PSERC Hikes Tariff for DEE Development Engineers Subsidiary’s Biomass Plant by 49 Percent

Punjab State Electricity Regulatory Commission (PSERC) has approved a tariff of INR 5.224 per kWh for the 6 MW biomass power plant operated by Malwa Power Pvt. Ltd., a wholly owned subsidiary of DEE Development Engineers, for a further 10 years after expiry of its original power purchase agreement.

The plant at Gulabewala was commissioned in April 2005 and supplied electricity to Punjab State Power Corporation Ltd. under a 20-year agreement that ended in April 2025. During the pendency of the tariff petition, the project continued to receive an interim tariff of INR 3.50 per kWh, as directed by Appellate Tribunal for Electricity.

The newly approved tariff for FY2025-26 marks a 49.3 percent increase over the interim rate and comprises a fixed-cost component of INR 0.97 per kWh and a variable-cost component of INR 4.254 per kWh. The variable component will rise by 5 percent annually during the extended term.

The order enables the company to recover nearly INR 5.80 crore for electricity supplied between May 2025 and February 2026, during which the plant exported around 3.37 crore units to PSPCL at the interim tariff.

At an estimated plant load factor of 85 percent, DEE Development expects the project to export 4.53 crore units in FY2026-27 and generate revenue of about INR 24.31 crore.

The company is also preparing to commission a biomass pellet plant at the same location with a capacity of 72,000 tonnes per annum. The facility will convert agricultural residue, including rice straw, into biomass pellets for supply to thermal power plants for co-firing with coal and renewable purchase obligation compliance.

Operating at 50 percent utilisation, the pellet plant is expected to produce around 36,000 tonnes annually and generate approximately INR 23.40 crore in revenue, taking the combined revenue potential of the biomass power and pellet businesses to nearly INR 47.7 crore in FY2026-27.

However, the company said that the tariff remains lower than expected because the regulator relied on the 2012 renewable energy tariff regulations of Central Electricity Regulatory Commission rather than the 2024 framework.

Commenting on the order, KL Bansal, Chairman and Managing Director, Dee Development said, “We acknowledge the Hon’ble PSERC’s Order determining the tariff for MPPL’s Muktsar plant at INR 5.224 per kWh for the extended term of 10 years. While the Order recognises the distinct operational realities of standalone biomass IPPs and rightly distinguishes them from co-generation plants, we believe the tariff determined is on the lower side, particularly with regard to the fixed cost component and the variable cost benchmarking methodology adopted by the Commission.

“The Commission has relied on the CERC RE Regulations 2012 for determining the fixed cost, whereas the applicable regulations ought to be the CERC RE Regulations 2024, which provide for substantially higher O&M expenses at INR 54.70 lakh/MW for FY 2024-25 with 5.25 percent annual escalation. Similarly, the variable cost has been benchmarked against a competitively bid tariff for a new project to be commissioned in FY 2021-22, which does not adequately reflect the current cost of biomass procurement for an operational standalone IPP. We are of the view that the tariff ought to have been higher to ensure the economic viability of the plant over the extended PPA period," he added.

He  said that the enhanced tariff of INR 5.224 per kWh over the interim rate of INR 3.50 per kWh was a positive step and, together with the proposed commissioning of the 72,000 MT per annum biomass pellet plant at the same location, positioned MPPL to achieve a combined revenue potential of around INR 48 crore per annum. He added that the company remained committed to its green energy operations and to delivering sustainable value to stakeholders.

However, he said that the company was actively evaluating the option of filing an appeal before the  Appellate Tribunal for Electricity to seek an upward revision of the tariff in line with the CERC RE Regulations 2024 and the plant’s actual operating cost parameters. He added that the company would take all necessary legal and regulatory steps to protect its commercial interests and secure a fair and sustainable tariff for the remaining extended term.