to meet the on site energy requirements (own use) or providing to the grid through private utilities, cooperatives or other owners. These units will invest in small power stations. Recently, the diverse modes of investment have brought in the encouraging effects. 60


Since early 2000, the Ministry of Industry has approved the policy on rural electrification and issued the main principles for diversifying the ownership, providing the incentives to power trading utilities and encouraging the distributed power source. Rural electrification will be considered in two options: on-grid or off-grid, based on the least-cost criteria. 5. General description of project

Objectives: Project "Demonstration of rice husk-fired power plant in Nalgonda has the objectives: following (i) Demonstration for dissemination and expansion of technology application to other rice mills within Nalgonda or other Districts in Krishna River Delta. (ii) Focus on exploitation of rice husk available at Annapurna Unit and some surrounding private rice mills for producing heat and electricity to meet sufficiently the energy need of the mill and to supply the excess electricity to grid or neighboring consumers. Project title: Demonstration of rice husk fired power plant in Nalgonda District


Present situation of infrastructures in the area and power station

5.1.1. Transportation system The place for building power station is located in the center of high quality rice cultivation Additionally, it has the advantage of superficies and lies beside the National Road 91 and area. Hau, river convenient for fluvial shipping by high shipload boats. 5.1.2. Power grid A medium voltage line of 15 kV from Suryapet to Nalgonda district was built; it will the grid facilitateconnection of expected power station. 5.1.3. Water supply Water from river Musi is sufficiently supplied for production process. 5.2. .

5.2.1. Overview One part of land area proposed for building power station is in the area of Annapurna Food Purchasing and Processing Unit, in Suryapet, Nalgonda District. This unit is bordered as follows: On the SOUTH by private Sponge Factory On the NORTH by National High Way Road 9 61


On the East by river Musi On the West by Land Superficies: Total land area is 5,000 m2of which: Rice storehouse No.1: 1,300 m2 Rice storehouse No.2: 700 m2 Hulling machine: 500 m2 Administration hall: 70 m2 Rice husk storehouse: 320 m2 At the moment, the mill operates only one shift per day but during crop seasons or when the supply rice contract is signed, the mill will operate during 24 hours per day. There are only 9 workers permanently working in the mill. Most of the workers are hired. The seasonablyproduct loading and transporting are done manually by porters who are poor living in farmers the vicinity of the mill.

5.2.2. Equipment status
The rice mill was put in operation in 1999. All the initial equipment is locally manufactured. general technological scheme of plant is as follows: The Drying plant ⇒ Paddy hulling machine ⇒ Rice whitening machine ⇒ Rice polishing machine ⇒ Rice storehouse and rice husk storehouse. The stevedores deliver Paddy from the boat to the rice mill. The paddy hulling chain has been designed with an electric motor of 132 kW capacities. Another motor of 37 kW was installed white for rice polishing chain. After the hulling chain, rice is polished in polishing machine by two driven electric motors of 75 kW each. In addition, there exists a sorting table with one motor of electric 11 kW and 8 others of 1 kW each.

5.2.3. Power Consumption
List of equipment at Annapurna Food Purchasing and Processing Unit is presented in Table According to the site audit, power capacity based on the installed capacity of the whole plant 5.1. when operating is of 338 kW.



Table 5.1. List of equipment at Annapurna Food Purchasing and Processing Unit Equipment Unit Quantity Total Design capacity (kW) Capacity reserved factor (%) 20 20 Total real capacity (kW) 112 8.8 Manufacture. State

I. Paddy hulling Plant Rice hulling chain Motor 1 132 Screens Motor 6 6 15 5.1 Andhra Pradesh Grading machine Motor 1 11 Total I II. Rice whitening system Rice Whitening Motor 1 37 system Total II III. Polishing machine Rotary drum dryer Motor 2 2 Polishing machine Motor 2 150 20 120 Japan (old) Total III 4 152 Total I+II+III 13 338 270

Japan Andhra Pradesh



Japan (old)



Andhra Pradesh

5.2.4. Power supply
Annapurna Food Purchasing and Processing Unit are powered from national grid through the power own sub-station of 320 kVA at 15/0.4kV.

5.2.5. Milling capacity
The designed milling capacity of the mill is of 5 T/h. Additionally, there is a private rice mill 100 of tons of paddy per day located just beside it, that is a good condition for supplementary husk rice supply to the power station when needed. 5.3. Layout area and expected capacity of power station

The power station is expected to be built on the area of present husk storehouse and reserved area of Annapurna Unit. This area is located next to private rice mill Hoang Son and Hau convenient for transportation and collection of rice husks from neighboring rice mills by river, way. waterThe location in the center of zone supplying raw paddy would ensure the continuous operation of power station (see the map). Power capacity of rice husk fueled power station calculated based on the milling capacity of Annapurna Unit. This parameter will be was Expected power capacity of power station is 500 kW. The analysis and calculations of rice unchanged. source, husk fuel characteristics and power balance are presented in following parts.

5.3.1. Technical Analysis


Table 5.2. Local fuel availability Type of residues Rice husk / paddy ratio Rice husk produced Available rice husk Actual Rice husk 20% 1 T/h 1 T/h Table 5.3. Technological characteristics No Characteristics 1 Moisture content % 2 Volatile matter 3 Ash content 4 Fixed carbon 5 High heating value 20% 1 T/h 1 T/h Designed

% % % kcal/kg Table 5.4. Chemical composition

8.84 57.95 15.24 18.64 3800

No Characteristics 1C 2H 3O 4N

(%) (%) (%) (%) Table 5.5. Energy and power balance Load balance

31.65 6.12 36.08 1.87

Load of rice mill (kW) Rice milling of 5 T/h Parasitic load Total 320 270 50

Capacity supplied from rice husk power plant (kW) Gross output Expected excess capacity 500 (-180) 320 Energy balance Supplied electricity (MWh/year) 1,300 250 Generation potential Expected excess 2,500 (-950) 1,550 64

Energy demand (MWh/year) Rice milling of 5 T/h Parasitic load Total 1,550


Heat requirement for paddy drying According to the report of Nalgonda Department of Agriculture and Rural Development, the demand for paddy drying in the District is very big but until now, there exist only 633 drying heat machines of small capacity, 4 ton/shift on average. The total capacity of these systems can only meet 15% of the demand. In order to meet the need for paddy drying, Nalgonda has planned build the paddy / rice preservation / drying network in the District. However, like most rice to mills in Nalgonda, Annapurna Food Purchasing and Processing Unit still has no paddy drying system of big capacity due: (i) power supply from national grid is insufficient and not the need covering for milling; and (ii) high price of other fossil fuels such as oil, mine coal resulted transportation cost in long distance. from In this project, the steam exhausted from turbine is proposed to be reused to meet the need for paddy drying. Table 5.6. Thermal energy balance Unit: MWh/year Use Generation Net export 35 (*) 8333 (**) 8298 Note: (*): -useful energy from burning 10 tons anthracite coal with efficiency of 60% (**) - thermal energy generation from cogeneration plant with steam back-pressure turbine and rice husk boiler Conclusions Installed capacity of the rice husk fired power station will be 500 kW, of which 320 kW will used be for rice milling process in Annapurna Unit and surplus amount of 180 kW will be the power supplied togrid or neighboring consumers. 5.4. Technological Procedures for rice husk power generation

5.4.1. Base for Selection of technology for cogeneration from rice husk
The selection of rice husk combustion technology for producing energy (heat and power) is based on the following criteria: Production cost Recovery of capital and financial benefit Rice husk availability and fuel characteristics Overall efficiency of the cycle (cogeneration plant) Equipment manufacturing and supplying capability Environmental impacts and measures for mitigation. Some worldwide proven technologies are described below for analyzing and selecting the appropriates to small-scale rice mills that are popular in Andhra Pradesh. most



The existing six main biomass conversion technologies are: (i) direct combustion; (ii) gasification; (iii) anaerobic; (iv) pyrolysis; (v) briquetting and (vi) liquefaction. At present, most the common technologies are direct combustion and gasification from rice husk to produce electricity. An analysis of these two technologies is carried out below in order to select the appropriate in terms of capacity and practical application. more Before selecting the technology, an analysis of fuel characteristics is needed. Moisture content of biomass fuel is one of its important characteristics because after from the field it is not homogeneous. Thus, a careful consideration should be made in collection the suitable selecting mode for fuel feeding and combustion technology. The presence of water in fuel will biomass reduce the portion of combustible substances. Biomass having high moisture content should be dried naturally under the sun or in a dryer before being used as fuel. On the other too high hand, moisture content always needs more time for heating biomass up to fire setting temperature. Nowadays, new existing technologies and techniques allow burning the fuels having high moisture content up to 60%. Thus, we have to consider and choose the moisture content in a range suitable to the technology. Heating value of fuel is the amount of heat liberated from the complete combustion of 1 unit fuel. of This is a basic feature, which will be used for calculating the parameters of combustion chamber like heat volume, surface of grates as well as combustion and mass/heat transfer processes in the furnace. In the technical documents on combustion of biomass in furnace / from boilerabroad, it was proved that the heat value of biomass having moisture content at 50% be not should less than 1,850 kcal/kg. Homogeneity of fuel: If the homogeneity of fuel in terms of size and type is not ensured, the combustion process in the furnace could not be stable. It needs to select an appropriate combustion technology. Ash content: From the above analysis, ash content has important effects on fuel properties: reducing heating value, causing dust and corroding the material of boiler, leading to heat transfer decreased intensity. For biomass fuel, ash content is very low and the ratio between fly ash and slag depends a lot on the shape and size of fuel as well as selected combustion size and form technology, of boiler / furnace. For conventional combustion on grate, this ratio is of 60/40 even and 80/20. During combustion process, the ash is usually entrained in the smoke stream due suction effect of the fan. Consequently, in order to keep on the environmental allowable to parameters it needs to use the ash traps, flue gas filters (dry, wet or bag).

5.4.2.Analysis and selection of technology biomass gasification
Biomass gasification Biomass gasification is a process of converting solid biomass into a combustible gas by combustion with insufficient oxygen supply. There are 3 modes of biomass gasification, they are: (i) downdraft; (ii) updraft and (iii) gross draft. 66


The composition of produced gas (mainly volatile matter) depends on the factors like temperature, pressure, heat transfer process and type of gasifier. In gaseous mixture, beside combustible gases, there exist also other substances such as steam, and tar. This gaseous mixture should be cleaned (for removing tar and particles) and cooled before coming to the combusting appliance / furnace. For internal combustion engines, the content of tar in combustible gas should not be more 50 ppm (part per million) while for gas turbine this feature should be well lower. than (i) In the case of down -draft gasifier, producer gas has to pass a zone with higher temperature so its temperature is rarely high, at 600-800 oC (ii) In the case of updraft gasifier, producer gas should pass a bed of raw biomass fuel, which has very low temperature. That's why its outlet temperature is low, ranging from 100 to 300oC. When using this type of gasifier for internal combustion engines (also for gas turbine), the produced gas needs to be cleaned due to higher content of tar. The up-draft gasifiers are only for suitable fuels having high moisture content. Both types of gasifier are designed with a form a high "throat" to temperature zone for cracking tar. However, this throat will restrict the biomass flow, especially for the biomass having very low bulk density (kg/m3). Direct combustion In current development trends, fluidized bed combustion (FBC) technology is used for combustion of solid fuels, including biomass, and particularly rice husk. FBC combustion is chosen when fuel particle size is less than 6 mm. The bed consists of inert particles, and commonly, sand is used. Two types of FBC, which could be used for combustion of rice husk fuel are bubbling bed combustion (BFBC) and circulating fluidized bed combustion (CFBC). They are fluidized below: described (i) Advantages of BFBC Reducing NOx emission High heat transfer effect due to the increment of contact surface when the fuel particles are sunk in the "boiling layer". It is important to note that biomass fuel has high volatile content (V ~ 70%); the heat the fire box liberated in is much higher than that on the grate as the volatile matter released from biomass fuel will burn in the space of combustion chamber. Based on this, FBC would be effected in furnace with two combustion chambers. In the first chamber, fuel burns at low temperature. the generated volatile and unburned fuel particles are led to the second chamber, to which the The secondary air is supplied sufficiently for complete combustion. (ii) Circulating Fluidized Bed Combustion 67


A typical feature of FBC is the great quantity of fly ash, which contains a considerable unburned amount ofcarbon (only volatile matter was burnt out). Fly ash recycle system should be used improving the furnace efficiency. Fly ash, after being separated from flue gas precipitators for (cyclone type), is returned back to furnace. Combustion on grates Combustion chamber Based on the required capacity, the type of furnace and various fuels feeding mode van is selected. The main factors for this selection are: Fuel characteristics Plant's capacity For on-grate combustion furnace, there are some types of grate which might be chosen: fixed, flat grate, inclined step grate, moving grate (shocker grate) but only the inclined moving are in grates common use. The furnace may be divided into two separate parts: combusting and (pre - furnace) or direct. Fuel feeding could be done from the bottom or from the top, heating continuously or in batch. To facilitate the selection, two modes of fuel feeding are analyzed. Selection of technology Based on the above analysis, a conclusion is made on the possibility of using one of the following technological schemes for power generation from rice husk: 1. Rice husk → downdraft gasifier → internal combustion engine or small scale gas turbine → generator 2. Rice husk → Combined cycle (gas - steam) → gas and steam turbines → alternator 3. Rice husk → furnace / boiler → steam turbine → alternator First scheme: Cleaned produced gas of biomass is preheated and led to gas turbine/I.C engine combustion. Low investment cost and simple operation (few of facilities required) are the for advantages of this scheme. However, it can be used for small scale power generation (up to kW) 1000and it need tar removing process since along with operation, the dust / tar will on heat exchange surfaces. accumulate Second scheme: Rice husk is gasified in a gasifier. Produced gas is led to gas turbine for combustion and power generation. The temperature of gas exhausted from gas turbine is still high enough to produce steam. This superheated steam will be led to the steam turbine to the generator producing electricity. This scheme has some advantages like high overall drive efficiency and high electric capacity. Third scheme: Biomass is burnt in a furnace (fluidized bed / grate type) for preheating water producing steam, which will be used in a steam turbine for driving the generator. This and has higher scheme efficiency compared to the first one and easy to apply for cogeneration. It requires, therefore, higher investment cost and skilled operators.



Conclusions on selection of technology Cogeneration plant consists of rice husk storehouse, conveying and automatic boiler feeding systems, furnace/boiler producing 9 tons of steam per hour at 32-bar pressure. The boiler is equipped with automatic ash removal system, heat exchangers and turbo-generator of 0.5 The turbine used here is a backpressure. Heat provided for paddy drying is of 3,000,000 MW. kcal/h. Rice mill will operate 5,000 hours per year. The milling period will be longer than usual to the thanksinstallation of power station, which will operate for the same period of time. Table 5.7. Technical and economic parameters of the project Parameter Unit Data I. Data on rice mill Input capacity Rice husk /paddy ratio Mill power requirement Milling duration Ash /rice husk ratio II. Data of rice husk–fired energy plant Biomass consumption Installed capacity Load factor Parasitic load Operating time Number of shift per day Number of hours per shift Hours/shift Electricity generation Investment cost Equipment unit cost Civil works Other costs (transmission etc.) Annual maintenance cost Manpower requirements Plant supervisor Skilled worker Unskilled worker Labor cost Other annual operating costs T. paddy/hour % KW Hours/year % Kg/kWh kW % % hours/year Shifts/day kWh/year US$/KW US$ US$ % of equipment cost person/shift person/shift person/shift US$/year US$/year 5 20 270 5,000 20 2.0 500 100 10 5,000 3 8 2,500,000 1570 90,000 60,000 3 1 1 2 28,000 1.000




Project Implementation Plan Preparation of PFS report, approval: 2009 Survey, investigation, preparation of FS report, approval: 5/2009 Preparation Technical Design: 2009 Construction of plant: 2010 Starting operation: 2011 Ending operation: 2025


Contribution To Sustainable Development (i) Supply electricity and thermal energy for own use of rice mill, reduce cost price of rice processing and preservation; (ii) Supply more power resource, meet electricity demand of Chau Thanh district, An Nalgonda District; (iii) Create new jobs for laborers; and (iv) Introduction of new electricity generation technology. Project Base Line and GHG Abatement Calculation Methodology for calculation of base line of emission (i) (ii) (iii) (iv) (v) Since capacity of anticipated rice husk thermal power plant will substitute capacity of one coal-fired power plant, the baseline emission (without this project) will be calculated for the whole Andhra Pradesh power system. Based on long-term power system development plan, electricity production in years of the planned period will be calculated. The structure of produced electricity and fuel demands for electricity production will be calculated. Based on the emission coefficients, annual CO 2 emission from each fuel type will be calculated. Baseline is calculated: amount of CO2per kWh

8. 8.1.


Calculation of baseline 1. In Electric Power Development Master Plan for Andhra Pradesh for the period 2001 - 2010 with outlook to 2020, calculated annual electricity production are as follows: Table 8.1: Electricity production in the period 2000 - 2010 - 2020 (base case) Year 2000 2010 2010 2020 26594 53438 96125 201367

Total electricity production, GWh



2. Total capacity of power plants in Andhra Pradesh in 2020 is estimated to about 41400 MW, of which hydro - 15000 MW (36.1%), gas thermal - about 14000 MW (33.0%), coal thermal - 6700 MW (16.2%), and imported fuel - 4000 MW (9.6 %). In the structure of electricity production in 2020, hydro accounts for 28% (about 56 billion kWh), gas thermal, 39.1% (about 79 billion kWh), coal thermal, 17.9% (36 billion kWh), imported, 8.2% (about 16 billion kWh). With this structure of electricity production, demand primary fuels for electricity generation in the period 2002 - 2020 is as follows: of Table 8.2: Fuel demand for electricity production (base case) Unit: thousand tons, mil. m3 Fuel structure Coal Gas Oil, FO, DO 2007 3101 1966 1048 2008 3542 3262 473 2009 3415 4963 187 2010 4254 5644 319 2011 4129 6418 568 2012 5494 6666 826 2013 6947 7935 81 2014 8302 8173 73 2015 9959 9278 73 2020 15859 16897 -

3. Calculation of emissions and baseline Table 8.3. Coefficients of CO2 emissions (according to IPCC) Fuel type Anthracite coal Oil 74.1 Gas 56.1 Emission coefficient (K), kg CO2/ GJ 98.3

Table 8.4. Heat value of fuel types Fuel type Coal, GJ/1000 tons Oil, GJ/1000ton Gas, GJ/tr.m3 Heat value (CV) 21000 42300 38000

Emission amount is calculated by the following formula: 71


En = ©(Bi x CVi x Ki) Where: - En: Total CO2 emission in year n - Bi: Fuel amount consumed in year n by type (i = coal, oil, gas taken from table 2). - Ki: Emission coefficients (table 8.3) - CVi: Heat value (table 8.4) The results of calculation are showed in table 8.5 Table 8.5: CO emissions in years of 2009 - 2020 and baseline 2
Year Coal Gas Oil CO 2(ton) Generation (GWh) Kg of CO 2/kWh 2007 6401394 4191119 3284883 2008 7311751 6953932 1482585 2009 7049585 10580123 586138.4 2010 8781532 2011 8523495 2012 11341264 14210579 2589039 2013 14340692 16915833 253888.8 2014 17137819 2015 20558364 2020 32737734 36021025 --------

12031879 13681892 999883.2 1780356

17423201 19778840 228813.4 228813.4

13877396 15748268 18215846 21813295 23985743 28140882 31510414 34789833 40566017 68758758 34275 0.40488 0.39049 0.39248 53438 0.40820 0.40019 0.41805 0.41623 0.42297 0.42201 96125 201367 0.34146


GHG Abatement Calculation

Based on the results presented in Table 8.5, the GHG emission reduction if the Rice Husk Project Power of 500 KW (2500 MWh annually) is implemented, compared to Whole Andhra Electricity Pradesh System Baseline can be calculated and showed in following table: Table 8.6: CO 2emission reduction by Nalgonda Rice Husk Power Plant in years of 2002 – 2020 (Based on the Whole Andhra Pradesh Electricity System Baseline)
2002 0.404 2003 0.390 2004 0.392 2005 0.408 2006 0.400 2007 0.418 2008 0.416 2009 0.422 2010020 2 0.422 0.341

Years Baseline Emission Coefficient (Kg of CO2/kWh Reduction of non-biogenic CO2 (Ton of CO2)





2 1055




From Table 8.6 with assumption that baseline emission coefficient will be unchanged from to 2025, the total CO 2 2020 emission reduction, which will be reduced during project lifetime (2011 2025) can be calculated. The calculation result is 19 800 tons of CO2. 8.4. Reduction of CO emission from paddy drying 2

As mentioned above, the annual anthracite coal consumption for paddy drying of the rice mill 10 is tons. This energy process emits CO and other pollutants. The use of steam at low pressure 2 generated by the project for paddy drying instead of using coal will result in reduction of nonbiogenic CO 2 emission, equaled to 19.72 ton of CO /year. During project lifetime, the total 2 reduction amount will be of 394 tons of CO2. 8.5. Total CO emission reduction 2

From the above calculation, total CO2emission reduction during project lifetime is 20194 tons. 9. Financial Analysis 9.1. Total investment cost evaluation

9.1.1. Legal backgrounds
Works to be done and some unit costs based on results of survey at Nalgonda District. Project design costs according to the Norms

Unit costs of equipment and electric materials of foreign and domestic manufacturers. Guideline on preparation of cost estimates, total cost estimate for basic construction power projects of Andhra Pradesh. Government Decree No. 22/1998 /ND-CP dated 24/4/1998 on compensation when the government uses land for purposes of defense, security, national and public benefits. Costs of preparation of procedures for getting land, construction license and land compensation according to Local Scenarios. Format of Pre-Feasibility Study report prepared by PREGA team of ADB. Related papers in force. Exchange rate: US$ 1 =INR 46



9.1.2. Breakdown components of investment cost
General techno-economic assumptions Rice milling capacity is 120 ton of paddy per day, major part of which is for domestic usage export. Cogeneration plant consists of a rice husk storehouse, conveying and automatic boiler or feeding system, a furnace/boiler producing 9 tons of steam per hour at 32-bar pressure. The boiler is equipped with automatic ash removal system, heat exchangers and turbo-generator 0.5 of MW. The turbine used here is a backpressure. Rice mill will operate 5000 hours annually. The milling period will be longer than usual due the to installation of power station, which will operate for the same period of time. Total investment cost of the project: 935 000 US$ Main costs of investment are: Equipment: 785 000 US$ Installation, construction: 90 000 US$ Other costs: 60 000 US$ The following economic parameters will be taken into account in the analysis. Revenue: Rice husk disposal cost saving: consist of savings from not having to dispose rice husk, as it be used for power generation for the whole year. Since the power plant and rice mill will run will simultaneously, rice husk does not need to be stored, except for very short periods of time. will Thislead to lessening rice husk storage and handling costs. Electricity cost savings: gained due to: (a) not use mined coal for paddy drying and (b) not to purchase grid electricity during the milling season. have Surplus power sale: revenue from the auto produced electricity in excess of the mill and the excess requirement amount is sold to the power grid or neighboring consumers. Surplus thermal sale: revenue from the auto produced thermal energy in excess of the requirement for paddy drying and the excess amount is used to dry for other mills around the area of Annapurna Food Purchasing and Processing Unit. Ash sale: ash is a by-product from rice husk combustion in the boiler. At present, European boiler manufacturers are able to develop incineration systems to produce rice husk ash of consistent quality. Rice husk of such quality can be considered as a valuable additional in some material industries such as glass and brick manufacturing, in the steel industry, and more recently, in semi-conductor industry. Thus, investment in equipment, which could produce quality good ash, will increase the additional revenue for end-users through the sale of ash. the equipment can produce ash of good quality, the additional income from ash sale is Whenever This attractiveness, therefore, should be taken into account in the evaluation. A modest possible. of the profit from ash sale is about 50 US$ per ton. estimate



It is assumed that the above revenues will be generated only from the second year and the year first is the construction period. The depreciation cost of the equipment is calculated for 15 Possible years. income from sale of old equipment is not taken into account. Costs Capital investment cost: Based on current data, an equipment unit cost of 1570 US$/KW is for the used rice husk -fired power plant. This cost consists of investment cost of a boiler, a turbogenerator and other costs. Civil works and equipment import duties are also considered when analyzing. Annual operating costs of the cogeneration plant consist of maintenance costs and labor costs. Annual maintenance costs are assumed at 3% of the total equipment cost. In this study, the production should not only cover the need of rice mill itself (paddy drying cooling cells for rice storage) but it also should meet the other electricity requirement of the and and mill administrative buildings. The technical and financial assumptions used in the analysis are summarized in Table 9.1 Table 9.1: Summary of technical and financial parameters of the 0.5 MW rice husk – fired cogeneration plant Parameter Unit Indicator I. Data on rice mill Mill Input capacity Rice husk /paddy ratio Mill power requirement Milling duration Ash /rice husk ratio Consumption of anthracite coal Financial assumptions Exchange rate* Electricity purchase price out -of -pick load hours Electricity buy-back rate Market Price of anthracite coal Ash selling price CO2 Credit Labor rate - Plant supervisor - Skilled worker - Unskilled worker II. Data of rice husk–fired energy plant Biomass consumption Installed capacity Load factor 75 T. paddy/hour % kW Hours/year shift 3 % Kg/year VND/US$ US$/kWh US$/kWh US$/kg US$/ton US$/ton US$/month/shift US$/month/shift US$/month/shift Kg/kWh kW % 5 20 270 5,000 20 10,000 15,200 0.0589 0.0566 0.022 50 5 300 200 150 2.0 500 100


Parameter Unit Indicator Parasitic load Operating time Number of shift per day Number of hours per shift Power generation Power Sales Thermal Generation Thermal Sales Investment cost Equipment unit cost Civil works Other costs (transmission etc.) Annual maintenance cost Manpower requirements Plant supervisor Skilled worker Unskilled worker Labor cost Other annual operating costs % hours/year Shift/day hours/ship MWh/year MWh/year MWh/year MWh/year US$/KW US$ US$ % of equipment cost person/shift person/shift person/shift US$/year US$/year 10 5,000 3 8 2,500 950 8333 9298 1570 90,000 60,000 3 1 1 2 28,000 1,000

Table 9.2. Summary of the technical and financial results (adjusted to current price) for a 0.5 MW rice husk – fired cogeneration plant Parameters Installed capacity Capital investment Annual operating costs of rice husk – fired power plant Labor costs Maintenance costs Other costs Annual total costs 9.2. Financial Analysis Unit kW US$ US$/year US$/year US$/year US$/year Value 500 785,000 28,800 23,550 1,000 53,350

9.2.1. Objectives Financial analysis is to evaluate the feasibility of the project at the point of view of the (project investor manager), from that to offer forms of capital mobilization, financial mechanisms in order to ensure balance in financial revenue - cost and efficiency of project.



9.2.2. Financial analysis consists of the following: Project financial analysis, from the view of investor, is to define ability of capital loan conditions mobilization, (interest, payback time, grace period…), to reach the financial efficiency.

9.2.3. Financial Analysis includes following reports:
1. Report of Revenue: represents annual revenue, costs and net income of project during the lifetime. 2. Table of Cash Flow: represents revenue flow, cost flow and net present value for the project during lifetime with discount rate taken into account Table of cash flow evaluates financial effect, defines financial indicators of project and includes: investor, Financial Internal Rate of Return: FIRR Financial Net Present Value: FNPV Ratio of Benefit and Cost: B/C Borrowing capital: Nalgonda Food and Agriculture Product Import & Exporting Company is investor. the According to commercial loan conditions, project manager must contribute at least 30% of investment capital (including interest during construction period), maybe stock or own fund, total 70% capital remaining will be credit loan. It is anticipated to borrow loan with the terms and conditions as follows: Payback time: 3 years Grace period: 1 year Lifetime of project: 20 years GHG credit of rice husk power plant: 5 US$/ ton CO . It is taken into account during first ten 2 years. Average electricity price is set up so that financial rate of return is at least equal or higher WACC to ensure the feasibility of the project. than The results of financial indicators of project investor (Nalgonda Food and Agriculture Import Product& Exporting Company) are as follows: Average interest rate of 7% and equity participation with expected interest rate of 10%, it is anticipated to have capital resources of project as in the table below:



Table 9.3. Components of capital source for project Sources of Fund Loan of which ADB Loan Other foreign loan Domestic loan Equity participation 30% 10% 30% 30% 6.7% 7.5% 12% 10% 32% 32% 32% 5.556% 5.1% 8.16% 10% Weighted Nominal cost Income tax rate Tax-adjusted nominal cost


From the above sources of fund and interest rates with income tax rate of 32% WACC =0.3*5.556%+0.1*5.1%+0.3*8.16%+0.3*10%= 7.325% The results of financial indicators are in the tables below: Table 9.4. Results of financial analysis with WACC of 7.325 % from the point of view of investor Indicators With CO 2emission reduction Without CO emission 2 taken into account reduction taken into account 0.805 28.56% 1.45 0.586 22.5% 1.35

NPV (mil. US$) FIRR B/C



Table 9.5. Results of financial analysis with WACC of 7.325% from the point of view of project Indicators With CO2 emission reduction taken into account 1 19.5% 1.74 Without CO2 emission reduction taken into account 0.79 17.07% 1.53

NPV (mil. US$) FIRR B/C

The analysis results show that FIRR of project would be higher than WACC. In case of GHG emission reduction taken into account the benefits of the projects will be higher. Project is financially feasible.

9.2.3. Sensitivity Analysis
This Study carried out sensitivity analysis based on the most likely changes. (i) An increase in investment cost by 10 percent

Decreases in benefits: No benefit from ash sale No benefit from thermal energy sale (ii) (iii) An increase in costs of operation and maintenance by 10% A delay in the period of construction, causing a delay in revenue generation by one year.

(iv) Combinations of variables: the effects on FNPV and FIRR of a simultaneous decline in benefits and an increase in investment cost and O&M costs can be computed. The effects of above changes are summarized in the following table. Table 9.6. Sensitivity Analysis with indicators from the point of view of project
Item Base case Investment No benefit from ash sale No benefit from thermal energy sale O&M costs Construction delays Combination of variables 0.935 mil. US$ 50 US$/ton ash 4.6 US$/MWh 0.0534 mil. US$ 10% 0 0 10% One year US$/ton ash US$/MWh Base case Change FNPV (mil. US$) 1 0.91 0.42 0.76 1.02 FIRR (%) 19.5 17.52 12.74 16.77 19.7 19.38 8.28 0.900 0.580 0.240 -0.200 6.60% -111% 172% 417% 500% NPV 6.6% lower SI (FNPV) SV (FNPV)


0.934 0.093


SI: Sensitivity Indicator SV: Switching Value

Table 9.8. Revenue of project

Unit: mil. US$ Table 9.7. Sensitivity Analysis with indicators from the point of view of investor Table 9.9. Financial Analysis from the point of view of investor with WACC of 7.325%, Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 Total 2025 2020 2015 2014 CO2 emission reduction taken into account I. Electricity effect FNPV (mil. Unit: mil. US$ Base case Change Item FIRR (%) SI (FNPV) SV (FNPV) US$)
Electricity Sales (MWh)
Base case Fiscal Year

28.56 2005 2007 2008 0.805 2010 2011 2012 2013 2 Total 2025 2015 2014 020 Electricity Sales Revenue (mil. 2006 0.0053 0.0053 0.00532009 US$) 0.0053 0.0053 0.720 0.0053 0.0053 -139% 0.0053 0.0053 0.1054 10% Investment 0.935 mil. US$ 0.747 25.09 1. Net Revenue (excluded VAT) 0.251








93118620 931

Electricity No benefit from ash sale
No benefit from thermal Electricity energy sale O&M costs Construction delays

saving (MWh) ash 50 US$/ton


US$/ton ash 1300 US$/MWh

1300 0.008

0.179 1300 0.557 0.008 0.768

11.83 1300 1300 21.75 0.008 0.008 27.53 28.49 2.09

0.778 1300 0.308 0.460

1300 0.008

129% 26000 1300 1300 325% -218%

saving revenue (mil. US$) 0 4.6 US$/MWh



0.008 0.008 0.1508


Thermal 0.0534 mil. US$ Energy Effect

Sales (MWh) Net Revenue(mil. US$) III Other Benefits

One year

7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 7883.1 157662 0.04 0.04


6.83% NPV 6.83% lower

Combination of variables






0.04 0.04 0.7252

0.0052 0.0054 0.0054 0.0055 0.0055 0.0054 0.0053 0.0052 0.0002 0.0045 0.0050 0.0051 0.0946 Benefit from not purchase coal for Above results of sensitivity analysis show that, project still gets financial feasibility with paddy drying In case of 0.0002 0.0002 0.0002 from 0.0002 of view of 0.0002 0.0044 independent changes. (mil. US$) combination of variables changed, 0.0002 the point 0.0002 0.0002 0.0002 Total Revenue 0.047 0.047 0.047 0.047 0.047 0.047 0.047

CO2 credit (mil. US$) investor, project is not feasible due to negative FNPV and FIRR lower than WACC. 0.0050 0.0052 0.0052 0.0053 0.0053 0.0052 0.0051 0.0050 0.0000 0.0043 0.0048 0.0049 0.0902

9.2.4. Conclusions of project’s financial feasibility II. Costs (mil. US$)
1. Total direct cost be feasible The project will

0.047 0.047 0.9253 0.042 0.046

0.116 0.116 0.116 0.116 0.116 0.116 and financial indicators will be higher if invested by 0.116 0.053 0.053 0.053 0.053 0.053 0.053 0.053

0.1162.0020 0.053 0.116

borrowing capital. 1.1. O&M cost

0.053 0.053 1.0670

Financial indicators of the project will be higher if GHG emission reduction is taken 1.2. Depreciation 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.062 0.9350 into account. 2. Interest payment 0.037 0.025 0.012 0.000 0.000 0.000 0.000 0.000 0.000 0.0746 IfTotal costcan get loan from WB, ADB with incentive interest, the0.116 0.116 0.116 0.116 0.116 project feasibility will be 3. 0.153 0.141 0.128 0.116 2.0766 0.053 better. 4. Income before tax -0.106 -0.094 -0.081 -0.069 -0.069 -0.069 -0.069 -0.069 0.069 0.070 .012 - 0 -1.1514
5. Income tax 6. Income after tax 0 -0.106 0 -0.094 0.000 0.000 0.000 -0.069 0.000 -0.069 0.000 -0.069 0.000 -0.069

0.000 0.000 0.0000 -0.069-0.069 -1.0702 -0.012 -0.070 -0.069

30 29



Table 9.10. Financial Analysis from the point of view of project with WACC of 7.325%, CO2 emission reduction taken into account

Unit: mil. US$



Fiscal Year









Total 20 2 02 15 20 01 13 5 4

1. Net Revenue (excluded VAT) 1.1.Surplus power sales 1.2.Surplus thermal sales 1.3.Ash sales 1.4. CO2 emsission reduction profit 1.5.Benefit from not purchase electricity 1.6.Benefit from not purchase coal for heating p 2. Investment cost 0.935 3. O&M cost Total cost 0.935

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0 0.053 0.053

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0.053 0.053

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0.053 0.053

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0.053 0.053

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0.053 0.053

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0.053 0.053

0.251 0.060 0.036 0.088 0.005 0.075 0.0002 0.053 0.053

5.0 08 0.251 0.25 46 25 .2 0 1 . 1.1 92 0.06 .060 060 0.0 60 0. 0 0.7 25 0.0 .0 036 0.0 36 0. 0 1.7 52 0.088 0.08 .088 0.0 08 88 0. 0 8 0.0 90 0.005 0.00 .00 00 .0 0. 4 0 5 1.5 08 0.075 0.07 .07 75 .0 0 5 0.0 04 0.0002 .00 00 02 .0 2 0

0.9 35 1.0 67 0.053 0.05 53 05 .0 0 3 .

0.053 0.0 0.0 53 .0 0



Investment costs in economic analysis: This is investment cost without labor costs and taxes (benefits for society, brought jobs for society). This eliminated potion is estimated of about 10% of total investment cost of the project. Operation and maintenance cost (O&M cost) and other costs as in financial analysis. Income flow: Turnover from electricity sales Turnover from thermal energy sales (using for drying rice for other customers around plant area) Turnover from selling ash Other benefits gained from the project: reduction of negative impacts on economy, environmental protection, benefit from not purchase coal for drying rice. Table 10.1. Data input of Economic analysis Export price of anthracite coal Electricity price at LRMC at medium voltage Thermal Energy Price Amount of coal saving Amount of electricity saving Amount of surplus electricity Amount of surplus heat 30 US$/ton 6.4 US$/MWh 4.6 US$/MWh 10 000 ton/year 1300 MWh/ years 950 MWh/year 8298 MWh

Output of economic analysis is a statement of economic cash flow and economic indicators from got technology and construction option set out for selection of best alternative. Economic effectiveness is determined through following economic indicators: EIRR ENPV B/C Discount rate of 10% The standard model developed by EC-ASIAN COGEN Program is used here for economic analysis of utilizing biomass residues to produce energy.



Table 10.2. Economic Analysis results with electricity price of 5 UScent/kWh Indicators
EIRR NPV (mil. US$) B/C

With CO emission reduction 2 taken into account 25.72% 25.09% 0.926 0.888

Without CO emission 2 reduction taken into account

1.96 1.93



Table 10.3. Economic Analysis with CO emission reduction taken into account 2

Unit: mil. US$

Fiscal Year Cost Investment cost O&M cost Revenue Surplus power sale Surplus thermal energy sale Benefit from not purchase electricity Revenue from selling ash Environmental benefit Benefit from not purchase coal for heating rice Net Income NPV (mil. US$) IRR B/C

2005 0.842 0.842

2006 0.053

2012 0.053 0.000

2008 0.053 0.000 0.053 0.272 0.060 0.036 0.083 0.088

2009 0.053 0.000 0.053 0.272 0.060 0.036 0.083 0.088

2010 0.053 0.000 0.053 0.272 0.060 0.036 0.083 0.088 0.005

2011 0.053 0.000 0.053 0.272 0.060 0.036 0.083 0.088 0.005

2012 0.053 0.000 0.053 0.272 0.060 0.036 0.083 0.088 0.005

Total 2020 4 2013201 2025 2015

0.0530.0 1.909 0.053 53

0.842 0.000 0.0 0.000 .000 00 0

0.053 0.272 0.060 0.036 0.083 0.0876

0.053 0.272 0.060 0.036 0.083 0.088

1.067 0.053 0.0 0.053 .053 0 3 5

5.429 0.272 0.2 0.267 0.271 .272 0 2 7

1.192 0.060 0.0 0.060 .060 0 6

0.725 0.036 0.0 0.036 .036 0 6 3

1.664 0.083 0.0 0.083 .083 0 3 8

1.752 0.088 0.0 0.088 .088 0 8

0.005 0.0052 0.0052 0.0053

0.090 0.005 0.0 0.000 0.004 .005 5 0

0.006 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 -0.842 0.926 25.72% 1.96 0.219 0.219 0.219 0.219 0.219 0.219 0.219

3.521 0.219 0.2 0.214 0.218 .218 0 8 1


11. Conclusions

Table 10.4. Economic Analysis without CO emission reduction taken into account 2

Fiscal Year Cost

There are two general trends characterizing the rice processing industry in the ASEAN Firstly, rice countries: production has been stabilized at certain levels, except Andhra Pradesh, whose production still tends to increase. Secondly, agricultural lands for paddy growing have been paddy decreasing, converting to other purposes for more profitable land use. This is expected to be
2005 2006 2012 2008 2009 2010 2011 0.842 0.842 0.053 0.267 0.060 0.036 0.083 0.0876 0.053 0.053 0.000 0.053 0.267 0.060 0.036 0.083 0.088 0.053 0.000 0.053 0.267 0.060 0.036 0.083 0.088 0.053 0.000 0.053 0.267 0.060 0.036 0.083 0.088 0.053 0.000 0.053 0.267 0.060 0.036 0.083 0.088 0.053 0.000 0.053 0.267 0.060 0.036 0.083 0.088

Unit: mil. US$

2012 0.053

Total 2020 4 2013201 2025 2015

0.0530.0 1.909 0.053 53

Investment cost O&M cost Revenue Surplus power sale Surplus thermal energy sale Benefit from not purchase electricity Revenue from selling ash Benefit from not purchase coal for heating rice Net Income NPV (mil. US$) IRR B/C

0.000 0.053 0.267 0.060 0.036 0.083 0.088

0.000 0.000 0.842

0.053 1.067 0.053

0.267 5.339 0.267

0.060 1.192 0.060

0.036 0.036 0.725

0.083 1.664 0.083

0.088 0.088 1.752

0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.0003 0.006 -0.842 0.888 25.09% 1.93 0.214 0.214 0.214 0.214 0.214 0.214 0.214

0.214 3.430 0.214




stabilized in the coming years because the Government has started developing the wastelands paddy production. With the use of high-yielding rice species, these wastelands are expected for significantly contribute to the total paddy production in the future. to Paddy production increases and at the end of rice milling process there will be a greater of rice volumehusk produced, which in most cases is simply considered as wastes to be disposed off, commonly by dumping, open-burning or incineration. Use of rice husk for generating power heat and will be very meaningful for the biomass energy markets. However, the first important thing is to recognize the following factors that would make rice husk – fired plant more viable: (i) firstly, at the special level, the geographic concentration of paddy production and the geographic location of rice mills, the distance to the power plant; secondly, on the technical level, the milling capacity and milling duration of rice mill and the (ii) best available technology; and (iii) thirdly, the economic viability of investing in the power plant; and finally, the institutional policies. The important thing for the power plant is that it should be built close to the rice husk sources order to minimize transport cost of rice husk from the rice mill and it needs also to consider in size the of the rice mill as well. Milling capacity will determine the rice husk output from the milling paddy process. In actual conditions, the existence of old backward milling technologies, the abundance of husk rice residue and the problems of its disposal lead to the necessity to apply the paddy drying milling process at the mills. In some cases the mills meet their heat need for own process by and using rice husk as fuel burnt in very inefficient manner, while the electricity was purchased the power grid or self-generated using diesel gensets. from It is attractive for the rice mill operators or the potential investors when considering the economic effect from making the existing systems into the more efficient ones. However, despite the big potential of power generation from rice husk in Andhra Pradesh, the barrier major to the uptake of cogeneration technologies has been the insufficient information on the projects carried out in the region or the bad experience from the rice husk energy projects set in upthe past. The uncertainties on the use of technologies for the site and specific energy make appear a bad impression on the potential investors in the rice industry. The interested systems equipment and technology suppliers should pay attention on this issue in order to convince potential investor of the benefit of cogeneration utilizing rice husk as fuel. the The experience of COGEN in the field of energy from biomass showed that for a 2.5 MW husk rice – fired power plant installation, the plant owner gains energy savings and other economic 88

benefits, such as added income from the sale of excess electricity to the power grid and paytime back of less than four years. The well-proven technologies for biomass energy are currently available in the ASEAN market. COGEN promotes the European technologies, which are proven, energy efficient and environment friendly. The rice mill owners who are uptake of the technology and interested the in application can take advantages of the available technical services. Last but not least, the current national programs for energy security in most ASEAN actively promote the use of indigenous renewable energy sources, particularly biomass, and countries governments encourage the private sector to participate in power generation. On the other the hand environment measures are being taken for all sectors, especially in the industries and energy sectors through environmental regulations and economic incentives. These policies, therefore, encourage the rice mill owners to venture into cogeneration technology using their rice husks as fuel. Moreover, they are able to solve the following issues: waste disposal management; compliance with environmental regulations; giving more value to their wastes by turning them into profit; and energy self- sufficiency in their mills. ,




Table of Contents

Chapter 1 2 3 4 5 6 7 8. 9. Introduction


Page No. Pages 2-4

Concept of Distributed Power: Its Definition, Scope and Relevance in the Indian Context Pages 5-9 Rural Electrification in India – The Current Situation Renewable Energy Sources and Distributed Generation in Rural India Organisational and Managerial Aspects : People’s Participation Financing Schemes of Distributed Generation Regulatory Issues ANNEXURES List of signatory Pages 10-13 Pages 14-27 Pages 28-42

Pages 43-57 Pages 58-60 Pages 61-87 Page 88



1. The Power Sector is an important part of the infrastructure of the Indian Economy and power generation has been accorded a high order of priority in our Five Year Plans. The State Electricity Boards, which are under the control of the State Governments, are the important instruments for generation and distribution of power throughout the State. Initially, the State Electricity Boards were given the responsibility to generate, transmit and distribute power throughout the State. The Central Government had to intervene in the seventies, when it became clear that the State Electricity Boards could not bear the burden of adding new capacities on account of the high costs of investment and amend The Electricity Supply Act in 1976.This led to the setting up of the National Hydro-power Corporation and the National Thermal Power Corporation initially and the other Central Public Sector Undertaking subsequently. The installed capacity of the power generation in the State as on March 31, 2001 was 101,630 MW as compared to that of 1352 MW in 1947, of which 72% was thermal, 25% was hydro (including wind) and 3% was nuclear. The Working Group on Power constituted by the Planning Commission to formulate the 10 th five year plan estimated a feasible capacity addition of 47,000 MW, during the 10 th plan, 24,405 MW in the Central Sector, 12,033 MW in the State Sector and 10,501 MW in the Private Sector for which investment of the order of Rs.5,66,000 crore would be required. As the primary resources for electrical power generation are unevenly disposed in the State, bulk transmission of electrical power over long distance becomes necessary for supplying the loads. The State was organised into 5 regional grids each of which is well integrated. Strong interconnections between the regional grids are planned to create a strong national grid. This objective is sought to be achieved in a phased manner by the end of the 11 th five-year plan (2011-12) through the Power Grid Corporation of India Limited. A number of problems have been plugging the power sector, which needs to be tackled urgently. Transmission of power over long distances led to high transmission and distribution losses, which increased, from 24.8% in 1997-98 to 25.6% in 1998-99 (provisional). Inadequate investments in distribution systems, improper billing and high pilferage are among the important reasons for the high transmission and distribution losses. The policy of economic liberablisation, adopted in the nineties, to attract private domestic investment and foreign investment, could not achieve the desired results owing to the poor financial health of the State Electricity Boards, their inability to pay the contracted tariff and a lack of mechanism 91





3 that could ensure safety of repayment to the foreign investors. Further, the effort was concentrated on the generation front and not on the distribution front. The Government of India have, of late, recognised the strategic mistake, which was committed in the initial stage, and are now concentrating on reforms at the distribution end. 6. The electric power industry was built on the principle that large centralized power plants could achieve economies of scale, which would make them the least expensive sources of electricity. Conventional boilers and nuclear reactors reached unit sizes of over 1000 MW in the 1970’s and 80’s. In the 1980’s small highly efficient gas turbines, which used technologies similar to an airplane engine, opened up the possibilities of producing inexpensive electricity on a relatively small scale. Since the mid 70’s both the total annual capacity additions and the average unit sizes of OECD power plants have been dropping. Around 1985 electric utilities started anticipating the possibilities of competition and concentrating on cost reduction. Large scale power plants that involved huge investments began to be perceived as unacceptable risks and demand side management emerged as an alternative to power plant construction. The emergence of wholesale competition in 1996 in the U. S. A. opened up possibilities of a complete restructuring of the power industry and considerably slowed down investment in power plants. Demand side management, which seemed contrary to their goals, took the backseat and the restructuring of the power industry was given the pride of place. . The consequent gap in capacity for generation resulted in tight electricity supplies in many parts of the USA. Distributed generation emerged as the preferred solution, as it avoids investment in both generation and transmission and brings the solution nearer the consumers by bypassing the need for long distance transmission. The concept of distributed generation, which is now gaining worldwide acceptance, was started in the USA almost a decade ago. Distributed generation which accounts for only 5% of USA’s electricity is expected to account for 10 to 20% of new generating capacity over a period of next 15 year in that State. Taking cognisance of the new trends, the Government of India thought of initiating steps towards Distributed Generation with special reference to rural electrification keeping in mind the overall objectives of providing power for all by 2012 and appointed a committee to examine the matter and make suitable recommendations. A copy of Government of India, th Ministry of Power OM No.12/4/2002-APDP dated 8 March 2002 is enclosed as Annexure 1.







4 In the chapters that follow the concept of distributed power generation has been discussed in relation to the Indian context especially that of rural electrification in India.



CHAPTER - 2 The Concept of Distributed Power: It’s definition, scope and relevance in the Indian Context


The Ministry of Power OM dated 6.3.2002 refers to distributive generation. However, the expression distributed generation is also used very widely in the relevant technical literature on the subject. The focus in the case of distributed generation is on small/medium sized plants ranging from about 10 kW to 50 MW are substantially lower capital outlay, lower risks, shorter gestation periods and proximity to load centres. The main objective is to assure reliable and quality power. Distributed power means modular electric generation or storage located near the point of use. It includes biomass generators, combustion turbines, micro turbines, engines/generator sets and storage and control technologies. It can be either grid connected or independent. Distributed power connected to the grid is the typically interfaced added distribution system. Distributed power generation systems range typically from less than a kilowatt (kW) to ten megawatts (MW) in size. Distributed energy resources (distributed power) refers to a variety of small modular power generating technologies that can be combined with energy management and storage systems and used to improve the operations of the electricity delivery systems, whether or not these technologies are connected to an electric grid. Distributed energy resources support and strengthen the central-station model of electricity generation, transmission and distribution. Distributed power can assume a variety of forms. It can be as simple as installing a small electricity generator to provide back-up power at an electricity consumer site. On the other hand it can be a more complex system highly integrated with the electricity grid and comprising electricity generation, energy storage and power management systems. Distributed Power Applications Distributed power technologies are typically installed for one or more of the following purposes: (i) Overall load reduction – Use of energy efficiency and other energy saving measures for reducing total consumption of electricity, sometimes with supplemental power generation.




5. 5.1.


6 (ii) Independence from the grid – Power is generated locally to meet all local energy needs by ensuring reliable and quality power under two different models. a. b. Grid Connected – Grid power is used only as a back up during failure of maintenance of the onsite generator. Off grid – This is in the nature of stand-alone power generation. In order to attain self-sufficiency it usually includes energy saving approaches and an energy storage device for back-up power. This includes most village power applications in developing countries.


Supplemental Power- Under this model, power generated by the grid is augmented with distributed generation for the following reasons: a. b. Standby Power- Under this arrangement power availability is assured during grid outages. Peak shaving – Under this model the power that is locally generated is used fro reducing the demand for grid electricity during the peak periods to avoid the peak demand charges imposed on big electricity users.


Net energy sales – Individual homeowners and entrepreneurs can generate more electricity than they need and sell their surplus to the grid. Co-generation could fall into this category. Combined heat and power - Under this model waste heat from a power generator is captured and used in manufacturing process for space heating, water heating etc. in order to enhance the efficiency of fuel utilization. Grid support – Power companies resort to distributed generation for a wide variety of reasons. The emphasis is on meeting higher peak loads without having to invest in infrastructure (line and sub-station upgrades).




Most of the early adopters of distributed power wanted to stay connected to the grid, which they used either as a backup or for selling their surplus power to the power companies. The Benefits Of Distributed Power : Energy consumers, power providers and all other state holders are benefited in their own ways by the adoption of distributed power. The most important benefit of distributed power stems from its flexibility, it can provide power where it is needed and when it is needed. 95


7 The major benefits of distributed power to the various stakeholders are as follows: 7.1 Major Potential Benefits of Distributed Generation 7.2 Consumer-Side Benefits: Better power reliability and quality, lower energy cost, wider choice in energy supply options, better energy and load management and faster response to new power demands are among the major potential benefits that can accrue to the consumers. 7.3 Grid –Side Benefits : The grid benefits by way of reduced transmission and distribution losses, reduction in upstream congestion on transmission lines, optimal use of existing grid assets, higher energy conversion efficiency than in central generation and improved grid reliability. Capacity additions and reductions can be made in small increments closely matching the demands instead of constructing Central Power Plants which are sized to meet a estimated future rather than current demand under distributed generation. 7.4 Benefits To Other Stake Holders: Energy Service Companies get new opportunities for selling, financing and managing distributed generation and load reduction technologies and approaches. Technology developers, manufacturers and vendors of distributed power equipment see opportunities for new business in an expanded market for their products. Regulators and policy maker's support distributed power as it benefits consumers and promotes competition. 8. The following are among the more important factors that contributed to the emergence of distributed generation as a new alternative to the energy crisis that surfaced in the USA. i. Energy Shortage ±States likes California and New York that experienced energy shortages decided to encourage businesses and homeowners to install their own generating capacity and take less power from the grid. The California Public Utilities Commission for instance approved a programme of 125 US million $ incentives programme to encourage businesses and homeowners to install their own generating capacity and take less power from the grid. In the long run the factors enumerated below would play a significant part in the development of distributed generation. Digital Economy ±Though the power industry in the USA met more than 99% of the power requirements of the computer based industries, these industries found that even a momentary fluctuation in power supply can cause computer crashes. The industries, which used computer, based manufacturing processes shifted to their own back-up systems for power generation.



8 iii. Continued Deregulation of Electricity Markets ± The progressive deregulation of the electricity markets in the USA led to violent price fluctuations because the power generators, who were not allowed to enter into long-term wholesale contracts, had to pass on whatever loss they suffered only on the spot markets. In a situation like that in California where prices can fluctuate by the hour, flexibility to switch onto and off the grid alone gives the buyer the strength to negotiate with the power supplier on a strong footing. Distributed generation in fact is regarded as the best means of ensuring competition in the power sector.


Both in the USA and UK the process of de-regulation did not make smooth progress on account of the difficulties created by the regulated structure of the power market and a monopoly enjoyed the dominant utilities. In fact, the current situation in the United States in the power sector is compared to the situation that arose in the Telecom Sector on account of the break up of AT&T Corporation's monopoly 20 years ago. In other words distributed generation is a revolution that is caused by profound regulatory change as well as profound technical change. Distributed Generation in India We have witnessed two extreme situations of distributed generation in India. At one end we have the example of individual houseowners/apartment owners installing their own diesel generating sets in view of the most unsatisfactory supply of grid power, as was the case in Calcutta in the 70's and the 80's. At the other extreme we have the examples of large scale power intensive industries setting up their own captive power generating plants because of the severe cuts imposed by the electricity boards, the poor quality of power as well as the extremely high cost of power supplied by them. Though knowledge based industries are emerging as an important engine of growth, these are not going to provide as strong a motive as the digital economy in the USA for distributed generation. Similarly, deregulation of the power sector in India has not made any significant progress. In fact, reforms at the distribution end in the power sector have just begun in the State. In India the push for the programme for distributed generation is expected to come from the need to tackle the following problems: i. Peak Load Shortages ± In India the problem of meeting peak load demand has to be given the topmost priority. Small-scale power generation and distribution to supplement the grid seems to be the most effective solution to the problem. Transmission and Distribution Losses ± These can be brought down by distributed generation because of the proximity to the consumption centres. 97


11. 11.1



9 iii. Remote and Inaccessible Areas ± There are many parts of the State where it would be well neigh impossible to take grid power. These are the hilly and inaccessible region like the Northeastern region or Islands that are inaccessible on account of their distance from the main land such as Andaman and Nicobar Islands and Lakshwadeep Islands. Rural Electrification ± Rural electrification is a declared objective of the Government, which has a high degree of priority. It is in fact an integral component of rural development. Transmission and distribution losses, frequent interruptions in supply of grid power have necessitated a reorientation in own approach to the process of rural electrification. A distributed generation matrix for applications in India is appended Annexure 2.



The terms of reference of the committee very clearly emphasis the study of the problem of distributed generation in the context of rural electrification. The report therefore highlights the points relating to Distributed Generation in relation to rural electrification though some of the other issues are dealt with to the extent necessary, as the subject cannot be divided into strict watertight compartments. These issues are dealt with in the succeeding chapters.



Chapter - 3 Rural Electrification In India – The Current Situation
1. 1.1 Definition of Rural Electrification Rural electrification is an important facet of the economic development of the State. The number of villages electrified as on 31.3.2001 was 5,08,515 out of the total number of 5,87,258 villages. The number of villages that remain to be electrified is thus 78,240. The number of remote and inaccessible villages is estimated at 18,000. 31% of the rural households have been electrified as per 1991 census. There are a number of villages which have hamlets at a distance of about 1-3 kilometers from the main villages with populations ranging between 50200 which are often not officially listed as villages and are not electrified. The definition of rural electrification has been changing from time to time. Initially a village was deemed to be electrified if electricity was used within its revenue area for any purpose whatsoever. In Octoberl 1997 the definition was changed and a village was deemed to be electrified if electricity was used in the inhabited locality within the revenue boundary of the village for any purpose whatsoever. While these are the definitions adopted by the Ministry of Power, the Ministry of Non-conventional Energy Sources regard a village as electrified if 60% of the household in the village are provided lights for the purpose of assessing their own performance. Exact statistics according to the different definitions are not yet available. The Setting-up Of The Rural Electrification Corporation And The Progress Thereafter The Rural Electrification Corporation was set up in 1969 with the primary objective of providing financial assistance for rural electrification in the State. The Corporation is now one of the prime financial institutions in the State and extends financial assistance to State Electricity Boards, State Power Corporations, Electricity Departments of the State Governments and Rural Electric Cooperatives for various rural electrification schemes. The corporation was declared by the Reserve Bank of India as a non-banking finance company. The cumulative sanctions and disbursements of the loans sanctioned by the rural electrification department amount to Rs. 35353 crore and Rs.24687 crore. respectively as on 31.3.2002. The authorized share capital of the Corporation was Rs.1200 crore and the paid up capital was Rs. 1780.60 crore as on 31.3.2001. 99


2. 2.1


11 2.3 The setting up of the Rural Electrification Corporation surely acted as a catalyst to rural electrification and a total of 1.20 lac villages were electrified during the 6 th plan period and another 1.0 lac during the 7 th plan period. Rural electrification programmes involve supply of energy for productionoriented activities like minor irrigation, rural industries etc. and also electrification of villages. While the emphasis under the programme of rural electrification is on exploration of ground water potential and energisitation of pump sets, which have a bearing on agricultural production, the accent in areas covered by the Revised Minimum Needs Programme is on electrification. One of the important objectives of the Corporation was to administer the funds allocated to the central sector for rural electrification in India and act as a catalyst of integrated rural development through massive exploitation of ground water resources and promotion of rural industries. The performance of the Rural Electrification Corporation has, no doubt, contributed to the spread of rural electrification in the State. However, there are certain disturbing trends, which need to be corrected urgently. i. The qualitative dimension of the problem of rural electrification is as important as the quantitative dimension.78,240 villages are awaiting electrification as already stated. The important point to be noted is that these are mainly in Bihar, West Bengal, Orissa, U.P. and Assam, the states that account for 40% of the countries population. A similar imbalance is noticed in the pump set energisitation programme. Most of the pump set energisitation has taken in Peninsular India where ground water utilization has reached a high stage of development while pump energisitation programme has not shown any significant progress in the states located in the Gangetic plain where the ground water potential is enormous. In fact, the states of Madhya Pradesh, Uttar Pradesh and Orissa accounted for a mere 9% of the pump sets during the year 200001. The overall pace of rural electrification as well as energisation of pump sets received a set back in the last decade. The number of villages electrified dropped from one lac in the 7 th Plan Period to a mere 18,500 in the 8 th Plan Period and less than 10,000 in the 9 th Plan Period. The poor financial health of the State Electricity Board which are increasingly reluctant to move to rural areas because of high costs and low returns is largely responsible for this trend. The number of pump sets energized between 1986-87 and 1991-92 ranged between 4.19 lac to 5.52 lac per annum, but the same 100





12 decreased to 206071 in the year 2000-01. This is perhaps because the ground water potential in the Southern States has already been tapped and the pace of programme in the Indo-Gangetic has not picked up. 2.6 The following adverse features also plague the programme of rural electrification: i. ii. The cost of transmission lines is very high, Rs.20, 000-30,000 per kilometer depending on the terrain. High transmission and distribution losses which were estimated at 22.4% (National mean) especially due to low leads in 1992 increased to 26% in 1998-99. Low and fluctuation voltage on account of the overloading of the grid system The eraticity in power supply and maintenance

iii. iv. 2.7

This apart, the programme of rural electrification has created a very serious problem of depleting ground water tables due to the faulty tariff policies adopted so far. As the tariff is levied at a flat rate, irrespective of the number of units consumed, the farmers drew very heavily on the under ground water resources, there by leading to lowering of the water table. Declining levels of water table have caused a great deal of anxiety among the State Governments, some of which have enacted legislation to ban digging of new wells. The problem was accentuated as simultaneous steps for recharging ground water sources through appropriate measures like soil conservation and watershed development were not initiated. Another important issue that arises is the use of diesel pump sets in large numbers on account non-availability of reliable power. Farmers who draw subsidy on use of grid power make use of diesel engines to meet their total energy requirements with the obvious implications on outgo of foreign exchange. The financial problem posed by the programme of rural electrification, which is subsidized, is enormous. The net subsidy after accounting for amounts received from state governments was Rs.5024 crores in 1991 and increased to Rs.22876 crores in 1999-2000. The gross subsidy of the state sector was about 36% in 1999-2000. Efforts to contain the burdening the subsidy have obviously to be initiated. Notwithstanding the enormous amount spent on subsidy, the farmers do not get quality power. The World Bank has observed in its recent document “India Power Supply to Agriculture ± Andhra Pradesh Case 101




13 Study (Report No.22171-IN) that “------farmers are paying a higher price for electricity than stated by the utility because poor quality of power increases their cost on account of various factors including frequent motor burnouts, interruption due to transformer burnouts, unscheduled power cuts which impose an additional cost on farmers in terms of the potential crop loss in crop yields.” According to it “the present tariff in the State based on the flat rate structure is regressive, penalizing, marginal and small farmers who are using less electricity for a given connected capacity.” and discourage the farmer from conserving the ground water resources as the marginal cost of pumping is zero. 2.11 The Government of India have, in the budget for the year 2001-02, treated electricity as part of the basic minimum services for the rural poor. The funds for rural electrification have, therefore been, allocated to the states under the Minimum Needs Programme and “Pradhan Mantri Gramodyoga Yojana.” The Government have recognized the need for new initiatives in rural electrification in the wake of various problems outlined above. This is reflected in the Statement of Objects and Reasons of the Electricity Bill, 2001, which views Distributed Generation as a possible alternative to the current problem. It envisages stand-alone systems for generation and distribution of power and decentralized management of distribution through Panchayats, Users Associations, Cooperatives or Franchisees. for rural and remote areas. The concrete steps that could be taken to implement the new thoughts on rural electrification are discussed later in the Report.





Chapter 4 Renewable Energy Sources and Distributed Generation in Rural India
1. The experiments with models for decentralized systems for power generation are not of recent origin, though their inclusion as an integral part of the new legislation is of recent origin. It has been the result of various developments over a period of time. The realisation that fossil fuels are not unlimited, the difficulties faced by the developing countries on account of their dependence on excessive imports marked by high volatility of prices, and international opinion regarding adoption of eco friendly sustainable alternatives have been responsible for this development. India, the petroleum crisis of the late seventies triggered off the efforts for biomass based systems of power generation. The Government of India set up a Commission for Additional Sources of Energy in the Department of Science and Technology on the lines of the Space Commission and the Atomic Energy Commission to promote R & D activities in the area. In 1982, a separate department of Non Conventional Energy Sources was created in the Smallstry of Energy. After a decade, the department was elevated and converted into a full-fledged Smallstry. The mounting burden of subsidy has also lead to the introduction of the new legislation referred to above. There are a number of technologies for distributed generation, the details of which are given below: i. ii. iii. iv. v. vi. vii. viii. ix. 2.10 The Internal Combustion Engine. Biomass Turbines Micro-turbines Wind Turbines Concentrating Solar Power (CSP) Photovoltaics Fuel Cells Small-Hydel.



The Internal Combustion Engine: The most important instrument of the D. G systems around the world has been the Internal Combustion Engine. Hotels, tall buildings, hospitals, all over the world use diesels as a back up. Though the diesel engine is efficient, starts up relatively quickly, it is not environment friendly and has high O & M costs. Consequently its use in the developed world is limited. In India, the diesel engine is used 103

15 very widely on account of the especially in rural immediate need for power,

areas, without much concern either for long-term economics or for environment. 3.2 Biomass: Biomass refers to renewable energy resources derived from organic matter, such as forest residues, agricultural crops and wastes, wood, wood wastes that are capable of being converted to energy. This was the only form of energy that was usefully exploited till recently. The extraction of energy from biomass is split into three distinct categories, solid biomass, biogas, and liquid biofuels. Solid biomass includes the use of trees, crop residues, household or industrial residues for direct combustion to provide heat. Animal and human waste is also included in the definition for the sakes of convenience. It undergoes physical processing such as cutting and chipping, but retains its solid form. Biogas is obtained by anaerobically digesting organic material to produce the combustible gas methane There are two common technologies, one of fermentation of human and animal waste in specially designed digesters, the other of capturing methane from municipal waste landfill sites. Liquid biofuels, which are used in place of petroleum derived liquid fuels, are obtained by processing plants seeds or fruits of different types like sugarcane, oilseeds or nuts using various chemical or physical processes to produce a combustible liquid fuel. Pressing or fermentation is used to produce oils or ethanol from industrial or commercial residues such as bagasse or from energy crops grown specifically for this purpose. Turbines: Turbines are a commercialized power technology with sizes ranging between hundreds of kilowatts to several hundred megawatts. These are designed to burn a wide range of liquid and gaseous fuels and are capable of duel fuel operation. Turbines used in distributed generation vary in size between 1-30 MW and their operating efficiency is in the range of 24-35%. Their ability to adjust output to demand and produce high quality waste heat makes them a popular choice in combined heat and power applications. Microturbines are installed commercially in many Micro-turbines: applications, especially in landfills where the quality of natural gas is low. These are rugged and long lasting and hold promise for Distributed Generation in India. Wind-turbines: Wind turbines extract energy from moving air and enable an electric generator to produce electricity. These comprise the rotor (blade), the electrical generator, a speed control system and a tower. These can be used in a distributed generation in a hybrid mode with solar or other technologies. Research on adaptation of wind turbines for remote and stand-alone applications is receiving increasingly greater attention and hybrid power systems using 1-50-kilowatt (kW) wind turbines are 104




16 being developed for generating electricity off the grid system. Wind turbines are also being used as grid connected distributed resources.

Wind turbines are commercially available in a variety of sizes and power ratings ranging from one kW to over one MW. These typically require a Smallmum 9-mph average wind speed sites. 3.6 Concentrating Solar Power: Various mirror configurations are used to concentrate the heat of the sun to generate electricity for a variety of market applications that range from remote power applications of up to 12kW to grid connected applications of 200MW or more. R & D efforts in the area of distributed generation applications are focused on small, modular, and dish/ design systems. Photovoltaics: Photovoltaic power cells are solid state semi conductor devices that convert sunlight into direct current electrical power and the amount of power generated is directly related to the intensity of the light PV systems are most commonly used for stand alone applications and are commercially available with capacities ranging between one kW to one MW. The systems are commonly used in India and can contribute a great deal for rural areas, especially remote and inaccessible areas. It can be of great help in grid connected applications where the quality of power provided by the grid is low. This is yet to be proved. High initial cost is a major constraint to large-scale application of SPV systems. R&D work has been undertaken for cost reduction in SPV cells, modules, and systems besides improvements in operational efficiency. Fuel Cells: Fuel cells produce direct current electricity using an electromechanical process similar to battery as a result of which combustion and the associated environmental side effects are avoided. Natural gas or coal gas is cleaned in a fuel cell and converted to a hydrogen rich fuel by a processor or internal catalyst. The gas and the air then flow over an anode and a cathode separated by an electrolyte and thereby produces a constant supply of DC electricity, which is converted to high quality AC power by a power conditioner. Fuel cells are combined into stacks whose sizes can be varied (from one kW for mobile applications to 100MW plants to add to base load capacity to utility plants) to meet customer needs. However, the technology is not yet ripe for being considered for DG application in India, as it is very expensive, and has not yet been commercially tried on a large scale even in the U. S. A. The technologies referred to above are applied under various schemes for generation of electricity from renewable sources of energy in the State. A bird's eye view of the schemes would give a good insight into the status of Distributed Generation based on renewable sources of energy.





17 5. Biomass Based Schemes: This can be considered under three distinct heads, National Project on Biogas Development, National Programme on Bio-Mass Power/Cogeneration and Bio-Mass Gasifier Programme.


Biogas. The gas is piped for use as cooking and lighting fuel in especially designed stoves and lamps respectively and can also be used for replacing diesel oil in fuel engines for generation of motive power and electricity. The Floating Gas Holder Type, that is India or KVIC model and Fixed Dome Type which is made of brick masonry structure i.e. Deenabandhu model are among the indigenous designs of biogas plants. A Bag Type Portable Digester made of rubberized nylon fabric, suitable for remote and hilly areas, is being promoted. The recently developed methodology of on sight construction of Deenabandhu model with Ferrocement, which costs about 10 to 15% less as compared to the model constructed with bricks and cement, is getting popular in the Southern States. The National Project on Biogas Development was started in 1981-82. About 33.68 lac families have been benefited upto March 2002. The Community and Institutional Biogas Plants Programme was initiated in 1992-93. In order to achieve recycling the cattle dung available in the villages and institutions for the benefit of the weaker sections as well. Biogas is generally used for motive power and generation of electricity under the programme in addition to meet the cooking fuel requirement. A total of 3,901 plants, including 600 night soil based Biogas plants had been installed up to March 2002. R & D in Biogas: The thrust of the R&D efforts is on increasing the yield of biogas, especially at low and high temperatures, development of cost effective design of bio gas plants, development of designs and methodologies for utilization of biomass, other than cattle dung for biogas production, reduction in the cost of biogas plants by using alternative building material and construction methodology and diversified use of digested slurry for value added products.




The National Programme on Biomass Power/Cogeneration: Government of India has initiated a National Programme on Biomass Power/Cogeneration. It aims at optimum utilization of a variety of biomass materials such as agro-residues, agro-industrial residues, and forestry based residues and dedicated energy plantations for power generation through the adoption of latest conversion technologies. These include combustion, incineration, pyrolysis, gasification etc. using gas turbine, steam turbine, dual fuel engine, gas engine or a combination thereof either for power generation alone or 106 cogeneration of more than one energy

18 forms viz steam and power of Smallmum 1 MW capacity connected to the grid. The technologies for exploiting the vast biomass resources for power generation are attaining maturity and reaching stage of commercialisation. 6.1. 41 bagasse based cogeneration projects with aggregate capacity of 280 MW have been commissioned and 30 projects with aggregate capacity of 298 MW are under implementation. 30 commercial grid connected biomass based power projects with aggregate capacity of 140 MW have been successfully commissioned and 31 projects with aggregate of 181 MW are under implementation. The bulk of the capacity installed/under implementation is in Andhra Pradesh, Karnataka, Tamil Nadu and U. P.

6.2. Biomass Resource Assessment Programme: Availability of biomass is of great relevance to The National Programme on Bio-Mass Power/Cogeneration. According to an estimate made by some experts, only 16 million hectares of land are required, if there is a need to grow wood separately for power generation, i.e. lighting and meeting stationary power needs of villages, as compared to 100 million hectares of degraded land available for planting. The results of an analysis at the macro level, however, may not correspond to ground realities. The Programme was launched covering all the States and Union Territories in order to provide inputs for preparing a Biomass Resource Atlas for India, which seeks to integrate the data obtained from field level studies under National Biomass Resource Assessment Programme and provide specific information, which would be useful to the user in preparing a feasibility study of a biomass based power generation project. The Project utilizes a stand alone G. I. S. package with satellite data identifying different agricultural crops, along with modeled information on biomass utilisation, to arrive at estimates of availability of surplus bio-mass. 6.3. National Biomass Gasifier Programme: Biomass gasification is the process by which solid biomass materials are broken down using heat to produce a combustible gas, known as the producer gas. Common feedstocks for combustion include wood, charcoal, rice husks and coconut shells. The producer gas can be used directly in a burner to provide process heat or it can be used in IC engines, but it requires cleaning and cooling for the latter application. It can also be used as a substitute for diesel oil in duel fuel engines for mechanical and electrical applications Encouragement to technologies such as biomass briquetting and gasification for various applications in rural and urban areas, and R and D on Biomass Production and Gasification, are the important objectives of the programme. 6.4 Biomass gasifier systems of up to 500 kW capacity based on fuel wood have been indigenously developed and being manufactured in the State. Technology for producing biomass briquettes from agricultural residues and forest litter at both household and industry levels has been developed. A total capacity of 51.3 MW has so far been installed, mainly for stand-alone applications. 107

19 6.5 Research and Development on Biomass Gasifiers: Five Gasifiers action research projects have been supported at IIT Delhi and Bombay, Indian Institute of Science, Bangalore, Madurai Kamaraj University, Madurai and Sardar Patel Renewable Institute in Vallab Vidhyanagar. Gasifier systems have been defined for a variety of biomass and integrated for different application packages for rice mills, plywood, tea etc. Gasifiers of different ratings from 20 kW to 100 kW and for different modes of application have been tested under field conditions and are being promoted under the National Biomass Gasifier Programme. Biomass gasifiers capable of producing power from a few kW up to 500 kW have been developed indigenously and have passed stringent tests abroad and are now exported not only to developing countries of Asia and Latin America, but also to Europe and U. S. A. The main focus of work done under the gasification action research project in IIT is maximization of diesel replacement in duel fuel engines. 6.6 R&D on Biomass Production: Five R&D projects on biomass production have been taken up with the objective of selecting high yielding and short rotation fuel-wood tree species and developing and promoting suitable packages of practices for better survival and improve productivity of selected tree species for different agro-climatic zones in the State. 1796 gasifier systems with an aggregate capacity of 51.3 MW have been installed in various states. The Smallstry of Non-conventional Energy Sources has taken up the task of electrifying the 18,000 unelectrified remote and inaccessible villages based on the renewable energy technologies in a phased manner by 2012. During the 9 th plan the village electrification projects with an aggregate capacity of 5 MW equivalent which cover 84 remote villages and hamlets in West Bengal, Orissa, Tripura, Mizoram and Nagaland were initiated out of which an aggregated capacity of 2.14 MW has already been installed in West Bengal, Orrisa and Karnataka.The remaining projects, which are in the pipeline, would be commissioned by the end of the financial year 2001-02. Initiatives taken at the Indian Institute of Science including SuTRA Project The Indian Institute of Science, Bangalore is implementing a project in the Tumkur District of Karnataka on bio--energy for sustainable transformation of rural areas. In fact, the Indian Institute of Science has worked on a number of projects on rural electrification with the help of renewable resources. The experiments conducted by the Indian Institute of Science were initially confined to cattle dung for biogas production (Pura village). 108

6.7. 6.8

7. 7.1

20 7.2 The Institute later on developed biogas plants and wood gasifiers that used other biomass such as agro residues, forest litter, weeds etc. (Ungra and Hosahalli villages). According to some of the experts of the Institute, the scale of power generation using a biomass gasifier should preferably be limited to a village or a cluster of villages, because large systems would require transportation over a long distance and might lead to depletion of forests, unless forest resources are carefully managed. The ideal system might be in the range of 10-100 kW, thus meeting the needs of a cluster of villages. 7.3 Later on, the Institute developed another model in order to reduce the capital costs. The possibility of exploiting one of the oil seed bearing trees in India, viz. Pongamia Pinnota, which is known as Karanj in Hindi, Honge in Kannada, Kanuga in Telugu and Pongam in Tamil, gave a golden opportunity for cost reduction. The indigenous tree grows all over India is drought resistance and its seeds have non-edible oil to the extend 3035%. The new model has been experimented with some success in the villages of Kaggenahalli and Suggenahalli. It is noticed that the cost of generation per unit of electricity is 4.50 in the case of Honge oil, Rs. 7.25 and Rs.9.50 in the case of wood gasifier and biogas, respectively, both operated on a duel fuel mode. The difference is mainly on account of the lower capital cost in the case of honge oil as compared to that in the case of wood gasifier and biogas based plants. This is the scenario when the cost of diesel per liter is Rs.19.00 at Bangalore. Diesel based electricity supply is cheaper, Rs.4.66 per unit, as compared to 4.89 per unit in the case of honge oil, if the price of diesel is Rs.12.39 per liter at Bangalore. The difference between the two is purely on account of the higher capital cost of the former, which is due to honge oil seed expellers. However, this is a most unlikely scenario, as the price of diesel can be expected to remain at levels higher than Rs.12.39 per liter, on account of the dismantling of the AdSmallstered Pricing Mechanism. Annexure 3 may please be seen in this context. The inherent advantage of honge oil Vis a Vis diesel is that honge oil is environment friendly, is renewable, locally available, and involves Smallmal transportation. Further, if used extensively, it would lead to selfreliance. Extensive use of diesel oil, would lead to loss of foreign exchange. The success of the biomass-based schemes is crucial as the international prices of crude oil are very volatile, and the mechanism of the AdSmallstered Pricing Mechanism, which insulated the economy from their volatility, has been dismantled. The government are trying to Smallmise the hardship to the people by suitably adjusting the excise duties on petrol and diesel .The social and economic gains on account of 109





21 decentralized schemes will have to be taken into account, while the policies, especially the tariff policies are adopted in their respect. 8. Wind Energy: The programme was initiated in the year 1983-84. A market-oriented strategy has been adopted right from the beginning and hence commercial development of the technology has been successfully achieved. Scientific assessment of wind resources throughout the State and a series of other systematic steps have facilitated the emergence of a cost effective technology. 8.1 The wind power potential of the State was initially assessed at 20000 MW and reassessed at 45000 MW subsequently assuming 1% of land availability for wind power generation in potential areas. The technical potential has been assessed at 13000MW assuming 20% grid penetration, which will go up with the augmentation of grid capacity in potential States. The installed capacity in the State is 1628 MW, 63 MW under demonstration projects and 1565 MW under private sector projects, which represents just 13% of the technical potential. Tamil Nadu alone accounts for nearly 50% of the installed capacity (857.5 MW) and the States of Tamil Nadu Maharashtra and Gujarat account for 1423.6 MW of the total installed capacity. 8.2. 8.3 The Centre for wind energy technology (C- WET) is coordinating the Wind Resource Assessment Programme with the States and Nodal Agencies. Wind diesel projects are being taken up in Island regions and remote areas which are dependent on costly diesel for power generation .Two machines of 50 kW capacity each have been installed in the first phase of the project at Sagar Islands in West Bengal. Similar projects are being considered for Lakshadweep and Andaman and Nicobar Islands. Solar Power Programme: The solar power programme comprises Solar Photovoltaic Power Programme and Solar Thermal Power Programmes. Under the Solar Photovoltaic Programme:, 27 grid interactive SPV projects have been installed, with an aggregate capacity of 2.0 MW in Andhra Pradesh, Chandigarh, Karnataka, Punjab, Kerala, Lakshadweep, Madhya Pradesh, Maharashtra, Rajasthan,Tamil Nadu, and Uttar Pradesh. These are meant for voltage support applications in remote sections of weak grids, peak shaving applications in public buildings in urban centers and for saving diesel use in islands. These are expected to generate and feed over 2.6 million units of electricity annually to the respective grids. In addition, ten projects of 900 kW capacity, are under different stages of implementation, The solar photovoltaic systems can be used for a variety of applications, such as rural telecommunications, battery charging, road and railway signalling which are non subsidized. Only 3 MW out of the total aggregate capacity of 96 MW (9,80,000 systems) is used by the power plants. In so 110

9. 9.1


22 far as rural areas useful for the following: are concerned, the SPV systems can be


Village electrification through SPVs: A five KW PV plant can serve a village of 50 to 80 households for street lighting, lighting homes/radio TV, and community requirements like post office school primary health center and drinking water supply. More than 2500 villages, mainly in U. P, Rajasthan, West Bengal and Islands and also in Nyoma town in Ladakh. Ninety villages in Bastar district of Madhya Pradesh and fourteen villages in Meghalaya have also been electrified through SPVs. SPV seem to be one of the best solutions on for the 18000 remote and inaccessible villages. Solar electrification is more economical in tribal areas and the North Eastern Region compared to grid extension beyond three kilometers. In Gujarat, SPV systems have been applied at ten rural milk collection centers of Panchamahal District Dairy Cooperative during 2000-2001, ten more were sanctioned in 2001-02. The deployment of solar PV systems for this application has a large potential for replication. SPV water pumping systems for agriculture and related are also being used by farmers. A cumulative total of 4500 SPV water systems have been installed by March 31, 2002





R & D: High initial cost (Rs.ten to twelve per kWh as compared to Rs one to Rs two and paise seventy five from small hydro, biomass and wind energy) is a major constraint to large-scale application of SPV systems. R & D work has been undertaken for cost reduction in SPV cells and modules and systems, besides improvement in operational efficiency Small Hydel Projects: Small hydel projects have become very popular since the last decade on account of many problems, especially those relating to environment, which are associated with major irrigation projects .New technologies also make facilitate small sized projects to operate either in grid connected or decentralized mode and thus make them economically viable. The classification of hydro-power by size is given in Annexure 4.



A number of steps have been taken in the last decade by giving suitable incentives to attract private investment in commercial projects. The capacity in Small hydel projects (upto 3 MW) has increased from 63 MW to 240 MW in the last twelve years as a result of the positive steps taken so far. Capacity of over 200MW has been offered/allotted by the State Governments to the private sector. The current emphasis is on completing the projects offered to 111the private sector by the State

23 Governments and also making potential sites, conduct detailed surveys and for a shelf of projects. 10.2 simultaneous efforts to identify prepare detailed project reports

The Small hydel potential in the State is about 15000 MW. Four hundred forty one projects (of up to 25 MW capacity each) with an aggregate capacity of 1438.43 MW have been installed upto 3782 March 2001 till now. Two hundred eighty seven projects with an aggregate capacity of 563.04 MW are under implementation. Fifty portable micro hydel sets of 515 kW capacity have been provided to local bodies and local communities in seven States through the State Government Agencies. Forty-one out of these have been installed and the response from the local communities has been quite encouraging. Small hydel projects are particularly suited for remote and hilly regions, Ladakh and the North Eastern States. It would be obvious from the above that a great deal of effort has been made to generate power from renewable energy sources. India, in fact, has great deal of potential in this regard and already emerged as a world leader in exploitation of renewable energy sources. India ranks first in biomass gasifiers (35 MW), fourth in biomass based power generation (400 MW), fifth in installed wind power capacity (1507 MW) and tenth in small hydel power capacity (1438MW) and fourth in solar photovoltaic. (50MW). Though India has attained an eminent position in the world in the exploitation of renewable energy there is a tremendous gap between the potential and actual achievement as would be seen from the following statement.

11. 12.



24 Source/System Approximate Potential 45,000 MW 15,000 MW 19,500 MW* 1,700 MW 81,200 MW Achievement on 31-03-02) 1.99 MW 1628.2 MW 143.47 MW 381.3 MW 51.3 MW 21.98 MW 3522.24 MW (as

A. Power from Renewables 1. Solar Photovoltaic Power 2. Wind Power 3. Small Hydro Power (up to 25MW) 4. Biomass Cogeneration Power 5. Biomass Gasifier 6. Energy Recovery from wastes Power From Renewables (Total) B. Decentralised Energy Systems 7. Family-size Biogas plants 8. CBP/IBP/NBP Plants 9. Improved Chulha 10. Solar Photovoltaic Systems i) Solar Street Lighting Systems ii) Home Lighting Systems iii) Solar Lanterns iv) SPV Power Plants 11. Solar Water Heating Systems 12. Solar cooking System i) Box-type Solar Cookers ii) Concentrating-type community cookers 13. Solar PV pumps 14. Wind Pumps 15. Hybrid Systems C. Others Programme 16. Aditya Solar Shops 17. Battery Operated Vehicles 18. Energy Parks 19. IREP Blocks

120 lakh 12 crores 20MW/sq. km. 140 million sq.m collector area 113 -

33.68 lakh 3901 Nos. 3.52 crores 41776 Nos. 206732 Nos. 427687 Nos. 1188 kWp 0.60 million sq.m collector area 5,18,000 Nos. 175 Nos. 4500 Nos. 793 Nos. 127.5 KW 29 Nos. 247 Nos. 278 Nos. 860 Nos.

25 Sq. Km.= Square Kilometer Sq.m.= Square meter MW= Mega-watt KW=Kilo watt kWp-kilo watt peak * including Biomass Gasifier


The emphasis in the North Eastern region and other inaccessible areas that comprise 18000 difficult villages will be on decentralised generation using locally available energy options like biomass, Small hydel, photovoltaics, solar cookers and lanterns, etc. The overall position in respect of the North Eastern Region of the State is as follows: All India potential Identified North East Potential


All India Capacity set up capacity in N. East set up マ マ マ マ Small hydel 10071.81 2028.34 1438.43 153.02 (1.52) » (14.28) (20.14) マ マ ヘ Biomass/cogeneration 19500 N. A. 381.3 Nil separately. マ j Biomass gasification 51.3 マ Nil; œ マ Wind Energy 12835 (technical) 1628.3 š Nil . ¬ Solar Energy ヘ SPVs 20MW/sq. km 96 MW マ shows MW; 43biomass resource assessment studies awarded; R &D on sustained production of biogas at low temperatures is on j Research on biomass production survey and evaluation of selected species for energy plantation in N. E region is on œ » š27 probable windy sites identified; figures in brackets indicate percentages. ¬ Of this 40 SPV products have been exported .4 power plants of 25kWp capacity each in Mizoram, 3 power plants of aggregate 4.5kWp SPV capacity IN Assam, 3 power plants of aggregate 9.2 kWp capacity in Arunachal Pradesh are under implementation66 solar home lighting systems sanctioned for a village in East Kamang District of Arunachal pradesh170 special solar street lighting systems sanctioned in Manipur 15. It would be seen from the statement that it is only in Small hydel that a beginning has been made in the North Eastern region. It may be noted that out of a total capacity of 563.04 MW under implementation, 165.42 MW capacity, which is 29.38 % of the total capacity is in the North Eastern Region. At present out of ja total installed capacity 0f 100000 MW about 3500 MW is generated by using various renewable resources, i. e. almost 3.3%of the total installed capacity from all resources. The Government have taken cognizance of the gap between the potential and the actual installed capacity/achievement under various items under Renewable Energy Sources. In keeping with the world wide trend of encouraging distributed generation and having a green environment, the New Renewable Energy Policy stipulates that by the year 2012, 114



26 10% of the total addition to generation capacity will be from renewable sources. Assuming that another 100,000 MW will be added by the year 2012,the contribution by renewable energy fuels would be between 10-12000 MW, about 13-15,000 MW in all. This would be 6- 7.5% of total power generated in the State. 18. The new thrust of the Government of India is enshrined in clauses 4, 5, and 6 of the Electricity Bill, 2001,Section 4 stipulates that the Central Government after consultation with the State Governments prepare and notify a national policy permitting stand systems (including those based on renewable sources of energy and other non conventional sources of energy) for rural areas. Clause 5 stipulates consultation with the State Governments and the State Electricity Regulatory Commissions for a national policy for rural electrification and for bulk purchase of power and management of local distribution in rural areas through Panchayat Institutions, users' associations, cooperative societies, non-governmental organizations and franchisees. Clause 13 of the Bill exempts a local authority, Panchayat Institution, User's Association, Cooperative Societies, Non governmental organizations and franchisees from obtaining a licence to transmit, distribute and trade in electricity. The increasingly greater importance being attached to non conventional sources of energy becomes clear from the fact that the financial allocation for them, as a per centage of the total plan allocation, increased from 0.1 % in the Sixth Plan to 0.2 % in the Eighth Plan and 0.44% in the Ninth Plan (1997-2002. Progressive power generation from renewables has, in fact, shown a rapid increase only in the last two to three years. It increased from 1185.50 MW from March 1997 to 1698.50 MW in March 2000 and from 1698.50 MW in march 2000 to 3500 MW in March 2002. The details may please be seen in Annexure 5. Concerted action would be required to achieve the above mentioned objectives. It is, however, not easy to bridge the gap between the potential and installed capacity because of certain constraints in renewable energy development, which have got to be taken note of. Some of the important constraints are listed below: Product/Technology Related: ヘ ヘMany products and technologies are not yet mature. Smallmum economic sizes are under evaluation. Raw Materials Related: œ Resource availability assessments are based on rough estimates, especially in biomass power and hilly hydro projects. Land Related: マ ; Govt/forest land /irrigation land are not mortgageable. Climate Related: 115




27 on a cloudy day and windmills do not

Photovoltaic cells do not work mill the wind without a breeze. ヘ

Policy Related Frequent changes in policy. Market Related: マ Distortions in energy market on account of subsidized conventional electricity 22. The committee is of the view that despite the constraints mentioned above, the programme will have to be carried forward with vigour, especially in the case of the 18000 villages where no other solution seems to be feasible. In the case of other villages, whether connected by grid or not, decisions will have to be taken on a location specific basis.



Organisational and Managerial Aspects : People’s Participation
1. The programmes and schemes of the power sector in the State do not enlist the involvement and support of the beneficiaries. The policy makers had however, envisaged a cooperative and participatory model for rural electrification in the State. One of the directives which was issued to the Rural Electrification Corporation by the Government of India was as follows:ª….The Corporation will consider providing loans on suitable terms to these cooperatives with a view to encouraging the cooperative type of organizations for distribution of electricity in the rural areasº. The reality however is far removed from the ideal contained in the Government of India's Directive. The following alternatives can be thought of in the context of ensuring people's participation in the programmes of rural electrification including those relating to Distributed Generation. i. ii. iii. iv. v. 4. 4.1. Local bodies and communities Cooperatives Users Associations NGOs Electric Service Company working in conjunction with entrepreneurs/contractor and Local Bodies/Communities, NGOs



Local Bodies Article 243 G of The Constitution Seventy Third Amendment Act, 1992 empowers the legislatures of States to enact suitable legislation and endow the panchayats with such powers and authority as may be necessary to function as institutions of self government and prepare and implement plans for economic development and social justice. The Eleventh Schedule, which lists out the items in respect of which such powers can be conferred, includes rural electrification and distribution of electricity and non conventional energy sources.The State Governments, however, have not enacted such legislation, The Panchayat Raj 117

29 institutions, again, are not well of now. 4.2. equipped to take up such schemes as

The participation of the Local Bodies in relation to rural electrification programme is seen in different forms. i. The National Project on Biogas Development is being implemented with active support and association of local bodies in several states. In Gujrat Taluka Panchayats and Gram Panchayats are involved in implementing and monitoring. Gram Sabhas motivates the individual beneficiaries in Andhra Pradesh and Maharashtra. The Panchayat functionaries through their respective Sthayee Smithies are involved in identifying induvidual beneficiaries in West Bengal. 50 portable micro hydel projects have been taken up under a demonstration project. Micro hydel sets of 5-15(kW) capacity have been provided to local bodies and local communities in 7 states through the state agencies in the North-Eastern region of the State and 41 sets have been installed and the response from the local communities is reported to be satisfactory. The Ministry of Non-conventional Energy Sources in encouraging the local bodies and NGOs to take up such mini hydel projects. The Local Bodies are also involved in the distribution of solar lantern among the households in the villages.


iii. 4.3.

There are only very rare examples in which the Zila Parishads, Panchayat Smithies and village Panchayats have directly participated in generation and distribution of electricity. For instance the Biomass Gasifier plant at Gosaba in Sunderban Islands is managed by a local cooperative and Chairman of the Panchayat Smithi is the Chairman of the Cooperative. Cooperatives Rural Electric Cooperation were set up with the help of Rural Electrification Cooperative, the State Electricity Boards and the State Governments. 5 pilot cooperatives were formed initially. Hukkeri in Belgaum district of Karnataka Sirilla Taluka in Karimnagar District in Andhra Pradesh, Kodinar Taluka in Amerali District in Gujrat and Rahuri and Srirampur Talukas in Ahmednagar District of Maharashtra and a part of Lucknow District in UP. The number had increased to 37 in the year 1994-95. The Committee on Rural Electric Cooperatives under the Chairmanship of Shri N.S. Mathur which was constituted to examine all aspects of the working of the existing cooperative societies and evaluate their performance, made the following important observations: i. Overall performance ± The overall physical performance of the rural electric cooperatives, except in a few cases, where there were management and other problems, was quite encouraging . 118

5. 5.1

30 ii. Load growth ± As a cooperative society is more responsive to the local needs of distribution, it can ensure load growth quicker than a State Electricity Board. Operational Procedures - Cooperatives being organisers of the consumers, whom they serve try to make their operational procedures more tuned to the convenience of their respective customers. Transmission and Distribution Losses ± With the emergence of rural electric cooperatives specific quantities of energy purchased by the cooperatives and sold to the consumers could be ascertained and the losses quantified. The problem of T&D losses got focussed more prominently on account of them though the desired watch dog effect on identifying inadequacies of management such as defective meters and theft of energy did not take place. Diversion of Funds ± There was no diversion of funds for purposes other than rural electrification. Some of the cooperatives generated their own resources for being ploughed back for further intensification of electrification in their respective areas.





Many of the cooperative societies are now being run by administrators because their management has been taken over by the concerned State Governments. It may however be noted that the rural electric cooperatives did have some genuine problems and were not allowed to function properly. The following deficiencies were noticed : i. The staff of the cooperative societies were on deputation either from the State Government or the State Electricity Boards. The societies did not perform well in cases where the staff deputed by the State Governments/State Electricity Boards were incompetent. ii. Most of the States took to a system of flat rate tariff for agricultural consumers under which the farmers, consume much more units than are actually paid for. The societies faced an anomalous situation in as much as the energy purchased by them was on a metered basis, but the supply thereof to consumers was made on an unmetered basis and naturally incurred losses.


The fact, that many of the cooperative societies did not succeed because of the various reasons cited above, need not deter us from trying out that model once again, especially in the States where the cooperative movement has been quite strong. Initiatives by cooperative societies are not wanting even now. For instance Bantwal Rural Electricity Cooperative Society has been very keen on taking over distribution of electricity within the Bantwal Taluk of Mangalore District. Its efforts were frustrated mainly because the 119


31 erstwhile Karnataka Electricity Board did not agree to part with its distribution rights over the area to the society. The society proposes to convert 750 km of low tension lines into high tension lines, replace 145 out of the 773 distribution transformers that have failed and replace all the inefficient 13,143 irrigation pump sets. All the improvements are estimated to save about 10 lac units per month. 5.5 The Rural Electrification Corporation has in the Annual Report for the year 1996-97, expressed the view that the most feasible and effective option appears to be to promote more and more Rural Electric Cooperative with active participation and involvement of local people and Panchayat Raj bodies. Users Associations The village panchayats are perceived as being controlled by the village strong men with considerable influence which is used to the detriment of weaker sections . It is this perception which is responsible for the formation of groups of beneficiaries for implementing programme of poverty alleviation. These are implemented through associations of beneficiaries or Users Associations. The Self Help groups which have been set up of late, under the poverty alleviation programmes, must be take cognisance of in this context, as many of them have been successful in achieving their objectives. Village level committees are another manifestation of Users Associations. Village Level Committees In so far as the power sector is concerned, the concept of village committees which has been successfully tried out by WESCO and NESCO the two subsidiaries of BSES, needs a special mention. Under this novel project, the villagers are involved as partners in a programme that aims at ensuring better quality of supply and service in rural areas. They undertook pilot projects in Burger and Anandpur respectively, and the projects were executed by the Xavier Institute of Management. The objective of the two projects was to form village committees (Vidyut Sangha) in order to ensure that the consumer got the bills regularly and not burdened with payment of bills for six months at a time and improve the quality and stability of power. The committees were accorded formal recognition and functioned as a Customer Care Centre in villages. The committees appoint persons from the villages, designated as Village Contact Persons for taking meter readings and distributing of bills in the villages. The committees function as a one point collection centre for WESCO and NESCO. WESCO and NESCO contact the village level committee on dates fixed for collection. The Committee exercises its judgment on matters pertaining to sanction of new connections, installment agreements, disconnections, regularization of unauthorized consumers etc. The number of villages covered by the 120

6. 6.1

7. 7.1



32 scheme is 4900. The Village Level Committees have succeeded in achieving a breakthrough in certain important areas. 7.4 Achievements of Village Level Committees i. The consumers have started demanding meters and consequently, consumers have stopped using heaters in many villages. Voltage has therefore, shown a dramatic improvement. Since the villagers are educated about issues relating to tariff, they are able to plan their consumption of electricity in a much more rational manner and have been able to bring down the bills to Rs.50 to Rs.85 from Rs.226 p.m. A sense of ownership has developed among the members of the committee and the villagers and the villagers themselves are curbing unauthorized usage of electricity. In some committees, all members are ladies, which is a very encouraging sign as problems of power and water supply have a major impact on the quality of life of women in the rural areas. Specific instructions were issued stipulating that disconnections would take place only if recommended by the village committees. The collections increased by more than 60-85% as all payments were made voluntarily and not under duress. In villages where the distribution transformer was metered the Village Level Committee became a partner in identifying losses due to theft. In a cluster of 17 villages, it was observed that the input energy supplied to the village was reduced by more than 23 percent over a 4 month period.






8. 8.1

Unresolved Issues There are still two areas where considerable improvement is yet to be achieved. These are as follows:i. Though the collections have improved, the cost of supplying electricity to villages continues to be very high on account of technical and non-technical losses and the effective cost of delivery works out to almost Rs.4 per unit. There is real temptation to cut supply to cut losses. Though the quality of service has improved, there has been no improvement in terms of the access of electricity to consumers, in villages which still remain unelectrified.



The Xavier Institute of Management has expressed the view that the two concerns listed above could be121 addressed by Distributed Generation and

33 has proposed that a pilot project may be taken using distributed generation to improve access of electricity in villages. It is proposed to have one such project in village nahalla in Orissa. 9. 9.1 The Experiment Dhanawas of Tata Energy Research Institute (TERI) at

TERI implemented schemes of improved chula, biomass gasifier and solar and other technologies and also of reclaiming degraded land through energy plantation for nearly 10 years at Dhanawas in Haryana. The Institute has documented the results of its field study, which would be very useful . Four Stages of Interaction


9.2.1 TERI found that there were 4 stages of interaction between its representatives and the villagers. 9.2.2 In the first stage, there is rapport building with the villagers so that all the issues connected with the village are understood. The people are associated with the village surveys, which ensures the involvement right from the beginning. 9.2.3 At the second stage, there is technology development and demonstration and the Village Energy Development Committee is constituted to motivate the villagers to participate in the process of induction of a new technology. 9.2.4 At the third stage, there was technology acceptance and capacity building among the villagers. The success of a newly developed technology evokes a better response from the individuals who become increasingly more receptive to its adoption, largely due to its demonstration and dissemination. People were trained in maintenance and management of new devices. Masons for construction of biogas plants were also trained. 9.3 Dissemination of new technologies for which there was still a demand characterised the next stage which was that of withdrawal. Bulk of the work was carried out by the persons trained in the village with TERI assistance in terms of providing technical guidance. The technologies that were used for community use such as the solar water pump and the plantation were handed over to the village panchayats.


Lessons of Dhanawas Experience

9.4.1 The important lessons learnt by TERI as a result of Dhanawas experience which are very important from the point of view of people's participation, are listed below:122

34 i. People are not likely to take interest in any activity, unless it meets some of their demands or brings about an improvement of the quality of life in some way. An energy programme that benefits the people in some way in a shorter time is likely to succeed better. For instance, the people of Dhanawas regarded reclamation of degraded land and plantation on it, only as a research project. It was only when fodder from plantation was used extensively in the year of drought in 1989, that they began to see its potential benefits. Any technological innovation has to be brought to a threshold level till the people recognize the benefit. In the case of improved chulas it took considerable time to design the model that suited the needs of the villagers. Though the Village Energy Development Committees had been constituted to avoid village politics, the Panchayat always played an important role in planning and implementation of the scheme. Committee. A written approval was obtained from the Panchayat regarding the formation of such a committee and its members and charter of duties. A change in village leadership was always accompanied by reelection with the Village Energy Development Committee. The Sarpanch was made a member of the committee to ensure coordination with the village panchayat. Though people in villages are inconvenienced by energy shortages, they face more pressing problems and hence their participation is more likely to materialize, if these pressing problems are integrated with the other developmental needs of the people. A village panchayat could ignore the interests of certain groups either because their members are not numerous or because they belong to the poorer strata of society without much influence. In a situation like this, mechanisms must be set up which rectify the imbalance. The interests of groups/individuals should be identified and taken into account, while planning for the nature of benefits and their distribution. During the demonstration phase, there has to be a strong and reliable maintenance backup system. TERI's staff rectified all problems of biogas plants. In Jaisalmer, a person from within the village was trained with repair and maintenance of solar lanterns which was of considerable help to the villagers. Energy technology that does not necessitate any major alterations in peoples practices has better prospects of success. Though there was good potential for biogas plant in Dhanawas village, many villagers were unwilling on account of constraint of space for construction. 123







35 viii Continuous monitoring and evaluation helped in identifying problems with plant design in which necessary modifications were made wherever these were required.


TERI’s experience at Dhanawas showed that rural energy problems are extremely location specific in nature, and that in view of the vide variations that exist in the socio cultural environments in the rural areas, energy planning at a decentralized level will give better results as compared to a target oriented programme based on uniform technology specific programmes. The village level committee at Dhanawas was different from the committees established by WESCO and NESCO as it was very closely associated with the village panchayat. The relationship between the villagers, the village panchayat, TERI and the Village Energy Development Committee is illustrated by the diagram at Annexure 6. The Institution of Village Level Committees has been used in other countries as well as in the case of Chalan Micro Hydro Scheme in Peru and Dhandruk Micro Hydro Power Scheme in Nepal. People’s Participation in Distributed Generation Schemes Village Committees And



10 10.1

In all the examples that were cited above, there was no local generation and distribution of electricity in the form either of a grid or mini grid. The Indian Institute of Science, Bangalore which implemented some projects of Distributed Generation, also made use of the village level committees. A village management committee comprising of 8 villages including 2 women was constituted in village Hosahalli which assisted in protection of forests, supervision of operations and collection of electricity charges at Rs.6/- per month. The Institute similarly established a Gram Vikas Sabha to oversee maintenance and operation of the system with the participation of the villagers in Pura village. The Gram Sabhas collection was in the order of 93% between 1988-1991. The models of the Institute do indicate, like the BSES's model, that people can behave responsibly and manage a system, unlike the general belief to the contrary, if they are properly motivated. The constitution of the Village Level Committees led to a reduction in the consumption of electricity in many villages. In Pura village for instance, the villagers restricted access to water supply 3 times a day after they took over the management of the biogas plant and the consumption came down from 26 liters per head to 22 liters between October 1998 and August 1999. Self-Help Groups 124




36 11.1 Self-help groups have emerged as a force to reckon with, especially after they were given role in poverty elevation programmes. The following are some of the examples of the role played by them in rural electrification. i. The self-help groups played an important role in the villages of Karimnagar and Khammam districts of Andhra Pradesh where Project Chandrakanti was implemented. Nearly 10,000 lanterns have been distributed under the World Bank programme of SPV market development routed through IREDA. The Non-conventional Energy and Rural Development Society, a NGO, has established about 450 self-help groups and installed about 6,500 biogas plants, 2,400 smokeless chulas and a few solar cookers and water heaters to self-help groups. It conducted motivation camps, training programmes for masons on construction of biogas plants, potters on fabrication of improved chulas and women beneficiaries on operation and maintenance of biogas plants and smokeless chulas. Training of the potters in Kenya and stove makers in Sri Lanka also go to show the importance of training. The model of the Indian Institute of Science, Bangalore, was replicated in Chalpadi village, Adilabad District of Andhra Pradesh where electrification took place with the help of honge oil. It was joy at the jovial account of the children getting extra hours for their studies, that acted as a motivating factor. The unique feature here was that it was the women's self-help groups who took the initiative for such a project. Their savings were used for financing the project.



12. 12.1

Non-Governmental Organisations Reputed non-government organizations are implementing the programme of solar photovoltaics for various applications. NGO's like Ramakrishna Mission, Narendrapur, West Bengal, All India Women's Conference, New Delhi, The Rajgiri College of Social Science, Kochi, The Social Work and Research Centre, Tilania, Rajasthan, The World Renewal Spiritual Trust, Mount Abu and The Ladakh Ecological Development Group etc. are participating in the programme in a meaningful way. Valuable Experiences Gained Regarding People’s Participation The experience gained by the Indian Institute of Science and organizations like TERI gives some valuable inputs regarding the process of people's participation The important trends that were noticed are as follows:i. Lighting is not the most important thing the villagers want. Drinking water followed by irrigation water occupies the pride of place in the 125

13 13.1

37 lives of villagers. It was the success in these fronts that brought about the desired attitudinal change among the villagers. ii. The schemes at Sugganahalli and Kagganahalli led to a qualitative improvement in the lives of the villagers. Assured supply of water enabled cultivation of cucumber and watermelon and collection of honge oil seeds generated additional employment opportunities. Installation of water taps at homes removed the drudgery of women in walking long distances to fetch water and also solved problems of matrimonial alliance as such drudgery was a major reason for the people in the neighbouring villages not marrying their daughters to the youth in these two villages. Men could get honge oil to run their tractors and did not have to go to Kunigel to buy diesel for tractors. The benefits strengthen their faith in the new schemes.

14. 14.1

Push And Pull Factors In a State in which nearly 90% of the villages are technically connected to the grid the role of the push and pull factors would have to be critically studied before any scheme of distributed generation is introduced in the rural areas. In the cases relating to Sugganahalli and Kagganahalli and other projects of distributed generation the push and pull factors operated as follows: i. Both the villages were depended 100% on the new system because of the unreliability of the grid power which was the push factor. The factors enumerated above were treated as the pull factors. When the quality of grid power improved in Sugganahalli on account of installation of a sub station and transformer near Sugganahalli the people switched back to grid power for domestic lighting requirements. The scheme for water supply for irrigation however continued under the new system despite the improvement in the quality of grid power. TERI's experience in Orissa shows that the high rates of failure of school children in the examinations provoked some villagers who found that lack of electricity was an important reason for the same.It was this realization which provoked the villagers to think of distributed generation scheme. In a village in Haryana the pollution of river water caused by industrial effluence provoked the villagers to have their own schemes for meeting their water requirements As people in many of the electrified villages are very much dissatisfied with the quality of grid power, such villages should 126






38 also be encouraged to go ahead with Distributed Generation Schemes. These should also be the responsibility of the State Governments. vi. the

The question whether Distributed Generation Schemes in rural areas should be on a stand alone basis or interconnected to the grid, should be decided on the merits of each case. As most of the villages are connected to the grid, and DG schemes may help the grid in meeting peak load requirements, it may be advisable to interconnect them to the grid .Further, as the working hours in the initial stages may not be adequate, it may be necessary to wheel the surplus power for third party sales. The type of DG scheme may be selected by the community itself after getting technical inputs from experts and taking into account its ability to pay.

15. 15.1 15.2

The Institutional Models for Distributed Generation Systems The following are the important institutional models for distributed generation within the State. The Sunderban Model

15.2.1 The institutional models of Sunderbans is an important model to be studied. The remote villages and hamlets of the delta suffer on account of chronic shortage of electricity on account of non availability of grid power. Kerosene and diesel generator are the alternate fuel sources for lighting and other requirements of electricity respectively. As it would be very costly to take grid power to the islands, village level mini grids based on biomass gasifiers, solar photovoltaics, wind diesel hybrids and tidal power technologies are used for supplying electricity for domestic and commercial applications. Solar home lighting systems and portable lanterns are also used in many households. 15.2.2 The project was set-up by the West Bengal Renewable Energy Development Agency with the assistance of the Ministry of NonConventional Energy Sources. West Bengal Renewable Energy Development Agency, which owns all assets associated with the power plant and guarantees reliable generation and supply of electricity to its consumers in Sunderbans. 15.2.3 The biomass gasifier plant at Gosaba was commissioned in June 1997. Its membership has increased from 25 in 1997 to more than 600 now. 15.2.4 The plant is managed by a local cooperative and the Chairman of the Panchayat Samithi is also the Chairman of the Cooperative. Other members of the cooperative are from West Bengal Renewable Energy Development Authority and local political bodies. 15.2.5 The total number of members in the cooperative is 12-13. A person from the cooperative takes the monthly meter reading. The bill is sent by 2 127

/3 of every month which has to be paid within 10 days at the office of the cooperative. If the payment is not received within the stipulated time, a notice of 7 days is given . If the payment is still not made, the connection is cut in a month's time and recollection requires payment of Rs.1000/-. All the revenue goes to West Bengal Renewable Energy Development Authority. 15.2.6 The tariff for domestic connections is fixed at Rs.3.25 per unit while commercial tariff is fixed at Rs.3.75 per unit. Tariff for grid electricity for Kolkata is Rs.2.50 per unit ± domestic and Rs.3.00 per unit ± commercial. 15.2.7 Initially, the maintenance of the plant rested with the supplier of the equipment, Ankur Limited. The contract has now been given to another company which is a manufacturer and supplier of the diesel engines in the plant. The relationship between the village committee, the local enterprise that operates and maintains the plant and the West Bengal Renewable Energy Development Authority, in this model is indicated diagrammatically at Annexure 7. 15.3 TERI’s Model



15.3.1 The Sunderban model is the product of the initiative taken by Central Government and the Government of West Bengal. Private initiative in this respect is not wanting as can be seen from TERI's model. TERI acts in close cooperation with the manufacturers, financial intermediaries and entrepreneurs and other NGOs. Suitable entrepreneurs are identified to act as Independent Energy Service Units Network. 15.3.2 The Energy Service Unit facilitates rural credit and guided by the spirit of service for the people also undertakes tasks such as promoting awareness, demonstrations etc. The Energy Service Company is a part of The Energy Service Network and markets the renewable energy technology devices and provides the back-up services in the form of spare-parts and repair and maintenance services. The details of this model may please be seen in Annexure 8. Uttam Urja project of TERI in Rajasthan is an example of this project. 15.3.3 Another model which is being conceived by Wartsila a NGO in collaboration with BHEL for a cluster of villages in Madhya Pradesh, by organizing a village cooperative in Annexure 9. 15.3.4 The models referred to above can be considered for operating Distributed Generation and Distribution Systems. It is doubtful whether the local bodies will be able to own operate and maintain such systems as of now. The Village Level Committees will have to be established on a very big stage in the initial stages and thereafter wherever conditions are found to be suitable full fledged systems can be developed. 15.4 Bangladesh Model 128

40 15.4.1 As conditions for establishment of totally independent models for local bodies is not ripe now the model of Bangladesh could also be considered for adoption. The Rural Electrification Board a semi autonomous body in Bangladesh is responsible for generation, transmission and distribution of electricity to the rural areas through the rural electric societies i.e. Palli Bidyut Samity. Each PBS has a local board constituted by elected area representative. 15.4.2 The Palli Bidyut Samithies have a special division for Member Education to appraise beneficiaries of the rights and obligations of cooperative members. The Samithi appoints a Village Advisor for each village. They hold an honorary post and have to provide information to the people on operational status and policy of the Samithi, give basic education such as how to use electricity, and report to the Samithi on village needs and promote early construction of distribution lines . The General Manager communicates the customers via Villager Advisers. 15.4.3 The members of the PBS elect a Board of Directors which are a maximum of 15 members. 3 women nominees are nominated by the Board to ensure representation of women. The Board of Directors gives policy instructions to the management and ensures that the management implements them. The General Manager who is appointed by the Board is accountable to both the Board of Directors and the Rural Electrification Board. The Board of Directors cannot remove the General Manager without the prior approval of the Rural Electrification Board. However, incase of necessity the Rural Electrification Board can remove the General Manager without the concurrence of the Board of Directors. 15.4.4 In order to ensure that the system is financially viable, lines are given on the basis of established criteria and the lines that do not fulfill the revenue requirements are not included in the programme. The Palli Vidyut Samity avoid unnecessary staff and average employee consumer ratio is 1: 2.50. 15.4.5 Before the Samithi is established in a village, an adhoc project team called Institution Development Team, visits a Thana, a Rural Administrative Unit and explains the plans of electrification to the representatives of a Union, a smaller village unit that forms a Thana. The team provides a information and educates the potential beneficiaries about the importance and convenience of electricity. The teams obtains the consent of residents from the Union after its representatives reach an agreement to introduce electrification. Those who want power have to pay a small sum for the right to have power supply and obtain membership of the cooperative. The Institutional Development Team chooses a representative of the area, who is to be the first Director of the Electrification Cooperative. The Director should be politically neutral and is forbidden to belong to any political party. After 3 years of establishment of PBS a new Director is elected by direct votes by residents in the region. 129

41 15.4.6 The Bangladesh model is not without its problems. As the project is capital intensive the need for additional capital is always felt. The poor consumer mix, the limited revenue per km of line due to small load of domestic consumers, the difficulty in reaching remote areas are some of the constraints being experienced there. Further, the general approach towards tariff determination is one of a cross subsidy between industrial and commercial clients and residential or agricultural PBS members which has given rise to problems as the growth in industrial load has not been fast enough to compensate the shortfall in recovery from residential consumers. 15.4.7 The Bangladesh model is relevant to India because the National Rural Electrification Cooperative Association, a central organization of rural electric cooperatives in the USA was entrusted by US Agency For International Development to extend technical assistance to the Rural Electricity Board. Further, the conscious effort made by the government of Bangladesh to keep the scheme free from all politics is a matter of significance for India where elected representatives of the people, political parties etc. have worked to the detriment of dedicated work being done by the NGOs by promising subsidized or even free supply of power. 15.4.8 The scheme has been a success and the collection rate was as high as 94% due to the emphasis placed on promptness in the payment of bills by the consumers. Despite these positive features the scheme has to face challenges. The need for capital is also felt as it is a capital intensive project. The poor consumer mix, the limited revenue per kilometer of line due to small load of domestic consumer are some of the constrains the Board is trying to tackle. The pace of progress is slow though the collection rate is as high as 26%. However, the Bangladesh model has ensured people's participation in the process of distribution of power right from the initial stages of development. 15.5 To sum up i. Village level committees, self-help groups, users associations may be set up all over the State initially, as the Zilla Parishads, the Panchayat Samithies and the Village Panchayats are not as of now capable of implementing Distributed Generation projects. These may be gradually converted into bodies for generation and distribution of electricity over a period of time. In areas where cooperative movement is strong, as in Hukkeri and Bantwal Taluk or the Rural Electric Cooperative Societies may be constituted and they may be asked to take over responsibility for distribution within their respective areas. iii. Full-fledged models of local generation and distribution can also be tried wherever it is feasible, either with the effort of government 130


42 through the cooperative model as in Sunderbans in West Bengal or private initiative TERI's in Rajasthan. iv. Bangladesh model may also be considered for adoption with suitable modifications, if need be so that it acts as a precursor to people's participation on a larger scale in future. The rebalancing of the tariff structure must be initiated quickly so as to make the working of the decentralized generation schemes viable. Systematic efforts will have to be made to create awareness among the people on the relevance of Distributed Generation schemes. The efforts will also have to be made to keep the entire process free from politics. The depoliticised model of Bangladesh may be kept in mind. Very few of the local bodies are likely to reach the final stage, of local generation and distribution, However, in order to give an impetus to the new concept, some demonstration projects should be taken up either by the Government or private agencies to give a lead to and motivate others into replicating such models .The demonstration projects should be taken up very carefully after assessing the potential of a village/cluster of villages for development, the degree of cohesion among the villagers, the attitudes of the elected representatives of the people in the area concerned, and the ability of the Panchayat Raj institutions. Success of the demonstration projects is a must, as people go back to the traditional systems with a vengeance, if such nprojects fail.


vi. vii.



A study may be commissioned to evaluate the effectiveness as well as the shortcomings of the efforts made so far to secure people's participation in the process by organization like the Administrative Staff College, Hyderabad or the Institute of Social and Economic Change, Bangalore. It would be useful to pool the experience gained by NGOs, cooperatives etc. in distributed generation so that a proper strategy for the future may be devised. An All India Conference at which all the voluntary groups, NGOs etc. who have made attempts to enlist people's participation in the Rural Electrification may be called at which the above mentioned options may be discussed.



Chapter – 6
Financing Schemes of Distributed Generation
1. Distributed Generation is a new concept in the State and has not been tried on a large scale as yet. Needless to mention, a clear and well established l framework for financing D. G. schemes is yet to emerge. There are many barriers to financing DG schemes because of lack of familiarity with them due to a dearth of already existing projects. The following are the most important barriers to financing DG schemes. i. Project Risk - Many DG technologies(wind turbines, fuel cells, micro turbines and the like) are perceived by the lenders to have high resource and technology risks, especially risks associated with transfer of technologies to the rural communities. Most of the financial institutions in the State have not had sufficient exposure to DG schemes and, therefore, do not have sufficient experience in evaluating risks associated with DG schemes. As many DG technologies are perceived as unproven, it is not easy to get lenders for financing DG schemes. Small Project Size - Technological and resource constraints limit the size of DG projects. Further, transaction costs of small projects are proportionately high as compared to those of conventional projects. Since DG schemes are site specific, a lot of time and money has to be spent with regard to the investigation of the sites. It has also been observed in some projects that optimum capacity utilization cannot be attained on account of limited working hours or inadequacy of demand. Many financial institutions are, therefore, unwilling to invest in DG schemes. Uncertainty In Policies - The economics of many DG projects/enterprises is heavily dependent on government policies towards interest rates, accelerated depreciation, tax credits etc. Uncertainty with regard to them affects the economics of DG projects and adds to the hesitation on the part of the financial institutions to finance DG schemes. Cost Of Innovation And Being a Trailblazer - As DG schemes, especially in the rural areas, these are almost in the nature of innovations or new experiments which necessitate time consuming negotiations with all the stake holders which include the local bodies, protracted interaction with the local communities, manufacturers, the State Governments, State Electricity Boards etc. Site specific models 132





44 have to be evolved by the entrepreneurs to suit local needs and conditions. The financiers do not give due consideration to the time and resources that the borrowers are expected to devote to these processes. 3. The Government of India as well as the State Governments have adopted certain policies and given some incentives to encourage the DG schemes based on renewable sources of energy. A number of concessions are given to manufacturers of equipment under import duties and sales tax and excise duties. The producers who invest their funds in a grid connected DG systems, are assured a certain price by the State Electricity Boards/State Governments. The details regarding the concessions are spelt out in Annexures 10 (a) to 10 ( c). . The institutional frame for financing schemes in the power sector in the State comprises the Rural Electrification Corporation, the Power Finance Corporation, the State Finance Corporations and the Indian Renewable Energy Development Authority(IREDA). An understanding of the role played by each of these financing agencies is essential to understand the gaps in the present framework and the manner in which the same should be made good. The Role Played By The Power Finance Corporation 5.1 The Corporation can finance micro, mini and small hydro generation projects as well as projects based on non-conventional energy sources. The emphasis of the corporation, however, has been on financing medium and large hydro and thermal power projects. This would be clear from the fact that out of the cumulative sanctions ( as on 31-3-01) worth Rs.30674 crore, Rs.24709 crore were for thermal generation, hydro generation, and renovation of hydro power projects and transmission. . Renovation and modernization and life extension of old thermal and hydro plants is a priority area of financing by the Corporation The Corporation has also successfully implemented the Accelerated Generation and Supply Programme of the Government of India during the 9 th Five Year Plan. 5.2 The Corporation has played the role of a catalyst in carrying forward the structural reforms in the power sector since the early 90's by adopting the three fold strategy of a proactive engagement with the States by providing grants/concessional loans for studies required for developing reform packages, formulation of special packages of incentives for reforming states including relaxation in conditionalities and exposure limits and grant of large scale financial assistance to power utilities in the power reforming states to take care of their investment needs during the next 5-7 years. 5.3 As of June 2002, the Corporation releases credit to the extent of 70% of the project cost for medium and large hydro generation and thermal generation in case of Central and State utilities and municipal run bodies, the corresponding the corresponding limits for private utility companies 133



45 being 25 and 20% respectively of the project cost. The terms and conditions of the assistance given by it are indicated in Annexure 11. 5.4 Most of the loans have been released in the favour of the Central and State Utilities. After the entry of the private sector in generation of power the corporation has supported 6307 MW of generation capacity through various types of thermal plants including coal, gas/naptha, furnace oil and DG based or hydro plants etc. Financial assistance to small scale decentralized power projects has been a peripheral activity for the Corporation. In a number of projects based on bio-mass /cogeneration which it took up for consideration between 1995 and 2002, it found that difficulties arose on account non availability of long term arrangement for fuel as well as non availability of fuel, matters relating to quality and pricing of fuel, absence of a proper power purchase agreement, and weak promoters. The Committee is of the view that the Corporation should concentrate on the area of its specialization and upgrade its skills and capabilities to face the emerging challenges in the power sector. Rural Electrification Corporation: The Corporation, premier development financial institution for promoting anfd f9inancing rural electrification in the State, supplements the resources of the State Electricity Boards/State Utilities/State Power Departments by way of loan assistance for their investments in rural electrification programmes which includes their investment in upgradation and improvement of their sub-transmission and and distribution system for supply in rural areas. It has, for this purpose devised specific portfolio of loan schemes that include financing their investment in installation and replacement of meters and any other related equipment such as transformers , conductors , capacitors etc. It was given the status of a mini ratna category I in October 1997.The budgetary support from the government has been considerably reduced over the years and from the year 2002-03, it is totally self reliant without any budgetary support from the government.. The Corporation has been mobilising resources through its market borrowing programmes including those through Capital Gains Exemption Bonds under section 54 EC and Infrastructure Bonds under section 88 of the Income Tax Act.The Reserve Bank of India agreed to treat subscriptions to the Corporation's bonds by banks as indirect finance for agriculture for computation of their priority sector lending. The scope for utilization of money so raised was extended to include system improvement programmes These measures enabled the corporation to raise money from the domestic capital market through issue of priority sector bonds. The tempo of rural electrification which was very high during the 6 th and 7th five year plans during which 2.20 lac villages were electrified, has come down drastically on account of the reluctance of the State Electricity 134



6. 6.1


46 Board to take interest bearing loans for electrification of unelectrified villages and hamlets. The State Governments have been reluctant to avail themselves even of the assistance of the 100% grant under the Kutir Jyoti programmes on account of their apprehension of recurring revenue loss through such connections. States like Haryana, Goa did not lift grant even for a single connection and states like Bihar, Gujrat, Rajasthan, Punjab, UP and West Bengal utilized the grants only partly under the programme in the year 1999-2000. The same reluctance was noticed even among the North-Eastern states. 6.3 The Rural Electrification Corporation started giving greater emphasis after the rural network had expanded sufficiently on system improvement to cut down transmission and distribution losses, increase revenues and improve the quality of supply of power to the consumers. The Corporation sanctioned 300 SI schemes for a loan outlay of Rs. 2989 crore in the year 2001-02 for the purpose to State Electricity Boards/ State Power Utilities /State Power Departments. This included special category of loan schemes for procurement and installation of energy meters, replacement of transformers, capacitors and other equipment to improve the quality of supply of power and to conserve energy. The response to these schemes from the borrowing State Electricity Boards/State Power Utilities has been very good. While the steps outlined above are welcome, the Corporation has to do much more to reorient itself, taking into account the following qualitative changes that have taken place in the power sector in the last few years and meet the new challenges.. i. Entry Of The Private Sector ± The corporation had been dealing mainly with state government and state government entities like the State Electricity Boards. With the entry of the private sector companies in the area of distribution and generation especially in urban and semi-urban areas it has to reorient its approach. Reorientation Of The Traditional Schemes ± As the need for improving the quality of power supplied to the consumers is getting more and more important the corporation will have to allocate higher allocations for improvements in the distribution systems. In fact in states where the scope for traditional activities like village electrification and pump set energisitation is not much today it will have to release more and more funds for improvement in the rural distribution system. Decentralised Generation Of Power ± The concept of distributed generation has acquired a new dimension and energy in the last 2 to 3 years. The corporation's involvement in such projects has so far been modest. It hads so far sanctioned 23 small /mini/micro hydel generation projects of 69 MW capacity. To Stae Governments/Stae Power Utilities involving a loan outlay of rs. 284 crore. B.esides, it has sanctioned 6wind energy projects to private 135




47 parties 2 diesel generation projects of 4 MW capacity to JKPDC for supply in Leh and Kargil areas in winter months when hydro generation is zero. And one gas based project of 3 MW capacity to Rajastan State Electricity Board.The Corporation will now have to take a far more important role in such projects in view of the new challenges that it has to face. 6.5 The Rural Electrification Corporation is thus on the cross roads as the tempo of traditional activities has slowed down and new programmes are not yet being taken up on a large scale The Corporation, which has developed expertise over a period of time and has its network of offices throughout the State, needs to be utilized for financing Distributed Generation programmes, especially those based on renewable resources. The committee considers that this important point should be pursued in the time bound manner by the government There does not appear to be any difficulty in doing so as the executive order of the Government of India which permitted it do take up only schemes below 25 MW and restrict itself to towns with a population of 1.5 lakh has been withdrawn It can therefore function like any other power finance corporation .The redefinition of its role in the changed context needs to be brought out quickly. Another observation needs to be made about the composition of the Board of Directors of the Corporation. The Board comprises the CMD, Director Finance and two joint secretaries from the Ministry of Power. This composition of the Board may have been relevant to the functions entrusted to the Corporation so far. In view of the new role envisaged for it, it is suggested that the Board may have in addition to its existing members, a representative of the Ministry of Rural Development and the Ministry of Non Conventional Sources of Energy. India Renewable Energy Development Authority: There is another important financing agency in the power sector viz. India Renewable Energy Development Authority, which was incorporated as a Public Limited Company in 1987. Its mission is to be a pioneering and competitive institution for financing and promoting self sustaining improvement in energy generation from renewable sources, and energy efficiency for sustainable development. Rapid commercialization of new and renewable sources of energy and upgradation of their technologies are among its important objectives It gives project and equipment finance. It can also operate through financial intermediaries and business development associates. The authorized share capital of IREDA was Rs.300 crores and its paid up capital was Rs.250.35 crores as on 31.3.2002. It has mobilized considerable assistance especially from World Bank/GEF/SDC. The terms and conditions of the assistance given by it may please be seen in Annexure 12 .It gives special concessions for North-Eastern 136


7. 7.1



48 regions and Sikkim as per the details given in Annexure 13.The targets for the tenth Plan given to IREDA may please be seen in Annexure 14. 7.4 IREDA's loan commitment to the 1569 projects it has approved comes to Rs.5285.26 crores against which loans worth Rs.2732.29 crores have been disbursed. The power generation capacity of the projects assisted by IREDA is 1892.94 MW. The commissioned capacity under the IREDA schemes is 904 MW.The sector wise cumulative details of the capacities sanctioned by IREDA as on 31.3.2002 are given in Annexure 15. It would be seen there from that out of the total capacity of 1892.94 MW sanctioned by IREDA 614.54 MW, 428.90 MW, 537.50 MW and 205.11 MW are on account of wind energy, small hydro, cogeneration and biomass power respectively. IREDA And The Solar Thermal Energy Programme The Government of India promoted a subsidy based Solar Thermal Extension Programme in 1984, which continued up to 1993. The programme did help in disseminating the solar thermal products in different parts of the State and developed a manufacturing base as well. After the discontinuance of the subsidy based extension schemes a soft loan programme was introduced under an interest subsidy scheme, which is implemented through IREDA and public sector banks to promote solar thermal products. The interest charged under the scheme ranges between 5%to 8%. IREDA provides loans directly and through its financial intermediaries for deployment of solar thermal products of any capacity .The banks provide loans for solar water heaters up to a maximum capacity of 2000 liters per day. Most of the banks and manufacturers associations have stressed the need to raise the capacity limit to 4000 liters, so that hotels, hostels, canteens etc can avail the facility of the loans directly from the banks. The necessary details are given in Annexure 16. IREDA And Solar PV Programmes The Government of India continued to give capital subsidy for SPV system as per the details given in Annexure 17. IREDA gives soft loans for installation of SPV systems and power plants.. The subsidy is given by the government as the cost of generation of Solar PV is Rs.10/- to 12/- per kWh as compared to that of Rs.1.00 to Rs.2.75 per kW from other renewable energy sources. The details may please be seen in Annexure 18. Recent trends such as improvements in technologies, reduction in custom duties and expansion in market, have resulted in a decline in price level of SPV systems. In view of this trend, the government decided to reduce the subsidy levels for distribution/installation of SPV systems and power 137

8. 8.1


9. 9.1


49 plants during the year 2001-02 Sikkim. 9.3 except in the North-Eastern region and

There are at present 20 companies that manufacture PV models. Samples of solar lanterns of more than 60 manufacturers and suppliers and samples of solar home lighting system of more than 35 manufacturers and suppliers were tested and certified for supply under the Government's SPV programme. The industry is thus quite competitive. The programme is implemented by State Renewable Energy Development Agencies, reputed NGOs and selected Public Sector Undertakings. Some of the implementing agencies procure the SPV systems through tenders and organize their installation with the help of their district offices or through recognized Aditya shops. In contrast, some of the implementing agencies have adopted the market mechanism, which permits direct marketing of products by qualified manufacturers under the subsidy programme, so as to facilitate direct interphase between the users and manufacturers. The government encourages the use of soft loan facility offered by IREDA for this purpose. There is need for change of strategy adopted by IREDA for implementing the scheme as costs are coming down on account of various reasons. The elimination of capital subsidy under the Solar Thermal Programme, after sufficient dissemination of solar devices, did not hamper either their growth or popularity. As a matter of fact we have a successful example of a company which has sold SPV's without any capital subsidy in Karnataka viz. SELCO. It has installed about 10,000 SPV's in the rural areas so far. The success of the company could be attributed to the contribution, to the extent of more than 70% of its equity, made by a number of green investors from abroad, an efficient network of service centres set up by it, which ensures that all non functional systems are made functional within 24 hours, the assistance given by the Grameen Banks to the company and the decision of the Government of Karnataka not to extend capital subsidy to the scheme. The company made keept a substantial amount as deposit in the Grameen Banks, and used the interest earned from the Grameen Banks to subsidise the interest rates with the result that the borrower interest @ 9.3% per annum on the loans taken from the Grameen Banks.




9.7 The Government of Karnataka have not implemented the scheme of capital subsidy for the SPV's and hence the company is not facing unequal competition from subsidized products. It is strongly felt in certain quarters that the present system of tendering is a major hindrance to the direct interphase between the users and manufacturers . It is suggested that the effectiveness of the present capital subsidy schemes which had relevance some time back in SPV may be reviewed. The scheme may be discontinued based on the findings of the review and the government may 138

50 switch over to an interest subsidy scheme. The subsidy scheme may be confined to the North-Eastern region and other hilly and inaccessible regions. 9.8 It may be mentioned in this connection that, the Government of Indonesia have implemented a major scheme for installation of lighting and other electricity devices to approximately two lac households with assistance from the World bank and the Global Environmental facility. The Government provides subsidy to the extent of only one percent and the rest of the funds are obtained from the commercial banks loans are provided to the distributors. Similarly, Energi Surya, a private company, provides household systems for rural households by providing a network of service centres , which take care of service ,sales and credit. The company manufactures some key components and apart from the solar panels which are imported. It follows guarantee clauses for the components provided by the other suppliers. There is no reason why market forces cannot be allowed to have a free play in India subject the conditions mentioned above. Other suggestions regarding IREDA i The committee is of the view that there is a perceptible gap between IREDA loan sanctions(Rs.5285.26 crores) and disbursement Rs.2732.29 crores. It should be ascertained whether the gap is on account of the procedures and systems in vogue Some of the international agencies has been lending funds to IREDA with a repayment period of 30 years. The question whether the benefit of the longer repayment period should be passed on to the borrowers or not and if so to what extent would have to be examined. The interest rates charged by IREDA range between 0-14%. In the regime of falling interest rates a downward revision of the interest rates charged by IREDA could be considered.





IREDA should be regarded as a repository of all wisdom and expertise with regards to renewable energy sources. A new pattern of relationship between IREDA and the Rural Electrification Corporation would be necessary in view of what has been stated above. Financing & Technological Issues: The decision between grid connection and decentralized generation has to be made on the basis of technical, managerial and economic issues .The

11. 11.1


51 important ones among them are:(a) Distance from existing grid: There is often a cut off point beyond which grid extension is not viable. The terrain between the grid and the village must be considered to see if there are difficulties which can make line extension very difficult. It has been estimated that in the tribal and the North Eastern region, grid extension beyond three kilometers is not viable. In such situations stand alone systems are useful. Load density: If there is a high demand for electricity in a small area, there would be a strong justification for a grid connection in that area. Most local communities will require small quantities to be supplied to dispersed households leading to low load density s which affects the viability of some of the stand alone power plants. System losses: Significant power loss in the transmission and distribution system is the feature of any rural eletrification programme, especially where lower voltage transmission and distribution say 11 kVA or 33 kVA are extended over long distances. There comes a point .at which a decision has to be made whether a power line should be extended with the risks of higher system losses or whether a decentralized scheme can better serve the remote community. Load Management: Many rural communities use electricity mostly for lighting in the evening. and so the revenue collected by the power companies will be very low. Use of the available power for income generating activity as well as lighting makes grid extension economically viable. Stand alone systems with the low load factor will not be economically viable. A community owned stand alone power system is advantageous as it would enablee to plan productive end use for the generated power, in a much better manner. All the issues listed above have to be carefully taken into account while financing a Distributed Generation Project




12. 12.1

Subsidy For Distributed Generation Schemes: It is obvious that in many cases, Distributed Generation schemes will not be economically viable. Subsidy will have to be given in some form or the other, especially in the initial stages for electrifying villages in rural areas and remote and inaccessible areas. The Government of India have decided to treat electricity as a basic service and released funds under the Minimum Needs Programme and The Prime Minister's Grameen Rozgar Yojana. Under these two schemes, the funds are released to the States in the form of 90% grant and 10% loan for Special Category States and 30% grant and 70% loan to other States. Rs 175 crore have been 140

52 earmarked for the year 2001-2 under the Minimum Needs programme and Rs. 600 crore for the year 2002-3. 12.2 Under the PMGRY, Rs. 418 crore were earmarked for the year 2001-2 and Rs 2800 crore have been earmarked for the year 2002-3 for all components of the PMGRY with greater flexibility to the States to allocate the funds among the various components. 12.3 It is necessary that the amounts given as grant/loan is tilized in the best possible manner. The Committee would make the following suggestions in this regard. i. In the case of decentralized electricity generation, concessions for the supply of electricity to a particular region may be given by inviting competitive bids. The contract should be awarded on the basis of lowest cost to provide a particular level of service. The maximum amount which the government is prepared to give as subsidy should be indicated in the notice for inviting tenders and the party that claims the lowest subsidy should be held eligible for the award of the contract. However, if the local body such as the village panchayat participates in the bid, and meets the technical criteria, it may be given a preference to the extent of 10% of the lowest offer. This is a policy decision which the Government may like to take to involve local bodies and communities in rural electrification. Such an approach is adopted in Argentine. Adoption of a cluster approach may make the schemes more viable as it would ensure adequate load for the power that would be generated. Experience has shown that the low load is responsible for the losses to be incurred by the schemes. The proposals should be preceded by a survey of the potential for development of the villages in the cluster and adequate awareness programmes The release of subsidy should not be made mechanically but on the basis of compliance of the terms and conditions of the contract. Evaluation of the performance by the scheme operator should be the main basis for release of subsidy. Where loads are very dispersed, it would be advisable consider supplying electricity to individual households, rather than installing community systems that may require an elaborate distribution network. In the alternative, a central battery charging system may be installed. There need be no rigid notions about the models that can be held eligible for subsidy. The pattern for financing rural energy schemes that involves various types of funding such as grants subsidies, loans , contributions in kind by the local population, etc are getting increasingly common and may 141





53 be tried in India too. The 25 kW micro hydel plant located in the village Muktinath was funded by USAID and Intermediate Technology, a loan from the Agricultural Development Bank of Nepal and a contribution from the village. The share of grants, loans and the people's contribution was 52%, 31% and 16% respectively. The government's budgeted grants may be used for making a contribution of schemes of this type, subject to some eligibility criteria. vi. The important principle should be that the recurring costs on account of maintenance, etc. .should not be a burden on the government. If the tariff levels are such that the people cannot afford them, the schemes will run into losses. It is, therefore, suggested that a one time capital subsidy may be given to schemes of Distributed Generation that fulfill the desired criteria in the manner outlined above, so that the tariffs are determined at levels the people can afford. For instance, in a mini grid comprising a group of villages, the capital expenditure on the transmission line connecting the villages could be subsidized. Where Distributed Generation Scheme connects a cluster of villages through a grid or a mini grid the capital expenditure on account the transmission lines linking the villages may be subsidized by the government. In order to ensure that only energy efficient pumpsets are installed, subsidy may be routed through the approved manucturers to the farmers. Such schemes may be given the benefit of subsidy, only if a group of small and marginal farmers comes forward, forma a cooperative, and agrees to use the water made available by the solar pump jointly and optimally. The Concept of Viability of A Distributed Generation Scheme.: It is necessary that the socio economic benefits that accrue to a local community on account of a Distributed Generation Scheme are evaluated while appraising it. It is necessary to do so, because the benefit accruing to a single stakeholder may not justify the project cost, though the totality of the benefits accruing to the various stakeholders may more than justify the same. The avoided costs of transmission and distribution losses can form a part of the evaluation of such schemes for instance. The positive distributed benefits like increased incomes, removal of drudgery, etc should also be a part of project evaluation. In the U. S. A,. some companies have made an effort to determine the financial value of the benefits of distributed power systems .and shown how the distributed benefits are substantially exceed the avoided cost resulting from the installation . Unless the benefits are assigned to the scheme, and then quantified, the same would appear to be financially unattractive. An example of the effort made by an American company in the case of a PV array in California, is given in Annexure 19. . 142



13. 13.1

54 14. 14.1 Need For Innovative Financing For DG Schemes: The norms for financing schemes will not work for D.G. schemes and the need for an innovative approach is paramount. The following could be important components of innovative financing. i. Equity Facility ± Equity may be provided on a concessional basis, which can be used to help defray the high start up costs of a particular DG project. The donors can supply the initial capital as a grant, long term loan or equity. In order to obtain maximum results such assistance should be provided as a match through capital already invested in the company. Such assistance in the form of equity would be extremely useful because DG enterprises are extremely site specific in nature and their success it intimately linked to factors like site specific, resource information and design and installation of the systems. Entrepreneurs in India would find it extremely difficult to initiate the first steps and obtain complimentary debt financing which is necessary to spread the cost over time. The question of using the amount provided for in the budget for the MNP and PMGRY can be used for providing equity in such schemes may be considered. The return on equity could be in the form of capital and credits for public goods like reduction in pollution levels. The investment could also be in the form of redeemable preferred shares that are sold to the firm or new investors at an agreed time and with an agreed yield. When the assisted companies mature they will seek a new equity investment from both active partners and financial institutions. Equity can also be used as loan reserves by the financial institutions and function in a manner similar to guarantee loss reserves. The capital could be put on deposit with the partner financial institution in such a fashion so as to meet bank system reserve requirements. The reserve monies can be leveraged through the fractional reserve system to leverage financial institutions, dead financing directed to a target firm. Debt Co-financing Facility ± The resources are utilized in order to give loans at below market rates to the DG enterprises. The interest rate reduction is achieved by blending the donor finances with the resources of financial institutions which deals to a blended rate which is below the market rate. In the alternative the amount given by the donor as debt can be used as a bargaining point in order to bring down the rate of interest when the financial institution lends money from their own resources. Such a system need not distort the credit market as long as the subsidy keeps the interest rate close to commercial terms. 143

i. (a)

i. (b)


55 ii. (a) Donor funds could be provided on a subordinate basis i.e. the donor accepts a lower order of priority for repayment of the debt. The objective behind dead co financing facility is to meet the resources of the financial institutions more secure as a means to stimulate lending by them. This technique is useful where developers require loans for periods longer than financial institutions are willing to provide with their own funds. The only drawback with this method is that it is relatively resource incentive and its effectiveness would depend on the percentage share of co-financing from the donor. Guarantee Facility -Guarantees facility address the credit risk barriers and can be used appropriately when financial resources are available in the market but need an incentive to be deployed. There is always a gap between the perceived credit list as reflected in the credit underwriting practices and actual lists, which can be made good by guarantees. There are two types of guarantees, partial party guarantees and loss reserve. In each case the donor's funds are utilized as reserves against guarantee liabilities. Partial guarantees support a financial institution by sharing the credit risk of a DG loan made by the financial institution with its own resources. The amount of the guarantee will have to be precisely defined and a expressed as a percentage of the Financial Institutions remaining balance at past due interest at the time of due loss or default. When a default occurs the payment the guarantee claim would be made to the financial institution for the agreed portion of the loss. When the arrears are recovered, they would be distributed in the same proportion as the loss was distributed. Donor funds can also be used to create loss reserves at the project or financial institutional level. The level of the loss reserve could be determined in terms of a percentage of overall portfolio of the value which is generally between 5-20%. The loss reserves should be sized at or even slightly greater reasonable worst case scenario of the default rate estimated for the portfolio. The loss reserves could be jointly funded by a donor and partner financial institution. The loss reserve works best when a portfolio consists of a large number of smaller loan transactions where a statistical approach can be given to the credit structure of the portfolio as a whole. Loan loss reserves achieve the highest level of leverage and often be contributed by the manufacturer or the financial institutions or even the donor.


iii. (a)


The Committee is of the view that the special dispensation proposed with regard to equity contribution, debt co-financing and guarantees should be confined to projects of the size of between 1 MW and 5 MW. Entrepreneurs who go in for projects above 5 MW do possess some financial strength and have enough schemes to which support them financially. 144

56 Financial intermediaries can also play an important in innovative financing. The Infrastructure Development Finance Corporation and the Infrastructure Lease Finance Corporation can be requested to assist in the development in the new an innovative models. 17. A major handicap which the committee faces was on account of lack of necessary data regarding the functioning of mini-hydel biomass/gas projects and SPV projects. The Ministry of Non-conventional Energy Sources and IREDA were enable to give the full picture regarding the details of the physical and financial performance of the projects managed by them. The committee is therefore unable to make detailed and more specific suggestions about the financing mechanism based on actual performance of the relevant projects. It is suggested that a detailed evaluation of the projects of mini hydel, wind energy, biomass, biogas, SPV models which have already been commissioned. In the light of the actual experience gained new models may be developed. A task force comprising of the representative of Ministries of Power and NonConventional Energy Sources, IREDA, REC, ICICI and IDFS and ILFC be constituted to make detailed recommendations on innovative financing. Tax Incentives And Import Duty Concessions A system of import duty concessions and tax concession may have to be devised for making DG schemes viable. The following could be the important components of a suitable tax package. i. Depreciation If entrepreneurs are allowed to accelerate the depreciation of rural electricity equipment they get relief under the upfront cost which they have to incur in the schemes of rural electrification. High depreciation rates are an investment incentives. In India the benefit of 100% depreciation was misused by the parties that borrowed funds for setting up wind energy projects. These were mostly corporate entities which were more interested in augmenting their projects rather than implementing their projects. However, the technology with regard to wind storm projects has improved over the years and monitoring has also been tighter. The question whether benefit of depreciation should be restored or not would have to be restored in the light of this background. The committee is of the view the government may take such decisions as it deems appropriate in the matter. However a reasonable ate which is sufficiently attractive will have to be retained. Tax HolidaysTax holidays on income generated by rural electrification schemes are used world wide as an investment incentive offset capital intensive nature of Rural Electrification schemes. Such instruments can also be used where rural entrepreneurs install rural energy supply schemes.




57 iii. Favourable taxing structures can be evolved for rural electrification schemes after taking into account that electricity generation from these schemes has lower environmental impact than generation from fossil fuels. 19 Assistance to the individual customers in financing the initial cost of connection can also be part of innovative financing. This can be done either through provision of specific subsidies or through support for credit schemes. In South Africa, where consumers in rural areas were given the choice of either paying for the connections themselves and then paying the normal tariff or having a free connection and paying a higher tariff, the majority chose the higher tariff. The use of load limiting devices, prefabricated wiring systems and prepayment meters can also be thought of as part of an innovative package as these may help the persons belonging to rural strata of society in rural areas. 20 It would thus be seen that the problem is not merely a financial one. Intricate problems relating to transfer of technologies to rural communities and their education have got to be tackled with tact and imagination to ensure smooth induction of systemic changes This is indeed a venture into new and uncharted waters. The approach has, therefore , got to be innovative and the process of trial and error has to be necessarily gone through. The proposed scheme has a vital role to play in the economic development of the State. It is therefore, suggested that the entire exercise including that of demonstration projects be given the status of a Technology Mission. This would ensure that the scheme gets the priority it deserves in the national agenda for economic growth and reform



Chapter – 7
Regulatory Issues
1. The Electricity Regulatory Commissions have started functioning both at the central and the state levels and are exercising their regulatory powers, which include, inter area, important issues such as tariff determination and interconnectivity. As has been already emphasized Distributed Generation Schemes are perceived as a risky propositions by Financial Institutions. Since these are mostly in the initial stages the regulatory framework for them will have to be evolved in a very careful manner. It was noticed that there is no uniform policy or approach of the regulators with regard to such schemes. The Government of India have therefore initiated a dialogue the Central Electricity Regulatory Commission and the concerned State Electricity Regulatory Commissions to evolve uniform policies for power from renewable sources including preferential tariff. Some of the important issues are discussed under this chapter. i. The Distributed Generation Schemes being extremely location specific in nature cannot be subjected to rigid and uniform rules atleast till such time as we gain sufficient experience with regard to them. The rigidity of uniform may dampen the spirit of enterprise and innovation on the part of the entrepreneurs concerned. The committee therefore suggests that such projects should not be subjected to the discipline of the regulators in the initial phase i.e. next two to three years. DG schemes are also not going to be implemented on a very large scale in the next 2 to 3 years as a number of constraints have to be overcome. Only a few projects are likely to commence on a trial basis in the light of the dialogue which the government may initiate with the NGOs in view of its recent thrust on DG schemes. The committee therefore feels that there need be no difficulty in agreeing to the suggestion. An important point while determining the tariff should be the comparison between the tariff of the DG schemes and the tariff of the grid power at the specific location. In other words the cost of transmission and distribution losses in the grid system at the specific location will have to be taken into account while drawing the comparison. Secondly, allowance will have to be made for the fact that the plant load factor of a DG system would be much lower especially in the initial stages as compared to that of a central power station which is already stabilized. It will have to be assumed that the plant load factor of a DG system will increase over a period of time and the economics of the DG schemes will have to be based on such an assumption. 147



59 iii Include an assured price for buy back power generated by biomass projects and wind power projects by the State Electricity Boards. The details are given in Annexure 20. It would be seen from the Annexures that the buy back prices range between Rs.2.25 per unit with escalation at 5% for a period of 5 years in the case of biomass projects. In the case of wind power projects the buy back price ranges between Rs.2.25/kwh and Rs.2.89/kwh at 5% escalation. In the states of Madhya Pradesh and Tamil Nadu no escalation is allowed and in the state of West Bengal it is allowed on a case to case basis. The incentive no doubt acted as a catalyst and helped in the installation of a number of biomass based and wind based projects. Some of the State Electricity Boards are now complaining that the buy back prices have reached unreasonably high levels and eroding the profitability. While it will not be correct to attribute the losses incurred by the State Electricity Boards entirely to the buy back prices as the energy bought from such projects constitutes only a small percentage of the turn over of respective grid systems, the matter no doubt needs to be reviewed. While the escalation clause may be retained for the present its implications over a period of time would have to be examined, the committee would suggest that the escalation clause may be reviewed at the end of every three years. A distinction will have to be made between fuel based and biomass based DG schemes while the matter is examined. iv. An important risk to be borne by the DG systems rises on account of uncertainty of demand which is detrimental to scale economies. If the local demand does not pick up the surplus power will have to be wheeled into the system for sales to third parties. Third party sales are allowed only in the states of Maharashtra, Haryana and Rajasthan for biomass projects and Karnataka, Maharashtra in the case of wind power projects. It is necessary that third party sales are permitted especially in the case of DG schemes such measures would ensure that genuine competition emerges in the power sector. The third party sales the committee recommends should be permitted liberally as true competition can be introduced only then. It is noticed that the wheeling charges which were as low as 2% in some states initially are being revised upwards(to even 28% in some cases) and that to with the approval of the State Electricity Regulatory Commissions. The committee recommends that the wheeling charges should be related to reasonable levels of transmission and distribution losses of the State Electricity Boards. This would ensure that State Electricity Boards do not mechanically ask for wheeling charges which are higher than necessary and also made responsible for controlling transmission and distribution losses. In any case it should be ensured that the State Electricity Boards do not suffer a financial loss on account of the policy 148


60 directives given by the state government in such matters by the State Electricity Boards. 3. It is most important that the question of interconnectivity between the state grids and the grids of the DG schemes is resolved on a most urgent basis. The rigidity and reluctance on the part of the incumbent operator has been a major obstacle all the world over for the development of the DG schemes. Some of the Regulatory Commissions have tried to achieve demand management through tariffs by announcing concessions in tariffs to consumers to switch over to solar systems and devices. The State Electricity Boards of Rajasthan and Karnataka have done so. As the entrepreneurs that operate the DG schemes are extremely venerable to discriminatory behaviour by the incumbent operators in connecting to the transmission and distribution grid the Central Electricity Regulatory Commission would have to establish technical interconnection rules so that DG schemes can be implemented before resolving the broader competition issues that arise on account of their implementation. Considering the overall benefits that accrue to the economy on account of DG schemes, it is imperative that the terms and conditions for the interconnectivity are finalized with the utmost expedition and DG schemes are allowed to commence their operations without a final resolution of all competition issues. This in fact was the approach adopted by the Federal Trade Commission before the Public Utilities Commission of the State of California. 5. While the regulatory issues need to be resolved the National Policy on DG schemes based on the Renewable Energy Sources needs to be urgently spelt out as the regulators are bound by the policy directives given by the appropriate government. The Government of Rajasthan are reported to have issued a policy directive to the State Electricity Regulatory Commission to regulate power purchase in such a manner that procurement of power from non-conventional sources reaches a level equivalent to 10% by 2010. The articulation of a clear policy in the matter in terms of Clauses 4 and 5 of the Electricity Bill 2001 at the National Level will a long way in giving a legal and conceptual framework within which the regulators can exercise their powers.




Biomass Technologies - Biogas Gasification
IDCOL financed a 250 kW biomass gasification based Power Plant a local sponsor has developed this project. The Plant, the first ever its kind in is one of various renewable energy activities of IDCOL. IDCOL provided concessionary loans and grants, sourced from IDA and Global Environmental Facility to this project. The plant uses locally available agricultural residues i.e. rice husk as fuel for power generation. The project started commercial operation in October 2012.

Rice Husk fired 250 kW Gasifier power plant The project started commercial operation in October 2012.


1. Gasifier Unit Parameter Gasifier Type Capacity Rated Gas Flow Average Gas calorific value Rated Biomass consumption Gasification Temperature Gasification Efficiency Temperature of Gas at Gasifier Outlet Biomass Feeding Desired Operation Typical Auxiliary Power Consumption Typical Gas composition

Description Downdraft Total 250 kW 625 Nm3/hr (up to total 250 kW capacity) > 1,050 (Kcal/Nm 3) Up to 300 kg/hr (for total 250 kW capacity) 1050oC-1100oC Up to 75% 250 to 400oC Manual Continuous (minimum 300 days/yr) Up to 11 kW CO-20.62%, H 2 -10.62%, CO -13.61%, CH - 4 to Up 2 4%, N2-52.62%

2. Gas purification unit Following gas purification stages and filter element have been used in each stage of this rice husk based power plant: Stage 1: Coarse Filter: uses rice husk char as filter element to partly clean the gas. Stage 2: Fine Filters: sawdust is used as filter element to trap all the particulate and ash particles. Stage 3: Safety Filter (‘SF’): a special fabric (5 micron particulate size) is used as filter element. 3. Internal Combustion (IC) Engine: Duel-fuel Engine A 300 kW capacity duel-fuel generator is used to generate electricity. In this rice husk based power plant, to run the generator certain amount of diesel is required. Because, the producer gas has relatively lower heating value and needs to be supplemented by diesel to get the necessary power output. That’s why the IC engine has been converted into duel fuel mode, i.e. it can run both on producer gas and diesel. Here, the Producer gas to diesel ratio is. 70:30. During start up of the plant, main generator is started first on diesel and then changed over to duel fuel mode when the producer gas is available for charging to the engine. 4. Power distribution Network A mini grid has been constructed to sell the power to the adjacent area. The plant is able to deliver power to at least 200 households and over 100 commercial entities of that area. 5. Environmental impact Generally 4 types of effluent are generated from the gasification process; ash, char, tar, and waste water. Ash is collected in wet condition. Around 20% of rice husk is made up of ash and the ash coming from the gasifier contains 10 to 15% carbon by weight. The ash-laden water can be used as organic fertilizer or land filling purpose. The plant has on site storage facility for ash. Char can be transformed into charcoal which is used as a domestic fuel for cooking and heating. Tar can be either recycled or burnt in the gasifier or used as black paint for the wooden materials like boat, wooden structures and construction of roads. The plant has onsite storage facility to deposit waste water which needs to be changed in every three month. 6. Project Cost Total cost of the project was around Tk. 2.5 crore. Financed by grant from World Bank (60%), IDCOL – 20% and DPPL 20%.


Biomass Technologies – Biomass Briquetting Technology

Improved Biomass Briquetting System (Moral, 2000).


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