TNERC moots sweeter deal for sugar mills producing power
This proposal is part of a consultative paper issued by the commission, which is currently seeking stakeholder comments and public feedback until June 8.
CHENNAI: The Tamil Nadu Electricity Regulatory Commission (TNERC) has proposed a sharp increase in the power tariff for bagasse-based co-generation plants, setting it at Rs 7.14 per unit for the 2025–26 financial year.
This proposal is part of a consultative paper issued by the commission, which is currently seeking stakeholder comments and public feedback until June 8.
The proposed tariff represents a notable increase from the current rate of Rs 6.11 per unit applicable for the 2024–25 financial year.
Under the existing structure, the fixed cost is Rs 2.73 per unit and the variable cost is Rs 3.38. For the upcoming control period (2025-26), the regulatory panel has proposed increasing the fixed cost marginally to Rs 2.75 per unit and a higher variable cost of Rs 4.38 per unit, reflecting rising costs of fuel and operations. For FY 2026–27, the tariff is expected to further increase to Rs 7.27 per unit.
The revision follows a petition from the South Indian Sugar Mills Association (SISMA), which cited cost escalations and urged the commission to revise the tariff accordingly. In response, TNERC has retained the cost-plus, two-part tariff structure while proposing several updated financial and operational parameters.
The capital cost per megawatt has been revised to Rs 5.62 crore, up from Rs 4.67 crore earlier. The normative Plant Load Factor (PLF) remains at 60 per cent, and an incentive of Rs 0.25 per unit is proposed for generation beyond this threshold. The life of the plant has been extended to 25 years for depreciation purposes. Fuel costs, based on bagasse, have been set at Rs 2,506.59 per metric tonne, with an annual escalation factor of 3.45%.
The consultation paper also outlines conditions for fossil fuel usage, open access charges, energy accounting, and billing procedures. The final tariff order will be issued after TNERC reviews all inputs from stakeholders and the public.
Bagasse is the residue that is left behind after sugarcane is crushed during sugar manufacturing process. The sugar mills use this to generate electricity by burning the bagasse in boilers to produce steam, which in turn turns turbines. Many mills generate more electricity than required to run their units, and supply it to the State-run utility’s grid.
