CPCB has underestimated the cost of setting up a pellet manufacturing unit, say experts
The Central Pollution Control Board (CPCB) revised the financial grants for biomass pellet manufacturing units in March 2023. It has earmarked a maximum allocation of Rs 28 lakhs per tonne per hour (TPH) of production capacity for manufacturing biomass pellets or 40 per cent of the capital cost of the plant and machinery — whichever is lower. These allocations, however, are grossly insufficient to meet the current requirements of the pellet manufacturing industry.
It is mandatory to use biomass or agricultural residue as combustion fuel along with coal in coal-fired thermal power plants. The biomass used for co-combustion in the power plants is processed and refined into pellets with a calorific value comparable to coal.
Biomass pellets are of two kinds — torrefied and non-torrefied. Biomass, if processed at 250-350°C in the absence of oxygen, leads to the formation of torrefied biomass. Whereas, in the case of non-torrefied pellets, biomass is shredded, grinded and sent to a pellet reactor, where it is compressed into pellet form with the help of binders such as sawdust, bagasse, molasses, starch and others.
The capital expenditure for setting up a pellet manufacturing unit entails variables such as land, machinery (shredder, grinder, dryer and palletisation reactor), air pollution control devices and other accessories such as conveyor belts, automation unit, pellet coolers and factory infrastructures such as shed and office.
The CPCB has increased the budget for manufacturing non-torrefied biomass pellets to 28 lakhs from 14 lakhs, as mentioned in the guidelines issued in October, 2022.
The cost of machinery with a production capacity of one TPH is approximately Rs 1 crore, said industry experts. This implies that grants would cover only 28 per cent of the capital investment on machinery as opposed to the claim by the CPCB to fund 40 per cent of the capital cost.
The CPCB has underestimated the cost of setting up a pellet manufacturing unit. The revised guidelines have pitched the capital for setting up a palletisation unit at Rs 70 lakhs with machinery costing Rs 35 lakhs and the remaining Rs 35 lakhs for air pollution control device and automation unit.
In the case of manufacturing torrefied biomass, no changes are introduced in the fund allocation in the revised CPCB guidelines. As previously, these units are entitled to receive Rs 28 lakhs per TPH of production capacity.
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However, the capital cost of setting up a torrefaction plant is almost double that of a palletisation unit, industry experts told Down to Earth. Therefore, these funds would only support 14 per cent of the cost of machinery for a torrefied biomass pellet manufacturing unit.
The funding is highly inadequate, especially considering that eight out of the 11 power plants in Delhi National Capital Region (NCR) have issued tenders for the supply of torrefied biomass, as found by a CSE study.
These financial grants based on a gross underestimation of the capital for establishing a new biomass pellet manufacturing unit will not help close the existing demand-supply gap as the country has limited pellet manufacturers.
Despite the mandate by the Ministry of Power and the Commission for Air Quality Management in Delhi-NCR and adjoining areas, the power plants co-fire biomass pellets only intermittently due to the unavailability of adequate and regular supply of biomass pellets to the power plants, the CSE study showed.
There is an imminent need to escalate the biomass pellet manufacturing capacity in the country if the government is serious about the realisation of its policy for 5-10 per cent of biomass co-firing in coal thermal power plants.
Nabha Thermal Power Plant of L&T Limited in Rajpura, Punjab and Indira Gandhi Super Thermal Power Project of NTPC in Jhajjar, Haryana, are the two plants in Delhi NCR that have taken steps towards facilitating the establishment of pellet manufacturing units. More such initiatives need to be taken by the power generators and the government, along with strengthening all the actors in the supply chain, starting from the farmers and aggregators to pellet manufacturers.
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