Maharashtra: Your job to recover what farmers owe us, says Discom to Sweets
The Maharashtra Electricity Distribution Company has instructed state sugar mills to ensure that payments to cane growers for their cane are only made after adjusting the electricity charges owed by these farmers to the electricity company.
The Maharashtra State Electricity Distribution Company Limited (MSEDCL) has warned the mills that it will buy power from them at a lower price if the mills fail to recover pending dues from the farmers.
Most sugar mills in the state generate their own electricity from bagasse, the fibrous material left over after extracting juice from sugar cane. Much of this electricity is used to run the plant and the surplus is purchased by the MSEDCL for distribution elsewhere.
The contracts for this sale of electricity to the MSEDCL must be renewed, and the electricity company has inserted new provisions which place the burden on the mills to collect electricity fees from farmers. Sweets resist this.
Across the country, 360 sugar refineries produce a cumulative 7,562 MW of electricity in their cogeneration units. Maharashtra leads the sector with 124 cogeneration plants and a total installed capacity of 2,600 MW. Uttar Pradesh (70 mills with a production of 1,800 MW) and Karnataka (58 mills with a production of 1,600 MW) are the other two leading states in terms of cogeneration.
In Maharashtra, factories enter into 12-year long-term Power Purchase Agreements (PPAs) with the MSEDCL to sell the generated electricity at a pre-determined tariff. While tariffs were higher before, since 2013 sugar mills have had to take part in tenders to sell their electricity. The current price is less than Rs 5/unit, which, according to the factories, roughly covers their cost of production.
For factories whose PPAs had expired, agreements were renewed this year at a base rate of Rs 4.75/unit. Although the rate was lower than expected, it was the inclusion of a “clawback clause” by the MSEDCL in the agreement that worried factories the most. The mills are expected to recoup royalties from the electric utility from the fair and remunerative price (FRP) it pays to farmers.
Jaiprakash Dandegaonkar, Vice President of Cogeneration Association of India, said: “If factories are not able to recover 10% of pending bills in the region, the purchase rate will be less than Rs 4.51/ unity.
Dandegoankar and other sugar mills have criticized this clause, saying it is illogical because apart from harvesting and transportation costs, they are not allowed to deduct any amount from the PRF offered to sugarcane growers. In case a farmer gets loans from cooperative banks, this can also be adjusted in FRP payment. But factory owners said they had neither the means nor the legal right to deduct anything else from the FRP.
For years, the growing amount of dues from the agricultural sector has been a major problem for the cash-strapped MSEDCL. Farmers, however, blamed erratic electricity supply and inflated bills as the main reasons for pending dues in the sector.
In 2020, the government of Maha Vikas Aghadi had launched a special initiative for the collection of electricity royalties from the owners of agricultural pumps. The Maharashtra government had allowed cooperative bodies, such as sugar factories, self-help groups and village panchayats to claw back electricity royalties, even offering a 10% financial incentive for clawback.
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So far, only 13 factories have renewed their PPAs with the new clause, but most of them have refrained from any aggressive action to recover electricity fees.
The owner of a cooperative mill in Kolhapur has legally stated that he is not allowed to deduct these amounts from the FRP payment without the written consent of the farmers.
“During the season, we had written every fortnight to the public electricity service to ask them to send us a statement of the contributions of each farmer, accompanied by a written consent for the deduction of the contributions. However, there was no response, so we did not deduct any amount,” Miller said.
When contacted, MSEDCL officials said requiring sugar mills to recoup electricity royalties from farmers was “not policy”, but did not explain the reasons for inserting provisions. in the new PPAs. “It is not our policy to request sugar cane mills entering for PPA with MSEDCL to recover arrears from farmers. There are 115,515 agricultural consumers (electricity) in Pune area having arrears of Rs 310 crore,” an MSEDCL official said.