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Before the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
World Trade Centre, Centre No.1, 13th
Floor, Cuffe Parade, Mumbai – 400 005
Tel. 22163964/ 65/ 69 Fax 22163976
Email: [email protected]
Website: www.mercindia.org.in/www.merc.gov.in
CASE NO. 158 of 2017
In the matter of
Petition of Nagpur Solid Waste Processing and Management Pvt. Ltd. for determination of
Tariff for sale of electricity from 11.5 MW Municipal Solid Waste based power project to
be commissioned at Nagpur to Distribution Licensees in Maharashtra
Coram
Shri. Anand B. Kulkarni, Chairperson
Shri Deepak Lad, Member
ORDER
Date: 5 February, 2018
M/s Nagpur Solid Waste Processing and Management Pvt. Ltd. (NSWPMPL), 513A,5th
Floor,
Kohinoor City, Kirol Road, Kurla (West), Mumbai has filed a Petition on 7 November, 2017
under Section 62(1)(a) of the Electricity Act (EA), 2003 and Regulations 8.1 and 8.2 of the
Commission‟s (Terms and Conditions for Determination of Renewable Energy Tariff)
Regulations, 2015 („RE Tariff Regulations,2015‟), for determination of Tariff for supply of
electricity from its 11.5 MW capacity Municipal Solid Waste(MSW) based Power Plant at
Bhandewadi, Nagpur to Distribution Licensees in the Maharashtra.
The Commission, in exercise of its powers under Sections 61, 62, and 86 read with Section 181
of the EA, 2003, and all other powers enabling it in this behalf, and after taking into
consideration the submissions made by NSWPMPL, suggestions and objections from the public
and stake-holders and other relevant material, has determined the tariff for the Project of
NSWPMPL at Nagpur as set out in this Order.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 2 of 92
Table of Contents
1. BACKGROUD AND BRIEF HISTORY .................................................................................................... 7
1.1. Background ............................................................................................................................ 7
1.2. Admission of the Petition and Public Consultation Process .................................................. 8
1.3. Organization of Order ............................................................................................................ 9
2. CONCESSION AGREEMENT BETWEEN NMC AND CONCESSIONAIRE ................................... 10
2.1. Tendering Process ................................................................................................................ 10
2.2. Salient features of Concession Agreement ........................................................................... 10
2.3. Salient features of the Nagpur MSW Project, as per NSWPMPL ....................................... 13
2.4. Scope of work of MSW Project ........................................................................................... 13
2.5. Existing and New Scientific Landfills.................................................................................. 14
2.6. Role of NMC ........................................................................................................................ 14
2.7. Term and Termination of Agreement:.................................................................................. 15
2.8. Ownership of assets and transfer of Project ......................................................................... 16
2.9. Viability Gap Funding .......................................................................................................... 16
2.10. Bid evaluation report and observations of NEERI and GIPE: ............................................. 16
2.11. Solid Waste Management Rules (SWM) 2016 and its Implications: ................................... 18
2.12. Provisions of Tariff Policy 2016: ......................................................................................... 21
3. PREMISES FOR DETERMINATION OF PROJECT-SPECIFIC TARIFF ....................................... 23
3.1. Regulatory Framework for Tariff Determination ................................................................. 23
3.2. Premise for Development of Tariff Structure: ..................................................................... 24
4. SUGGESTIONS/OBJECTIONS, NSWPMPL’S RESPONSE AND COMMISSION’S RULINGS .... 27
4.1. Maharashtra Energy Development Agency‟s (MEDA) Submission: .................................. 27
4.2. Nagpur Municipal Corporation‟s (NMC) Submission: ........................................................ 29
4.3. Maharashtra State Electricity Distribution Company Limited (MSEDCL)‟s Submission ... 31
5. PARAMETERS OF TARIFF DETEREMINATION .............................................................................. 34
5.1. Background .......................................................................................................................... 34
5.2. Technology of proposed MSW Project ................................................................................ 34
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 3 of 92
5.3. Calorific Value (CV) of MSW in Nagpur: ........................................................................... 38
5.4. Installed Plant Capacity ........................................................................................................ 41
5.5. Capacity Utilisation Factor ................................................................................................... 42
5.6. Auxiliary Energy Consumption Factor ................................................................................ 44
5.7. Capital Cost .......................................................................................................................... 48
5.8. Viability Gap Funding (VGF) .............................................................................................. 57
5.9. Useful Life of MSW Plant ................................................................................................... 58
5.10. Debt-Equity Ratio ................................................................................................................ 62
5.11. Depreciation ......................................................................................................................... 63
5.12. Operation and Maintenance(O&M) Expenses ..................................................................... 65
5.13. Escalation factor for Annual O&M expenses: ..................................................................... 73
5.14. Periodic Maintenance expenditure: ...................................................................................... 74
5.15. Interest on Term Loan .......................................................................................................... 76
5.16. Interest on Working Capital ................................................................................................. 78
5.17. Return on Equity .................................................................................................................. 79
5.18. Tipping Fee and Other Income ............................................................................................. 80
5.19. Discount Rate ....................................................................................................................... 82
5.20. Status of Statutory Clearances: ............................................................................................ 83
5.21. The summary of various parameters and assumptions ......................................................... 83
5.22. Tariff Rate and Other Conditions ......................................................................................... 86
5.23. Other Commercial aspects: .................................................................................................. 86
6. SUMMARY OF COMMISSION’S DIRECTIVES AND APPLICABILITY OF ORDER .................. 89
Appendix – 1 ..................................................................................................................................................... 90
List of persons at the Technical Validation Session held on 22 November, 2017 ........................................ 90
Appendix – 2 ..................................................................................................................................................... 91
List of persons at the Public Hearing held on 29 December 2017 ................................................................ 91
Annexure-1: Summary of Levellised Tariff ................................................................................................... 92
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 4 of 92
List of Tables
Table 1: Waste Generation in Nagpur ......................................................................................................................... 11
Table 2: Financial working by GIPE ........................................................................................................................... 18
Table 3: Emission standard for incinerators technologies as per SWM Rules, 2016 .................................................. 21
Table 4: Chemical characteristics of MSW ................................................................................................................. 38
Table 5: Physical characteristics of MSW ................................................................................................................... 39
Table 6: Summary matrix- All sources ........................................................................................................................ 40
Table 7: Summary matrix- Chemical and physical characterization ........................................................................... 40
Table 8: Comparative Capacity Utilization factor of MSW Projects........................................................................... 44
Table 9: Auxiliary Equipment Details submitted by NSWPMPL ............................................................................... 45
Table 10: Comparison of Auxiliary Consumption of various similar projects ............................................................ 46
Table 11: Auxiliary Consumption as considered by Commission ............................................................................... 47
Table 12: Break-up of Capital Cost as Submitted by NSWPMPL .............................................................................. 48
Table 13: Quotation for Plant & Machinery Cost (as per Hitachi-Zosen India Pvt. Ltd.) .................................. 49
Table 14: Details of Quotations received for Civil work of MSW Plant ............................................................... 50
Table 15: Comparative Capital Cost of MSW Projects ............................................................................................... 53
Table 16: Comparison of Soft Cost and Hard Cost of MSW Projects ......................................................................... 56
Table 17: Capital Cost of MSW Projects considered by the Commission ................................................................... 56
Table 18: Comparative Useful life of MSW Projects .................................................................................................. 60
Table 19: O&M Expenses for the plant as estimated of the by NSWPMPL ............................................................... 65
Table 20: O&M Expenses for pre-processing facility as estimated of the by NSWPMPL .................................. 66
Table 21: Summary of O&M expenses proposed by NSWPMPL (Year 1 to 7) ......................................................... 66
Table 22: Summary of O&M expenses proposed by NSWPMPL (Year 8 to 13) ....................................................... 67
Table 23: Detailed Break up of O&M expenses as submitted by NSWPMPL ............................................................ 67
Table 24: Category wise break-up of Employees as submitted by NSWPMPL ................................................... 68
Table 25: Detailed break up of A&G expense as submitted by NSWPMPL ........................................................ 69
Table 26: Detailed Break up of O&M expenses as submitted by NSWMPMPL ................................................. 71
Table 27: Annual inflation escalation for computation of Capex ................................................................................ 75
Table 28: Monthly 1 Year MCLR declared by SBI ..................................................................................................... 77
Table 29: Computation of Revenue from tipping fees ................................................................................................. 81
Table 30: Status of Statutory Clearances ..................................................................................................................... 83
Table 31: Summary of Project Specific Parameters .................................................................................................... 84
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 5 of 92
Abbreviations
APTEL Appellate Tribunal for Electricity
BOOT Build Own Operate and transfer
CEA Central Electricity Authority
CER Certified Emission Reduction
CERC Central Electricity Regulatory Commission
CDM Clean Development Mechanism
CoD Commercial date of Operation
CPCB Central Pollution Control Board
CSS Cross subsidy Surcharge
DBFOT Design Build Finance Operate and Transfer
DPR Detail Project Report
EA 2003 Electricity Act 2003
EIA Environmental Impact Assessment
EIL Essel Infra Projects Limited
EPA Energy Purchase Agreement
EPC Engineering, Procurement and Construction
FD Forced Draft
GCV Gross Calorific Value
GIPE Gokhale Institute of Politics & Economics
GoM Government of Maharashtra
ID Induced Draft
IDC Interest During Construction
IRR Internal Rate of Return
HV High Voltage
kVA Kilo Volt Ampere
kW Kilo Watt
kWh Kilo Watt Hour
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 6 of 92
LDO Light Diesel Oil
MEDA Maharashtra Energy Development Agency
MERC Maharashtra Electricity Regulatory Commission
MoD Merit Order Despatch
MNRE Ministry of New and Renewable Energy
MoEF Ministry of Environment & Forest and climate change
MSEDCL Maharashtra State Electricity Distribution Company Limited
MSETCL Maharashtra State Electricity Transmission Company Limited
MSW Municipal Solid Waste
MU Million Unit
MW Mega Watt
NCV Net Calorific Value
NEERI National Environmental Engineering Research Institute
NMC Nagpur Municipal Corporation
NSWPMPL Nagpur Solid Waste Processing and Management Pvt. Ltd.
O&M Operation and Maintenance
OEM Original Equipment Manufacturer
PLF Plant Load Factor
PPP Public Private Partnership
RDF Refuse-Derived Fuel
RE Renewable Energy
RPO Renewable Purchase Obligation
SERC State Electricity Regulatory Commission
SLF Sanitary land filling
SPV Special Purpose Vehicle
TPD Metric Tons per Day
WTE Waste to Energy
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 7 of 92
1. BACKGROUD AND BRIEF HISTORY
1.1. Background
1.1.1. Nagpur is one of largest city in the state of Maharashtra having 4.73% of the total urban
population of the state. Nagpur is being developed as a Smart City under Smart City
Mission of Government of India. As per Nagpur Municipal Corporation (NMC), the city
is currently generating an average of 1100-1200 TPD of waste, with an average
generation of 444 grams per capita per day.
1.1.2. For effective treatment of MSW in the Nagpur City, NMC had invited Expression of
Interest (EoI) published dated 29 November, 2014. Further, Request for Proposal (RfP)
was invited on 19 January, 2015 for selection of bidder for construction, operation and
maintenance of Municipal Solid Waste Management (MSWM) facility on Design, Build,
Finance, Operate and Transfer (DBFOT) basis for treating the MSW. Consortium of M/s
Essel Infraprojects Ltd. and M/s Hitachi Zosen India Pvt. Ltd., was selected vide
competitive bidding process and Letter of Award (LoA) was issued to Consortium by
NMC dated 4 January, 2017
1.1.3. Consortium has promoted and incorporated M/s Nagpur Solid Waste Processing &
Management Pvt. Ltd. (NSWPMPL) as Special Purpose Vehicle (SPV) for execution of
the solid waste processing plant at Nagpur. A Concession Agreement was signed between
NSWPMPL and NMC on 4 May, 2017 for design, construction and operation of MSW
processing facility at Bhandewadi, Nagpur for capacity of 800 MT per day including Pre-
processing of MSW in line with the provisions of the Solid Waste Management (SWM)
Rules, 2016 during the Concession Agreement Period.
1.1.4. NSWPMPL has proposed Hitachi Zosen‟s incineration technology for managing waste
processing and generating electricity from the processed waste. The Installed capacity of
the proposed Waste to Energy power plant is 11.5 MW.
1.1.5. Accordingly, NSWPMPL has filed the Petition under Sections 62(1) (a) and 86(1) (e) of
the EA, 2003 and Regulations 8.1 and 8.2 of RE Tariff Regulations, 2015 for
determination of Tariff for sale of electricity generated from its 11.5 MW MSW-based
Power Plant.
1.1.6. The prayers of NSWPMPL are as follows:
1. Take the accompanying Tariff Petition for approval of power purchase from the
11.50 MW pre-processed MSW based WtE plant of NSWPMPL on record and treat it
as complete;
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 8 of 92
2. Approve the levellised tariff of Rs. 7.80/kWh in accordance with the tariff structure
adopted by the Hon‟ble CERC;
3. Grant exemption from Merit Order Dispatch Principles for the Project.
4. Direct DISCOMs to consider the benefit of zero contract demand charges.
5. Direct the DISCOMs to consider energy which may be drawn during shut down or
start up after the CoD of the Project be set off against the energy injected into the
grid by the Project
6. Grant waiver on Cross Subsidy Surcharge on sale of power from the Project in case
of sale of power directly to third party.
7. Condone any inadvertent omissions/ errors/ shortcomings and permit the Petitioner
to add/ change/ modify/ alter portion(s) of this filing and make further submissions as
may be required at a later stage; and
8. Pass such an order as the Hon'ble Commission deems fit and proper as per the facts
and circumstances of the case.
1.1.7. This Order relates to NSWPMPL‟s Petition for determination of Tariff for supply of
electricity from its 11.5 MW capacity MSW-based Power Project at Bhandewadi, Nagpur
to Distribution Licensees in Maharashtra.
1.2. Admission of the Petition and Public Consultation Process
1.2.1. NSWPMPL has filed a Petition on 7 November, 2017 under Sections 62(1) (a) and 86(1)
(e) of the EA, 2003 and Regulations 8.1 and 8.2 of the RE Tariff Regulations, 2015 for
determination of Tariff for sale of electricity generated from its 11.5 MW MSW-based
Power Plant.
1.2.2. Preliminary data gaps were forwarded to NSWPMPL on 13, 22, 27 November,2017 and
11 December,2017, to which NSWPMPL submitted replies vide letter dated 21, 25
November, 2017 and 25 December,2017.
1.2.3. A Technical Validation Session (TVS) was held on 22 November, 2017. During TVS,
NSWPMPL made a presentation on the salient features of the Petition. The Commission
directed NSWPMPL to implead NMC as Party and serve the copy of the Petition to NMC
as well as to other Distribution Licensees in the state. TVS minutes were forwarded to
NSWPMPL on 29 November, 2017.List of person attended the TVS is at Appendix – 1
1.2.4. The Commission highlighted the data gaps in the Petition, and asked NSWPMPL to
comply with all data gaps within a week. Along with reply to data gaps, NSWPMPL
submitted a revised petition on 28 November, 2017. The Commission admitted the
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 9 of 92
revised Petition on 30 November, 2017 in accordance with Section 64 of the EA, 2003,
and directed NSWPMPL to publish its Petition in an abridged form by 7 December,2017,
and to reply expeditiously to all suggestions and objections received from the public on
its Petition.
1.2.5. NSWPMPL published the Public Notice in the daily English Newspapers viz. Times of
India and Indian Express and Marathi Newspapers viz. Loksatta and Maharashtra Times
in all editions all over Maharashtra on 5 December, 2017 inviting public
suggestions/objections and intimating the date of Public Hearing. Copies of the Petition
and its Executive Summary were made available at NSWPMPL‟s offices and on its
website in downloadable format. The Public Notice and Executive Summary of the
Petition were also made available on the websites of the Commission
(www.mercindia.org.in, www.merc.gov.in) in downloadable format.
1.2.6. A Public Hearing was held on 29 December, 2017 at the Office of the Commission, 13th
Floor, Centre No. 1, World Trade Centre, Cuffe Parade, Colaba, Mumbai. The list of
persons at the Public Hearing is at Appendix-2.
1.2.7. The Commission has ensured that the due process was contemplated under the law to
ensure transparency and public participation was followed at every stage and adequate
opportunity was given to all concerned to file their say.
1.3. Organization of Order
1.3.1. This Order is organized in the following 7 Sections:
Section 1 provides a brief history and sets out the quasi-judicial regulatory process
undertaken by the Commission. A list of abbreviations with their expanded forms is
included.
Section 2 describes the salient features of the Concession Agreement between NMC and
the Concessionaire.
Section 3 details the Tariff philosophy underlying the tariff determination.
Section 4 covers objection summary and rulings thereof.
Section 5 comprises the submissions with respect to performance parameters and
financial parameters, the Commission's analysis, and the methodology adopted to
determine the tariff and other parameters.
Section 6 summarizes the directives and rulings of the Commission.
Section 7 addresses the applicability of this Tariff Order.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 10 of 92
2. CONCESSION AGREEMENT BETWEEN NMC AND CONCESSIONAIRE
2.1. Tendering Process
2.1.1. NMC had issued RfP document for selection of developers on DBFOT basis (copy of
which is shared by NSWPMPL as part of this Petition), wherein it stipulated eligibility
criteria for shortlisting the potential bidders. The eligibility criteria included the past
experience in commissioning a MSW processing facility of minimum 200 MT per day of
MSW in India or elsewhere in last five years and the plant to be operational for 180 days
before bid due date.
2.1.2. The financial requirement of minimum net-worth of Rs. 25 Crore at close of preceding
year was also stipulated as part of bid condition.
2.1.3. The Bid evaluation and selection of successful bidder was on the basis of minimum
technical and financial criteria and the bidder who quoted the lowest tipping fee declared
as the successful bidder.
2.1.4. Accordingly, the Project has been allotted to Consortium of M/s Essel Infraprojects Ltd.
and M/s Hitachi Zosen India Pvt. Ltd on DBFOT basis for construction and operation of
a MSW processing facility for 800 TPD for a period of 15 years. Post completion of the
Concession Agreement period, Concessionaire will have to transfer all the moveable
infrastructure and facilities including vehicles, equipment, workshop offices,
communication arrangement etc. and immovable infrastructure facilities, free of cost to
NMC.
2.2. Salient features of Concession Agreement
2.2.1. Consortium of M/s Essel Infraprojects Ltd. and M/s Hitachi Zosen India Pvt. Ltd
promoted and incorporated NSWPMPL as Special Purpose Vehicle (SPV) for execution
of the waste processing plant at Nagpur.
2.2.2. A Concession Agreement was signed between NSWPMPL and NMC on 4 May, 2017 for
design, construction and operation of MSW processing facility at Bhandewadi, Nagpur
for capacity of 800 MT per day including Pre-processing of MSW in line with the
provisions of the Solid Waste Management (SWM) Rules, 2016 over the period of
Concession Agreement. The Concession Agreement is for a period of 15 years, including
construction period of 2 years.
2.2.3. NMC has agreed to deliver the assured waste quantity of 800 TPD ±20% at the Project
site for processing. NMC has also agreed to pay a tipping fee of Rs. 225 per MT with an
annual escalation of 4.5% till the end of the Concession Period.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 11 of 92
2.2.4. The waste generation on a daily basis in Nagpur city is quantified by NMC in a report
covering a span of almost two years from 2015 to 2017. The data is shown in the Table
below:
Table 1: Waste Generation in Nagpur
Year Waste per month (in MT) Average Daily (in MT)
Apr-15 32907 1097
May-15 31103 1003
Jun-15 32785 1093
Jul-15 34164 1102
Aug-15 32330 1043
Sep-15 32255 1075
Oct-15 34785 1122
Nov-15 34986 1166
Dec-15 36448 1176
Jan-16 34738 1121
Feb-16 34443 1188
Mar-16 36080 1164
Apr-16 33970 1132
May-16 36140 1166
Jun-16 36923 1231
Jul-16 37483 1209
Aug-16 35511 1146
Sep-16 33999 1133
Oct-16 36007 1162
Nov-16 35068 1169
Dec-16 35517 1146
Jan-17 36181 1167
Feb-17 34349 1227
Mar-17 36848 1189
2.2.5. The Concessionaire can market and sell or dispose of all the components/ products of
MSW, including but not limited to electricity, recyclables and to further retain and
appropriate any revenues generated from the sale of such products/ end-products.
2.2.6. The Concessionaire shall receive all financial benefits accruing in respect of or on
account of the Project, including Carbon Credits/Certified Emission Reductions (CERs)
under the Clean Development Mechanism (CDM) and share 50% of such fiscal
incentives/ benefits with the NMC as per the provision of the Concession Agreement.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 12 of 92
2.2.7. The treatment facility selected for the Project would scientifically process and dispose the
MSW. NSWPMPL is to ensure that not more than 20% of the MSW received at the
processing facility will be sent to a Landfill.
2.2.8. The Concessionaire should transfer the Project facilities to NMC, free of cost at the end
of the Concession Period or on Termination, in accordance with the provisions of the
Agreement.
2.2.9. The Concession Agreement also provided for Condition Precedent for its effectiveness as
under:
Condition Precedent required to be satisfied by the Authority (NMC):
NMC shall hand over the land to the Concessionaire for the development of the
Project and provide clear, vacant and unencumbered possession of the site to the
Concessionaire.
NMC will enter into an Escrow Agreement in accordance with Clause 23 and as per
the schedule 20 of Escrow Agreement.
NMC shall appoint an Independent Engineering/monitoring committee in accordance
with the Article 21.
Some of the major Condition Precedent required to be satisfied by the Concessionaire:
Provide construction and O&M Performance Security to the NMC as specified in the
Addendum.
Provide project development Fee of 1% of the total cost of the project.
Prepare the Environment and social Impact assessment (ESIA) Report through a
competent agency and obtain approval from NMC.
Obtain the EIA approval for the Project from competent authorities.
Procure all applicable permits specified in Schedule-2 unconditionally and if subject
to conditions, all such conditions required to be fulfilled by date specified therein.
Execute the Financing Agreements and deliver to the NMC.
Execute and procure execution of Escrow Agreement
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 13 of 92
Obtaining consent to establish and operate, based on project requirement from the
Maharashtra Pollution Control Board (MPCB), as per applicable rules and regulations
including SWM Rules, 2016.
2.3. Salient features of the Nagpur MSW Project, as per NSWPMPL
2.3.1. The proposed MSW Project involves use of mass combustion / incineration technology
for WtE conversion.
2.3.2. The Project will receive about 800 TPD of mix waste which will be segregated during
Pre-processing treatment and Project will process approximately 550 TPD of Pre-
processed MSW and produce around 80.59 million units yearly including Auxiliary
Consumption.
2.4. Scope of work of MSW Project
2.4.1. As per clause 2.1 of the Concession Agreement the scope of work is as follows: -
a) Design, construction and operation of MSW processing facility at Bhandewadi,
Nagpur for assured MSW quantity during the Concession Period.
b) The Concessionaire should erect a plant of capacity 800 TPD with presorting waste to
energy per day capable of producing 11.5 MW less auxiliary consumption.
c) Provision and operation of adequate number of suitable vehicles for transport of
MSW within the Municipal Solid Waste Management Facility at Bhandewadi
Nagpur.
d) Performance and fulfillment of all other obligations of the Concessionaire in
accordance with the provisions of Concession Agreement and matters incidental
thereto or necessary for the performance of any or all of the obligations of the
Concessionaire under the Concession Agreement.
e) Rehabilitation and operations and maintenance of existing Scientific Landfill and
disposal of process remnants and Residual Inert matters.
f) Re- Location of waste dumped at proposed land site at Bhandewadi.
g) The scope of work also included any and all other activities that are ancillary to the
above mentioned scope of work.
h) The Concessionaire has to develop and implement the above Project on DBFOT
basis.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 14 of 92
2.5. Existing and New Scientific Landfills
2.5.1. The Concessionaire is responsible for rehabilitation and operations and maintenance of
existing Scientific Landfills (SLF). As per the provisions of SWM rules 2016, post-
closure care of landfill site shall be taken for at least fifteen years. Accordingly, the
Concessionaire is required to close the existing SLF as well as to maintain the exiting
SLF post closure the till 15th
year of the Project life.
2.5.2. Further the Concessionaire is also responsible for design, construction and operation of
new SLF along with its post closure maintenance. Accordingly, the Concessionaire has
proposed new SLF consisting of 3 cells. Each cell of new SLF would be used
sequentially up to its storage capacity. Further, the use of the three cells for the new SLF
would be closed at the end of 4th
year, 8th
year and 13th
year from CoD of the proposed
Project respectively. Each of these closure would incur a capital expenditure towards
scientific closure of SLF site at respective years.
2.5.3. All closed SLFs would be maintained for 15 years from the day of their respective
closures.
2.6. Role of NMC
2.6.1. To grant in a timely manner all such approvals, permission and authorization which
Concessionaire may require.
2.6.2. To recommend and forward to the relevant authority/ministry /department any
application of Concessionaire to obtain necessary permissions.
2.6.3. To ensure that the building plans for the Projects Facilities at site are duly and
expeditiously approved by the concerned authority under relevant Acts/ Building by-laws
/other relevant bylaws or regulation
2.6.4. To handover land to the Concessionaire as per the requirement, on a License basis, for
development of the Project Facilities and Land Fill at Bhandewadi, Nagpur
2.6.5. To pay Tipping fee to Concessionaire for processing of MSW on a Monthly basis.
2.6.6. To declare and maintain or cause to declare and maintain, a no development zone around
the landfill site in accordance with applicable laws
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Order- Case No 158 of 2017 Page 15 of 92
2.7. Term and Termination of Agreement:
As per Concession Agreement, the tenure of Concession Period means fifteen (15) years
including construction period of 24 months starting on and from the Appointment Date
and ending on Transfer Date. As defined in the Concession Agreement, “Appointment
Date means the date on which Financial Close is achieved or an earlier date that the
Parties may by mutual consent determine, and shall be deemed to be the date of
commencement of the Concession Period” As defined in the Concession Agreement,
“Transfer date means the date on which this Agreement and the Concession hereunder
expires pursuant to the provisions of this Agreement or is terminated by a Termination
Notice.”
Further, as per the Concession Agreement the agreement may be terminated by either
party on the occurrence of the following Events:
2.7.1. Termination due to failure to achieve financial closure: As per clause 23.2 of
Concession Agreement in case financial closure does not occur, for any reason
whatsoever, the Concession agreement shall be deemed to have been terminated, upon
such termination NMC shall be entitled to encash the bid security.
2.7.2. Termination upon occurrence of any Forces Majeure Event: As per clause 26.8 of
Concession Agreement, if a forced Majeure Event subsists for a period of 180 days or
more with a continuous period of 365 days, either party may in its discretion terminate
the agreement by issuing termination notice to the other party, upon issuance of such
termination notice the agreement shall stand to be terminated.
2.7.3. Termination due to Default Event: In case of occurrence of either Concessionaire (i.e.
NSWPMPL) or Authority (i.e. NMC) event of default i.e. either party may terminate the
agreement by issuing a termination notice in a manner set out under clause 29.2.3 of
Concession Agreement.
2.7.4. Events of Default as per Concession Agreement have been stipulated as follows
1. Concessionaire Event of Default: In case a Concessionaire event of default occurs
(as given in clause 29.1.2) and the Concessionaire fails to cure the default within the
cure period (if cure period not specified a cure period of 30 days), the Concessionaire
shall be deemed to be in default of the agreement.
2. Authority Event of Default: In case an Authority event of default (as given in clause
29.1.3) occurs and NMC (the authority) fails to cure the default within the cure period
of 90 days, NMC shall be deemed to be in default of the agreement.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
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2.8. Ownership of assets and transfer of Project
2.8.1. As per clause 22 of the Concession Agreement, the ownership of the Project Facilities,
including all improvements made therein by Concessionaire during the Concession
Period that, all the immovable assets including sites and civil structure created for
processing facility shall remain with NMC, while the ownership of all the moveable
assets including equipment and machinery and vehicles shall remain with the
Concessionaire.
2.8.2. Upon completion of the Concession period the Concessionaire shall transfer all the
moveable infrastructure and facilities including vehicles, equipment, workshop offices,
communication arrangement etc. and immovable infrastructure facilities to NMC in
working condition and certified by independent engineer, free of cost.
2.8.3. The Concessionaire shall provide training to NMC‟s staff for taking over the Project
facilities from the Concessionaire for at least 3 months.
2.9. Viability Gap Funding
2.9.1. NMC has committed a Viability Gap Funding (VGF) support amounting to a maximum
of Rs. 70 Crore to NSWPMPL and as per clause 39.1 and 39.2 of the Concession
Agreement the VGF would be released in minimum of two tranches as follows: -
a) First tranche to the extent of a maximum 50% of VGF amount or an amount equal to
Concessionaire‟s equity contribution whichever is less shall be released at a date not
earlier than 30 day of fulfilment of condition precedent to VGF disbursement.
b) The balance 50 % amount shall be release in the second Tranche or progressively in
equal installments subject to equity contribution and achievement of milestones as
well as fulfilment of condition precedent to VGF disbursement.
2.9.2. VGF shall be released by NMC subjected to creation of security by Concessionaire
(NSWPMPL) in favor of NMC on the assets of the Project.
2.10. Bid evaluation report and observations of NEERI and GIPE:
2.10.1. The technical evaluation of bid was carried out by National Environmental Engineering
Research Institute (NEERI) and the financial evaluation by Gokhale Institute of Politics
& Economics (GIPE), Pune.
2.10.2. The key recommendations of NEERI report are as follows:
a) From the environmental point of view MSW management is essential and has to be
taken up on priority basis considering the rapid urbanization and increasing
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population. The scientific waste management should have priority over energy
recovery or product recovery.
b) The apprehensions about the incineration are air pollution and the design of basic
incineration equipment, which can be sorted out by selection of the appropriate and
proven design and robust pollution control systems. NMC may go ahead with Hitachi
Zonsen‟s technology subject to strict compliance to environment laws.
c) Hitachi Zosen‟s incinerator has considered the wide range of calorific value of MSW
i.e. from 1100 kcal/kg to 2200 kcal/kg, which is normal Indian MSW scenario with
800 TPD of nominal waste throughout of 1650 kCal/kg. NSWPMPL has designed the
WtE plant to burn waste with the lowest heat value (LHV) which can reasonably be
sent to a waste incineration plant.
d) NSWPMPL has proposed storage of 5 days which appears to be adequate in normal
circumstances.
e) The bidder shall install appropriate segregation system for removal of construction
and demolition (C&D) waste and to maintain caloric value suitable for the plant.
f) The bidder shall maintain the existing RDF, compost and landfill facilities to avoid
any further environmental impact and health problem to people inhabited in and
around the site.
g) The bidder shall install and operate state of art emission control system for
conforming to all Central Pollution Control Board (CPCB) and Maharashtra Pollution
Control Board (MPCB) norms, including dioxins and furans, Compliance to
Environmental norms is the most important.
Key observations of GIPE:
2.10.3. GIPE evaluated financial proposal of MSW processing plant at Nagpur and found that the
EPC cost of Rs. 251.63 Crore for MSW Plant is overestimated which includes soft cost of
16%.
2.10.4. Plant O&M expenses and periodic maintenance cost is also overestimated with escalation
rate of 6.5% p.a. which is higher than CERC norms of 5.72% p.a.
2.10.5. Overestimated cost and O&M expenses results in lower Project IRR (12.62%) and Equity
IRR (14.76%). Further NEERI report has not considered the favorable tax treatment
available for infrastructure Projects. Sales of revenue from electricity has not been
considered in the NEERI report.
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2.10.6. The cost of fly ash disposal plant has been considered as Rs. 3.37 Crore. However,
revenue from using the fly ash in the manufacture of bricks has not been estimated over
the Concession period.
GIPE reworked the financial parameters based on the CERC norms and found that the
project IRR and equity IRR of the Project works out to be 17.32% and 26.18%
respectively. GIPE has considered levellised tariff of Rs. 6.82 per kWh as per norms
considered by CERC. Details of financial working of GIPE is provided in the Table
below.
Table 2: Financial working by GIPE
Variable in Decision Sheet
Original
proposal of
EIL
GIPE
working as
per CERC
Guidelines
Financing Cost, IDC & Pre-Operative Exp. (% of EPC) 15.00% 15.00%
Yearly Increase in O&M Expenses 6.50% 5.72%
Interest Rate (p.a.) 12.75% 13.00%
Tipping Fee for Processing of Waste (Rs. per MT) 750.00 750.00
Yearly Increase in Tipping Fee for Processing of Waste 4.50% 0.00%
O&M - Processing 14.00 8.63
Gross MW Generation 11.50 11.50
Auxiliary consumption (%) 16.00% 12.50%
PLF: 1st year 60.00% 60.00%
PLF: 2nd year 80.00% 65.00%
PLF: 3rd year onwards 85.00% 70.00%
Levellised Tariff (in Rs.) 5.86 6.82
Based on above observations, GIPE concluded that the Project is financially viable.
2.11. Solid Waste Management Rules (SWM) 2016 and its Implications:
2.11.1. MoEF had notified the SWM Rules 2016 on 8 April 2016 to lay a framework for
scientific waste management across urban settlements and are applicable beyond
Municipal areas and extend to urban agglomerations, census towns, notified industrial
townships, areas under the control of Indian Railways, airports, airbase, Port and harbor,
defense establishments, special economic zones, State and Central government
organizations, places of pilgrims, religious & historical importance. These Rules
supersede the Municipal Solid Waste Rules, 2000. SWM,2016 Rules explicitly
emphasize on Pre-processing and Post-processing of MSW. These rules have casted the
responsibility of Pre-processing and Post processing on local bodies.
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2.11.2. The SWM Rules,2016 lay emphasis on:
Source segregation of waste to channelize the waste to wealth by recovery, reuse
and recycle
Levy of user fees for collection of waste by local bodies.
Waste processing and treatment
Promoting use of compost
Promotion of waste to energy
Revision of parameters and existing standards
Management of waste in hilly areas
Constitution of a Central Monitoring Committee
2.11.3. Clause 9 seeks Distribution Licensees to procure power generated from municipal solid
waste to energy plants.
2.11.4. Clause 10 stipulates facilitation of infrastructure creation for waste to energy plants and
providing appropriate subsidy or incentives for such waste to energy plants as the duties
of MNRE Sources.
2.11.5. Clause 15 specifies the duties and responsibilities of local authorities wherein the local
authorities are responsible for: -
Facilitation construction, operation and maintenance of solid waste processing
facilities (on their own /private participation/other agency) for optimum utilization of
solid waste by adopting suitable technology including waste to energy.
Adhering to the guidelines issued by the Ministry of Urban Development from time
to time and standards prescribed by the Central Pollution Control Board.
Undertaking (on their own/through other agency) construction, operation and
maintenance of sanitary landfill and associated infrastructure.
Stop land filling or dumping of mixed waste soon after the timeline as specified for
setting up and operationalization of sanitary landfill is over.
Allow only the non-usable, non-recyclable, non-biodegradable, non-combustible and
non-reactive inert waste and pre-processing rejects and residues from waste
processing facilities to go to sanitary landfill
2.11.6. Clause 16 stipulates monitoring of environmental standards and adherence to conditions
as specified under the Schedule I and Schedule II of the rules for waste processing and
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disposal sites, as one of the duties of State Pollution Control Board or Pollution Control
Committee.
2.11.7. Clause 19 specifies criteria for duties regarding setting-up solid waste processing and
treatment facility.
2.11.8. As per Clause 21, Non-recyclable waste having calorific value of 1500 kCal/kg or more
shall not be disposed of on landfills and shall only be utilised for generating energy either
or through refuse derived fuel or by giving away as feed stock for preparing refuse
derived fuel.
2.11.9. The Schedule I (A) of SWM Rules, 2016 specifies the following condition for site
selection of sanitary Landfills: -
Specifications for Sanitary Landfills
“(A) Criteria for site selection. -
…
(ii) The sanitary landfill site shall be planned, designed and developed with proper
documentation of construction plan as well as a closure planning a phased manner. In
case a new landfill facility is being established adjoining an existing landfill site, the
closure plan of existing landfill should form a part of the proposal of such new
landfill………………………………………………………………………….
2.11.10. Schedule-I (H) of SWM Rules, 2016 specifies the Criteria for post-care of landfill site as
below:
(1) The post-closure care of landfill site shall be conducted for at least fifteen years and
long term monitoring or care plan shall consist of the following, namely: -
(a) Maintaining the integrity and effectiveness of final cover, making repairs and
preventing run-on and run-off from eroding or otherwise damaging the final
cover;
(b) Monitoring leachate collection system in accordance with the requirement;
(c) Monitoring of ground water in and around landfill;
(d) Maintaining and operating the landfill gas collection system to meet the
standards.”
2.11.11. Therefore, as per the above provisions Concessionaire has to undertake the post-closure
care of landfill site for at least fifteen years.
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2.11.12. The Schedule 2 (C) of the SWM Rules, 2016 also stipulates various emission standards to
be met by incineration/thermal technologies in Solid Waste treatment/disposal facility as
follows.
Table 3: Emission standard for incinerators technologies as per SWM Rules, 2016
Parameter Emission standards
Values Reference
Particulates 50 mg/Nm3 Standard refers to half hourly average value
HCl 50 mg/Nm3 Standard refers to half hourly average value
SO2 200 mg/Nm3 Standard refers to half hourly average value
CO
100 mg/Nm3 Standard refers to half hourly average value
50 mg/Nm3 Standard refers to daily average value
Total Organic
Carbon 20 mg/Nm3 Standard refers to half hourly average value
HF 4 mg/Nm3 Standard refers to half hourly average value
NOx (NO and NO2
expressed as NO2 ) 400 mg/Nm3 Standard refers to half hourly average value
Total dioxins and
furans
0.1 ng
TEQ/Nm3
Standard refers to 6-8 hours sampling. Please refer
guidelines for 17 concerned congeners for toxic
equivalence values to arrive at total toxic
equivalence.
Cd + Th + their
compounds 0.05 mg/Nm3
Standard refers to sampling time anywhere
between 30 minutes and 8 hours.
Hg and its
compounds 0.05 mg/Nm3
Standard refers to sampling time anywhere
between 30 minutes and 8 hours
Sb + As + Pb + Cr +
Co + Cu + Mn + Ni
+ V + their
compounds
0.5 mg/Nm3 Standard refers to sampling time anywhere
between 30 minutes and 8 hours
Accordingly, the Concessionaire has to meet the above mentioned emission standards.
2.12. Provisions of Tariff Policy 2016:
2.12.1. The Tariff policy 2016 mandates distribution licensees to procure 100 % of the power
produced from Waste to Energy Project, the relevant extracts are reproduced below
“6.4 Renewable sources of energy generation including Co-generation from renewable
energy sources:
…………….
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1 (ii) Distribution Licensee(s) shall compulsorily procure 100% power produced from all
the Waste-to-Energy plants in the State, in the ratio of their procurement of power from
all sources including their own, at the tariff determined by the Appropriate Commission
under Section 62 of the Act.”
2.12.2. Further the clause 6.4 (2) of the Tariff policy 2016, stipulates exemption of waste to
energy plant from Competitive bidding based tariff determination. The relevant extract of
the tariff policy 2016 is reproduced below:
“6.4 (2) States shall endeavor to procure power from renewable energy sources through
competitive bidding to keep the tariff low, except from the waste to energy plants”
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3. PREMISES FOR DETERMINATION OF PROJECT-SPECIFIC TARIFF
3.1. Regulatory Framework for Tariff Determination
3.1.1. As per Section 62(1) of the EA, 2003, the Appropriate Commission is empowered to
determine the Tariff for supply of electricity by a Generating Company to a Distribution
Licensee, and for transmission and wheeling of electricity. As per Section 61 (h), the
Commission shall be guided, among others, by the aspect of promotion of electricity
generation from renewable sources of energy.
“61. The Appropriate Commission shall, subject to the provisions of this Act, specify the
terms and conditions for the determination of tariff and in doing so, shall be guided by
the following, namely………………………
(h) The promotion of co-generation and generation of electricity from renewable
sources of energy;”
3.1.2. Section 86(1)(e) of the Electricity Act, 2003 stipulates that –
"The State Commission shall discharge following functions, namely
(1)(e) promote cogeneration and generation of electricity from renewable sources of
energy by providing suitable measures for connectivity with grid and sale of electricity to
any person, and also specify, for purchase of electricity from such sources, a percentage
of total consumption of electricity in the area of distribution licensee.”
3.1.3. The Commission has recognized Municipal Solid Waste based Waste-to-Energy Projects
as Renewable Energy Sources. As per Regulation 2(cc) of the RE Tariff Regulations,
2015.
“(cc) „Renewable Energy Sources” means the renewable sources such as Mini, Micro
and Small Hydro, Wind, Solar, Biomass including bagasse, bio-fuel urban or Municipal
Solid Waste and such other sources as are recognized or approved by the MNRE”
3.1.4. Central Electricity Regulatory Commission (CERC) also recognizes these Projects in its
regulations as Renewable Energy Sources. As per Regulation 2(x) of the CERC RE
Tariff Regulations, 2017.
“renewable energy sources” means renewable sources such as small hydro, wind, solar
including its integration with combined cycle, biomass, bio fuel cogeneration, urban or
municipal waste and other such sources as approved by the MNRE;”
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3.1.5. Regulation 3.1 of the MERC RE Tariff Regulations, 2015 states that:
“3.1 These Regulations shall apply to those new RE Projects which are commissioned in
the State of Maharashtra for the generation and sale of electricity to Distribution
Licensees in the State, are Eligible Projects for the purposes of these Regulations, and
whose tariff is to be determined by the Commission under the provisions of Section 62
read with Section 86 of EA, 2003:”
3.1.6. As per Regulation 8.1, a Project-specific Tariff shall be determined on case to case basis
in case of MSW-based Power Projects.
“8.1 A Project-specific tariff shall be determined by the Commission on a case-to case
basis for the following types of Projects:
(a) Waste to Energy Projects based on the technologies approved by MNRE such as
Municipal Solid Waste-based Projects;”
3.1.7. Regulation 8.2 provides that the financial norms set out in the Regulations, except for
capital cost and O&M expenses, shall be the ceiling norms while determining the Project-
specific Tariff:
“8.2 The determination of Project-specific tariff for generation of electricity from such
RE sources shall be in accordance with such terms and conditions as may be stipulated
in the relevant Orders of the Commission:
Provided that the financial norms specified in Chapter 2, except with regard to
Capital Cost and O&M expenses, shall be the ceiling norms while determining such
Project-specific tariff.”
3.1.8. The Commission has issued a generic Tariff Order for procurement of power from RE
sources (namely, wind, non-fossil fuel-based co-generation, biomass, small hydro and
solar) for FY 2017-18 in Case No. 33 of 2017, dated 28 April, 2017.
3.1.9. While determining the Project-specific Tariff for this MSW Project, it has considered the
relevant principles and methodology adopted in the RE Tariff Order and subsequent
regulatory developments including amendments to MYT Regulations so as to ensure
consistency and certainty in the regulatory approach.
3.2. Premise for Development of Tariff Structure:
3.2.1. The Commission has analyzed the Detailed Project Report (DPR) and the revised Petition
submitted by NSWPMPL taking into consideration the regulatory framework and the
objective of promoting generation from MSW-based Power Project. The Commission has
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also taken into consideration objection/suggestion/ view expressed by stakeholders
through public consultation process and submission thereof. The Tariff has been
determined as per Regulation 9.2 of the RE Tariff Regulations, which reads as follows:
“9.2 A Petition for determination of Project-specific tariff shall be accompanied by
such fee as may be specified in the applicable Regulations of the Commission, and shall
be accompanied by:
(a) Information in Forms 1.1, 1.2, 2.1 and 2.2, as the case may be, appended as
Annexure-A to these Regulations;
(b) A detailed Project report outlining technical and operational details, site-specific
aspects, premises for Capital Cost and financing plan, etc.;
(c) A statement of all applicable terms and conditions and expected expenditure for the
period for which tariff is to be determined;
(d) A statement containing details of any grant, subsidy or incentive received, due or
assumed to be due from the Central Government and/or State Government, which
shall also include the computation of tariff without consideration of such grant,
subsidy or incentive;
(e) Details of financial gain through REC or any other mechanism;
(f) Any other information that the Commission may require the Petitioner to submit.”
3.2.2. Useful Life: Regulation 2.1 (mm) of RE Tariff Regulations, 2015 stipulates as follows
regarding the Useful Life of RE Projects requiring a Project-specific Tariff.
“Provided that the Useful Life of other RE Projects shall be as stipulated by the
Commission while determining the Project specific tariff, taking into consideration the
norms of the Central Commission.”
3.2.3. The CERC RE Regulations, 2017, specifies 20 years as the Useful Life of MSW Projects.
Accordingly, the Commission has taken the Useful Life of the present Project as 20 years
from its CoD. Rationale for considering useful life as 20 years have been elaborated in
subsequent Section.
3.2.4. Levellised Tariff Design: In accordance with Regulations 11.2 and 11.3, the
Commission has determined the levellised tariff for the Project case under consideration.
The relevant provisions are given below:
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“11.2 For the purpose of computation of levellised tariff, a discount factor equivalent to
the normative post-tax weighted average cost of capital shall be considered.
11.3 Levelisation shall be carried out for the „Useful Life‟ of the RE Project, while tariff
shall be determined for the period equivalent to the Tariff Period.”
3.2.5. Tariff Period: The Commission has considered a Tariff Period of 13 years from the CoD
for the MSW Project of NSWPMPL.
3.2.6. The assumptions and rationale for input values of Project-specific parameters have been
elaborated in the subsequent Sections of this Tariff Order.
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4. SUGGESTIONS/OBJECTIONS, NSWPMPL’S RESPONSE AND COMMISSION’S
RULINGS
4.1. Maharashtra Energy Development Agency’s (MEDA) Submission:
4.1.1. MEDA sought clarification from NSWPMPL, whether NSWPMPL has come up with any
pilot Project based on the same technology in order to prove the technology for Indian
climatic condition and to ascertain the performance parameters for development of large
scale MSW power Project.
4.1.2. MEDA suggested NSWPMPL to compare the parameters such as capital cost, Auxiliary
Consumption, O&M expense, working capital etc., with the parameters as approved by
Commission in its order in Case No 87 of 2015 dated 10 October,2016 in matter of
petition filled by Kolhapur Green Energy for determination of tariff from its 1.8 MW
MSW based power Project, wherein the Commission has determined levellised tariff of
Rs. 5.49/kWh for 20 years. [This was subsequently modified for revision in escalation
factor through Review Order as Rs. 5.94/kWh]
4.1.3. MEDA sought clarification from NSWPMPL if it has already opted for MNRE subsidy,
stating that the MNRE scheme for providing subsidy of 2 Crore/MW (Rs. 10 crore
/Project) was applicable only for setting up of 5 pilot Project based on MSW till 30
September 2017.
4.1.4. MEDA referred to MNRE's Standing Committee Report on power generation from
Municipal Solid waste dated August 2016, and submitted that the tariff for all waste to
energy plants should be declared through the process of Competitive Bidding.
4.1.5. MSW Projects Based on gasification, incineration and pyrolysis technology should
comply with MPCB norms as all these technology comes under combustion
route/thermal process.
4.1.6. MEDA submitted that the GoM RE policy 2015 dated 20th July 2015 only specifies
target of 200 MW for Industrial waste based power Projects, and no targets have been
specified for MSW based Power Projects in the RE policy.
NSWPMPL’s Reply:
4.1.7. NSWPMPL has undertaken detailed technology assessment while selecting the waste
processing technology for the proposed Project. It involved extensive discussions with
prospective vendors, including the site visits to several operational plants globally. For
this a team comprising of 3 members have visited 2 plants in China namely Teda
Environmental processing facility in the City of Dalian and processing facility in Gonzou
in China. NSWPMPL has also visited gasification plants in India and in Germany and has
evaluated existing technologies in „waste to energy‟ concept.
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4.1.8. NSWPMPL has thus selected highly proven and dependable technology for processing
the waste and creating sustainable green energy. Hitachi Zosen‟s incineration technology
provides the cleanest and most efficient capability for managing waste processing and
creating sustainable green energy. M/s Hitachi Zosen has more than 833 operating WtE
Projects worldwide. NSWPMPL has therefore decided to move ahead by selecting the
technology partner, Hitachi Zosen which has most successful, existing and commercial
viable Projects. The primary promoter of the Project viz. Essel Infra has also successfully
commissioned and operating waste to energy plant based on mass incineration
technology in Jabalpur. EIL had ventured into the SWM business with focus on creation
of a sustainable ecosystem for future generations. Essel Infraprojects Ltd. is successfully
operating 11.5 MW waste to energy plant in Jabalpur (M.P.) for more than one and half
years on the same technology proposed for this Project.
4.1.9. WtE Projects have nonstandard scope of work, geographically different factors, and city
specific waste characteristics play a big role in definition of the capital expenditure.
These factors make mere comparison of cost parameters completely inappropriate.
Comparison of Kolhapur and Nagpur Project cannot be done as Regulatory framework
allows Project specific capital cost consideration to MSW Projects. Further Nagpur
Project involves rehabilitation of existing waste and its subsequent closure. The existing
waste dumped in the SLF needs to be properly rehabilitated by use of excavators/JCB‟s
to enable proper closure of the same. This also requires design and construction of the
same. Additionally, Nagpur Project also have air cooled condenser which increases the
auxiliary consumption.
4.1.10. As per the discussion with MEDA and as per GoM Comprehensive policy for RE dated
July 20th
, 2015, Municipal Solid Waste based WtE Plants are not included in the list for
subsidy and other incentives. Therefore, in compliance with the policy, NSWPMPL has
not approached MNRE for the financial assistance under any scheme. However, the VGF
for the Project committed by NMC has been used to offset the tariff required.
4.1.11. NMC has followed the process of competitive bidding for selection of selection of
successful bidder for the Nagpur MSW plant. NMC had invited proposal for EoI for
selection of bidders for construction, operation and maintenance of MSWM facility for
treating the MSW on DBFOT basis. Consortium of M/s Essel Infraprojects Ltd. and M/s
Hitachi Zosen India Pvt. Ltd. won the bid in competitive bidding process. The above
process concludes that NMC had followed the recommended procedure for selection of
successful bidder for Nagpur WtE power plant.
4.1.12. NSWPMPL appreciates the concern raised by MEDA regarding compliance with
environmental norms. It would be appropriate to re-iterate that NSWPMPL has chosen a
technology partner which has a successful record of setting up plants with the proposed
technology across the countries having stricter norms for environmental compliance.
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NSWPMPL shall ensure that all statutory compliances are in place for successful
execution of the Project.
Commission’s view:
4.1.13. The Commission notes the MEDA‟s concern regarding of selection of appropriate
technology which suits Indian conditions. The technical evaluation report prepared by
NEERI and financial assessment report prepared by GIPE confirms that the said
technology and proposed Project is technically feasible and economically viable. Further
in response to the Commission‟s query during Public Hearing, NSWPMPL has confirmed
that, the support of its Technology Partner M/s Hitachi Zosen India Pvt. Ltd. shall be
available throughout the Concession Period of the Project.
4.1.14. The Commission notes the submission of MEDA and reply submitted by NSWPMPL.
Regarding availability of MNRE or any other subsidy, NSWPMPL has submitted that, it
is not availing any grant or subsidy except VGF of Rs. 70 Crores from NMC which it has
factored in Tariff.
4.1.15. Regulation 24 of RE Tariff Regulations, 2015, specifies the treatment to be provided to
the grant, subsidy or any incentives received by Project Entity. The Commission has
considered the VGF of Rs. 70 Crores to be received to NSWPMPL from NMC while
determining the Tariff.
4.1.16. Accordingly, the Commission rules that, in case any additional subsidy or grant is
received by NSWPMPL other than VGF of Rs. 70 Crores to be received from NMC,
MEDA shall inform the Distribution Licensee(s) regarding any such grant, subsidy or
incentives received by a NSWPMPL and Distribution Licensee(s) shall deduct any such
grant, subsidy or incentives received by a NSWPMPL in subsequent bills raised by
NSWPMPL towards sale of electricity in suitable installments or within such period as
may be stipulated by the Commission.
4.2. Nagpur Municipal Corporation’s (NMC) Submission:
4.2.1. The Commission during TVS, directed NSWPMPL to implead NMC as a Party and serve
the copy of the Petition to NMC. Accordingly, NSWPMPL impleaded as a Party and
served the copy of Petition and minutes of TVS. NMC vide its email dated 28 December,
2017 made its submission on the Petition submitted by NSWPMPL and queries raised by
the Commission during TVS.
4.2.2. NMC submitted that, the dumping yard at Bhandewadi, Nagpur is in existence since
1967. The waste was being dumped in around 55 acres of the reserved land in
unscientific manner. Regarding consideration of 15 year of Concession Period, presently
M/s Hanjer Biotech Energies Pvt. Ltd. is appointed as BOOT operator and processing the
waste of 200 MT/day and the contract is for 15 years. Since the life of existing SFL under
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existing contract with Hanjer is envisaged for another 15 years, during finalization of
present tender, NMC decided to consider the bid for 15 years‟ period.
4.2.3. Further, NMC submitted that, after the contract period of 15 years is over, NMC will be
in possession of the waste to energy plant, and shall operate the plant by appointing a
new operator on the basis of tendering. The tipping fee will be also decided based on the
quotes, received through tendering process after 15 years.
4.2.4. NMC also submitted that, the existing plant installed by M/s Hanjer was operating only
on part capacity. In the year 2011-12, due to major fire in the processing unit & the
operator‟s limitations, M/s Hanjer, could not bring the plant to its original capacity. Due
to this there was a PIL in the Hon‟ble Bombay High Court, Nagpur bench & this matter
was further transferred to the Hon‟ble National Green Tribunal (NGT) Western Zone,
Pune being an environmental issue.
4.2.5. National Green Tribunal (NGT) instructed NMC to go for new operator at the earliest.
On this, NMC has carried out tendering process selection of the developer for processing
waste of 800 TPD. Since only one bid was received, NGT directed to get the bid
scrutinized by NEERI and GIPE. NEERI and GIPE has scrutinized the bid submitted by
M/s Essel Infraprojects and submitted its report. The report of NEERI and GIPE was
submitted to NGT and NGT and directed to complete the tendering process. The bid was
negotiated before the Municipal Commissioner of Nagpur and M/s Essel Infraprojects
offered the revised Tipping of Rs. 225 per MT with 4.5% escalation. The same was
submitted before the standing committee for approval. Upon approval, Concession
Agreement was signed with NSWPMPL on 4 May, 2017.
NSWPMPL’s Reply:
4.2.6. NSWPMPL vide its letter dated 1 January, 2018 submitted its reply on the submission
made by the NMC dated 28 December, 2017. NSWPMPL submitted that in view of the
non-operational waste processing units, there have been a series of directives from the
NGT asking NMC to come up with new waste processing facility on urgent basis to
address the environmental concerns. The proposed site is next to the existing dump site,
which avoids the resistance to such projects from citizens. Moreover, the identified site
also makes it possible to include the closure of existing landfill and rehabilitation of the
accumulated waste in the scope of PPP Project developer. Hence, NMC had appropriately
decided to proceed with competitive bidding for 15 years in order to address the issues of
existing dumping site.
4.2.7. Technical evaluation of the bid was done by NEERI, while the financial evaluation was
done by GIPE to finalize the tipping fees and other financial parameters. The integrated
DPR of scientific management and disposal Municipal Solid waste of Nagpur city was
submitted under the Swachh Bharat Mission, which was subsequently approved by high
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 31 of 92
power committee of GoM on 22 March 2016, along with a provision of viability gap
funding of Rs. 96.22 Crore for various components of the Municipal Solid waste, out of
which Rs. 70 Crore was allocated to WtE Project and the same has been considered for
Tariff determination.
4.2.8. NSWPMPL submitted that the plant will be transferred to NMC free of cost after the end
of 15 years period as provided under the Concession Agreement. NSWPMPL further
submitted that, since identified site is sufficient to absorb the inert and residue from the
procession facility for only about 15 years, NMC shall decide the future strategy for the
proposed Project only after conducting techno-commercial feasibility check. While
conducting the feasibility check NMC shall pay due consideration to the various key
aspects, such as land availability, compliance to environmental norms, growing
population density, technological advancements and the expected increase in the quantum
of MSW from 800 to 1500 TPD by 15 years. Therefore, NMC would need great deal of
clarity to ascertain the future of Project beyond 15 years.
4.2.9. As regards determination of Tipping fee, NSWPMPL submitted that, NMC would be in a
position to determine tipping fee only after finalizing the future of the Project at the end
of 15 Years period as provided under the Concession Agreement.
Commission’s view:
4.2.10. The Commission notes the submission of NMC regarding, competitive process conducted
by NMC for selection of bidder on DBFOT basis. The Commission also notes that,
though NMC has entered in to Concession Agreement with NSWPMPL for 15 years,
NMC has submitted that, Post completion of concession period of 15 years, NMC would
have liberty to operate the Project either themselves or by appointing a new operator on
the basis of tendering.
4.2.11. As regards Tipping Fee, the Commission notes that, NMC has confirmed about providing
Tipping Fee as per the provisions of the Concession Agreement and also NMC has
confirmed about providing VGF of Rs. 70.00 Crore to the NSWPMPL‟s MSW project.
Accordingly, the Commission has considered the VGF and Tipping Fee while
determining the Tariff for said Project.
4.3. Maharashtra State Electricity Distribution Company Limited (MSEDCL)’s
Submission
4.3.1. MSEDCL vide its letter dated 28 December, 2017 sought one week‟s time for submitting
its objections/suggestions on NSWPMPL‟s Petition. MSEDCL vide its letter dated 1
January, 2018 made its submission.
4.3.2. MSEDCL submitted that it purchases RE power only for fulfillment of its Renewable
Purchase Obligations (RPO). MSEDCL would not assume any obligation to enter into
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 32 of 92
EPA, as it has sufficient power supply and adequate renewable projects in pipeline and
further option of purchasing REC to fulfil their future RPO target.
4.3.3. MSEDCL has submitted its analysis for higher Tariff of Rs. 7.80/kWh proposed by
NSWPMPL. NSWPMPL has proposed a PPA period of 13 years, while other SERC such
as Tamil Nadu, Telangana, Madhya Pradesh and Gujarat and MERC itself (in case of
Kolhapur MSW project) has approved PPA period of 20 Years.
4.3.4. Further, the Capital Cost of Rs. 19.03 Crore/MW proposed by NSWPMPL is higher as
against the Capital Cost approved by the Commission in case of Kolhapur MSW (13.79
Crore/MW) as well as the Capital Cost approved by other States (Tamil Nadu,
Telangana, Madhya Pradesh and Gujarat) for MSW Projects, which remains in range of
14 to 16 Crore/MW. Further, NSWPMPL is also receiving VGF of Rs. 6.09 Crore/MW
which was not available for other MSW Projects.
4.3.5. Further, the O&M cost approved for various MSW Projects in major states remains in the
range of 5 to 7% of Capital Cost, however NSWPMPL has computed O&M expense as
9.38% of capital Cost.
NSWPMPL’s Reply:
4.3.6. NSWPMPL vide its letter dated 4 January, 2018 submitted its reply to the objections/
suggestions submitted by MSEDCL. With regards to MSEDCL‟s submission on Useful
Life of 13 years considered by NSWPMPL, NSWPMPL submitted that, the RE Tariff
Regulations, 2015 does not explicitly define the term „useful life‟ for Waste to Energy
Projects in the state. The Regulations provide that the Commission can stipulate the
Useful Life in its Order after considering the case specific aspects for Waste to energy
Project. NSWPMPL has also submitted that, the O&M expense has highest impact on
Levellised Tariff which increases from 46% (year-2) to 82% (13th
year). This
demonstrates that, the higher Useful Life will further increase the Levellised Tariff on
account of increased O&M.
4.3.7. As regards Capital Cost, NSWPMPL has referred to Regulation 8.2 of RE Tariff
Regulations, 2015 which specifies, Project specific consideration of Capital Cost for the
WtE Projects. WtE Projects have non-standard scope of work, geographically different
factors, and city specific waste characteristics, therefore the approval of the Capital Cost
shall be on the merit of the specific Project under consideration instead of its comparison
with other Projects. In addition, NSWPMPL also has to comply with the norms specified
in the SWM rules 2016 such as mandatory pre-processing facility, compliance to
stringent emission norms etc., which has resulted into additional costs.
4.3.8. As regards O&M expenses, NSWPMPL submitted that the O&M expense as claimed by
NSWPMPL also includes additional O&M expenses towards Pre-processing activity
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 33 of 92
amounting to Rs. 744.13 Lakh. The Pre-processing activity is mandated by SWM rules,
2016, and these rules were not applicable at the time of implementation of other MSW
projects considered by MSEDCL. The O&M expenses estimated by NSWPMPL for the
Power Plant viz. Rs 1,308.00 Lakh works out to 5.98% of the Capital Cost which is well
within the limits approved by various SERC‟s for MSW based Power Projects.
4.3.9. NSWPMPL further submitted that, various other factors such as difference in ambient
conditions for design, lower bearing of soil, rehabilitation of existing waste and capping
of existing SLF and construction new SLF for ash and inert resulting in higher O&M
expenses.
Commission’s view:
4.3.10. The Commission has noted the submissions of MSEDCL, and the replies submitted by
NSWPMPL. The Commission has dealt with the issues relating to, Useful Life, Capital
Cost and O&M expenses in subsequent paragraphs in Section 5 of this Order.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 34 of 92
5. PARAMETERS OF TARIFF DETEREMINATION
5.1. Background
5.1.1. Regulation 10 of the RE Tariff Regulations, 2015, specifies parameters of the Tariff for
RE Projects as single-part tariff consisting of following cost components:
a) Return on Equity (RoE);
b) Interest on Loan Capital;
c) Depreciation;
d) Interest on Working Capital;
e) O&M expenses;
In addition, NSWPMPL has considered income from Tipping Fee as Non-Tariff income
to offset the revenue required from electricity tariff. The Commission has also taken
similar approach in its earlier MSW Orders in Case No. 77 of 2014 and Case No. 87 of
2015.
The performance parameters and financial parameters are discussed in this Section.
5.2. Technology of proposed MSW Project
NSWPMPL’s submission
5.2.1. NSWPMPL has carried out a detailed study of the waste processing options including
landfilling, Composting/Pre-processed MSW recovery, Gasification and Waste-to-Energy
and considered the advantages and disadvantages both technically and commercially
each.
5.2.2. Three types of systems can be adopted, namely:
Combustion systems (Incinerators): Thermal processing with excess amounts of
air.
Pyrolysis systems: Thermal processing in complete absence of oxygen.
Gasification systems: Thermal processing with less amount of air.
5.2.3. Combustion system is the most widely adopted thermal treatment process world-wide for
MSW. Though pyrolysis is a widely used industrial process, the pyrolysis of municipal
solid waste has not been very successful. Similarly, successful results with mass fired
gasifiers have not been achieved. As per SWM Rules 2016, incineration is one of the
thermal process to handle MSW for high calorific value waste.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 35 of 92
5.2.4. There are currently no indigenous waste-to-energy technology providers in India who
have experience in designing, developing, or operating combustion based waste-to-
energy plant on MSW. Therefore, it is unavoidable to source needed technology and
know-how for waste-to-energy from outside of India while keeping in perspective the
waste characteristics of Nagpur.
5.2.5. Europe and Japan are the global leaders for direct controlled combustion of MSW for
waste-to-energy and has maximum number of installation of waste-to-energy plants in the
world. The technology providers based in Europe have global experience for waste-to-
energy plants.
5.2.6. Keeping in perspective the waste characteristics in Nagpur, advantages and disadvantages
of waste processing technologies, ground reality of waste processing & disposal in the
City, maturity of technologies, commercialization of technology, mapping of global best
practices, NSWPMPL partnered with Hitachi Zosen‟s incineration based technology for
processing of MSW.
5.2.7. Hitachi Zosen‟s incineration Technology for waste-to-energy of MSW is the well-
recognized waste processing & disposal technology adopted globally lending itself
immense merit and credibility. There are over 494 waste-to-energy plants operating
globally.
5.2.8. NSWPMPL has proposed to use mass-burn combustion technology for the proposed
Project keeping in perspective the waste characteristics in Nagpur, advantages and
disadvantages of waste processing technologies, ground reality of waste processing &
disposal in the city, maturity of technologies, commercialization of technology, mapping
of global best practices.
5.2.9. The Waste to Energy process for proposed technology is as under:
Figure-1: Process overview- Block Diagram
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 36 of 92
Figure 4: Process Flow diagram
5.2.10. Key Features of the MSW power Project of NSWPMPL:
MSW pre-processing facility consists of MSW unloading, manual / mechanical
segregation, Pre-processed MSW preparation and bio-drying section for organic
fraction.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 37 of 92
NMC will deliver fresh waste at the proposed MSWM facility. The wastes are
unloaded at a designated area of the tipping floor. MSW storage pit handles the
waste.
There will be leachate collection drains from the pit and thus leachate present in the
garbage will be collected in the collection pit.
Mechanical segregation will be done followed by bio-drying.
The prepared Pre-processed MSW will be stored in the Pre-processed MSW storage
area.
Mass combustion / incineration technology is used for WtE conversion.
Combustion of preprocessed MSW at temperatures in the range of 850 to 1000
degrees centigrade. This technology combines the combustion and gasification in a
single process.
The energy recovered through combustion of MSW is used to generate electricity
via a steam turbine.
Finally, all rejected materials are sent to landfill sites through vehicles.
The Project will process approximately 550 TPD of Pre-processed MSW and
produce around 80.59 million units yearly including Auxiliary Consumption.
Technology is reliable grate system which has a long and successful history all over
the world. The optimized secondary combustion chamber with tangential secondary
air-injection and specifically chosen refractory which results in low emissions.
5.2.11. The Commission asked NSWPMPL to submit the status of permissions for all statutory
clearances. NSWPMPL submitted that, as per the clause 2.1.1 of the Concession
Agreement, NSWPMPL is required to obtain certain clearances prior to the Appointed
Date. NSWPMPL further submitted that, as per the MoEF letter dated 3 July, 2017,
provisions of EIA Notifications, 2006 regarding prior environmental clearance are not
applicable to waste to energy plants up to 15 MW capacity. Hence only application for
seeking Consent to Establish from MPCB would be initiated soon.
Commission’s Analysis and Ruling
5.2.12. The National Master Plan (NMP) for Development of WTE has recognized various
technologies such as Refused Derived Fuel (Pre-processed MSW), Aerobic Composting,
Vermi-Composting, Anaerobic digestion (bio-methanetion), gasification/ pyrolysis,
incineration and land filling etc., for WTE Projects. Of these, gasification/pyrolysis and
incineration/combustion are suitable for solid waste. The technology adopted by
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 38 of 92
NSWPMPL i.e. mass-burn combustion (incineration) technology for the WTE process, is
also recognised in the NMP.
5.2.13. Further, Report of Task Force on Waste to Energy dated 12 May, 2014, has
recommended that for areas with more than 300 TPD of waste generation, WtE
technologies based on incineration, pyrolysis and gasification should be considered and
that out of above three technologies, incineration results in 90 % reduction of volume of
MSW and involves lesser capital and O & M cost. Thus, NSWPMPL has selected Mass
Burn Controlled based WtE technology.
5.2.14. The Commission vide para 2.10 of this Order has noted the recommendations given by
NEERI in its technical evaluation wherein it has recommended NMC to go ahead with
Hitachi Zonsen‟s technology subject to strict compliance to environment laws, therefore
in line with the recommendations of NEERI report the Commission has considered the
technology particulars for determining the Project-specific Tariff.
5.2.15. With regard to requirement of environmental clearance, the Commission has noted the
submission of NSWPMPL that, the environmental clearance is not required for WtE
plants upto 15 MW and NSWPMPL will process for the required consent from MPCB to
establish the WtE plant. The Commission also notes that, consent or NOC from MPCB is
one of the Condition Precedent under Concession Agreement, which needs to be strictly
adhered to by NSWPMPL.
5.3. Calorific Value (CV) of MSW in Nagpur:
NSWPMPL’s submission
5.3.1. NSWPMPL has carried out waste characterization study for Nagpur to understand the
physical and chemical make-up of the MSW. GCV of MSW of Nagpur is as shown in the
table No. 4 below. The average calorific value i.e. 1089 kcal/kg in the table is mentioned
as on wet basis which can be considered as „as received basis‟ so when the NCV is
calculated on this calorific value it comes out to be 631 kcal/kg which is on a very lower
side.
Table 4: Chemical characteristics of MSW
Sample location MC*
(%)
TS*
(%)
TVS#
(%)
Ash#
(%)
Calorific value*
(kcal/kg)
Zones
Zone 1 59.16 40.84 79.02 20.98 878
Zone 2 37.10 62.90 83.60 16.40 983
Zone 3 58.13 41.87 78.20 21.80 953
Zone 4 80.95 19.05 91.67 8.33 914
Zone 5 56.86 43.14 42.40 57.60 1047
Zone 6 74.40 25.60 96.90 3.10 1009
Zone 7 66.60 33.40 79.88 20.12 1154
Zone 8 58.70 41.30 44.02 55.98 1082
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 39 of 92
Sample location MC*
(%)
TS*
(%)
TVS#
(%)
Ash#
(%)
Calorific value*
(kcal/kg)
Zone 9 74.40 25.60 96.90 3.10 1114
Zone 10 80.63 19.37 66.33 33.67 1059
Average 65 35 76 24 1019
Commercial & Institutional
Commercial 1 12.89 87.11 45.86 54.14 1467
Commercial 2 13.23 86.77 46.23 53.77 1364
Institutional 1 57.33 42.67 61.56 38.44 1124
Institutional 2 54.87 45.13 59.86 40.14 1098
Average 54 46 64 36 1165
Combined average of
zones, commercial and
institutional
56.1 43.9 69.5 30.5 1089
Therefore, from the above average calorific value of MSW comes to 1089 kcal/kg as
GCV.
5.3.2. Further NSWPMPL has also carried out physical analysis of MSW as shown in the Table
No. 5 below. The components of MSW were quantified in terms of % of the sample
composition for the all the zones and commercial & institutions. The physical
constituents are broadly divided into organic and inorganic substances.
Table 5: Physical characteristics of MSW
Components Average % Constituents
Paper 7
Cardboard 7
Plastic 8
Textile 3
Organic 60
Wood 3
Thermocol (Polystyrene) 8
Inert 2
Metals 1
Glass 1
Total 100
5.3.3. The calculation of GCV from the physical composition is done by considering the GCV
of individual components in proportions of their percentage that comes out to be
3213kcal/kg. With the moisture is included as it was found in Nagpur‟s MSW, it lowers
down GCV to 1411kcal/kg as on received basis and the NCV comes out to be 1083
kcal/kg.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 40 of 92
GCV from Historical survey by NEERI (2004-05)
5.3.4. A survey of 95 cities was done including Nagpur for the solid waste management which
included waste characterization. The GCV for Nagpur city waste was shown as 2632
kcal/kg without moisture and the % of moisture in waste was given as 41%, the as
received GCV after including moisture and NCV values come out to be 1553 kcal/kg and
1183 kcal/kg respectively.
Summary of waste characteristics
Table 6: Summary matrix- All sources
Source GCV (As received basis)
kcal/kg NCV kcal/kg
Chemical characterization 1089 631
Physical characterization 1411 1083
NEERI 1553 1183
5.3.5. As historical survey of NEERI was done at a very earlier stage (2004-05) so it is not
considered in this assessment.
Table 7: Summary matrix- Chemical and physical characterization
Source GCV (As received basis) kcal/kg NCV kcal/kg Moisture %
Chemical characterization 1089 631 56.1
Physical characterization 1411 1083 -
Average 1250 857 56.1
5.3.6. As mentioned above, average GCV and NCV for sample are 1250 kcal/kg and 857
kcal/kg at 56.1 % weighted moisture.
5.3.7. The Commission during TVS sought NSWPMPL to clarify, whether NSWPMPL has
envisaged any reduction in the Gross Calorific Value (GCV) of MSW because of change
in the MSW fuel such as plastic and allied material due to change in Government
policies.
5.3.8. NSWPMPL submitted that, it has arrived at the GCV of Nagpur based WtE plant on the
basis of waste characterization report issued by NEERI for Nagpur city. The report
implies the presence of plastic in the mixed MSW generated in Nagpur city. It is not
possible to ascertain any change in GCV content of waste as a result of an undeclared
policy of Government. It is not clear that when any policy change would come in force. It
is also unknown, what kind of plastic and allied material would be affected.
5.3.9. Therefore, the impact of such change in GCV due to new policy cannot be envisaged at
this point of time. However, if any such policy change if risks operational performance of
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 41 of 92
the project materially and affects overall viability, NSWPMPL would reach out to the
Commission for needful consideration at such point in time.
5.3.10. During mechanical segregation and bio drying, the GCV of inlet raw MSW will improve
due to removal of inert and moisture. Inlet raw MSW quantity is 800 TPD at GCV of
1250 kcal/kg, which improved up to 1818 KCal/kg in 550 TPD processed MSW.
GCV of processed MSW = 800*1,250/550*1,000 kcal/kg
= 1,818 kcal/kg
Accordingly, it is estimated that, 550 TPD processed MSW at GCV of 1,818 kCal/kg will
feed into boiler.
Commission’s Analysis and Ruling
5.3.11. The Commission has noted the analysis carried out by NSWPMPL for the MSW
available in Nagpur. NSWPMPL has estimated average 56.1% moisture by weight in the
MSW, this includes the seasonal variation also. The DPR submitted by NSWPMPL
provides the detailed computation of average GCV considered for unprocessed 800 TPD
waste and improved GCV of 550 TPD waste after pre-processing which works out to be
1818 kCal/kg.
5.3.12. The Commission also has noted the technical analysis of NSWPMPL‟s proposal carried
out by NEERI which confirms that, NSWPMPL has designed the WtE plant to burn
waste with the lowest LHV which can reasonably be sent to a waste incineration plant
and estimated power generation is computed considering the average lowest Calorific
value of MSW which ensures the estimated generation.
5.3.13. The Commission also notes that, while NSWPMPL has not envisaged any major change
in the Calorific value of MSW on account of Government‟s policies related to Plastic, it
has envisaged certain variation in the Calorific value of MSW to be received.
Accordingly, the Commission has noted the average Calorific value of MSW as 1800
Kcal/kg.
5.4. Installed Plant Capacity
NSWPMPL’s submission
5.4.1. The gross power generation, with net calorific value of incoming Pre-processed MSW as
1,800 kcal/kg and conversion efficiency of 24% is as follows:
Quantity of pre-processed MSW = 550 TPD
Assumed Net Calorific Value = 1,800 kCal/kg
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 42 of 92
Assumed Conversion Efficiency = 24%
Energy Recovery Potential from 550 TPD is estimated as per the following universally
accepted general formula:
Total MSW quantity (W tones) = 550 TPD
Net Calorific Value (NCV kCal/kg) = 1,800 kCal/kg
Energy recovery potential (kWh) = NCV x W x 1000/860
= 1.163 x NCV x W
= 1.163 x 1800 x 550
= 11, 51,370 Kwh
Power generation potential (kW) = 1.163 x NCV x W/ 24
= 1.163 x 1,800 x 550/24
= 47,973 Kw
Conversion Efficiency = 24%
Gross Generation potential (Minimum) = 11,513 kW
= 11.5 MW
Taking, net calorific value at 1800 kCal/kg, the possible power generation by using 550
TPD of Pre-processed MSW shall be 11.5 MW.
Commission’s Analysis and Ruling
5.4.2. The Commission referred to the DPR submitted by NSWPMPL and noted that the
proposed capacity is in line with NSWPMPL‟s submission. Further, the Commission also
noted the waste management plan of 800 TPD worked out by NEERI in its technical
scrutiny of bid which also confirms that, out of 800 TPD waste, about 600 TPD would be
made available for WtE power plant and NSWPMPL also has considered 550 TPD for
WtE power plant.
5.4.3. The Commission has also reviewed the installed capacity estimation submitted by
NSWPMPL. Accordingly, the Commission has taken the installed capacity of 11.5 MW
for the purpose of this Project-specific Tariff determination.
5.5. Capacity Utilisation Factor
NSWPMPL’s submission
5.5.1. Considering the availability of MSW from NMC and variation in the quality of MSW
across seasons, NSWPMPL has considered the Capacity Utilization Factor (CUF) as 65%
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 43 of 92
during the stabilisation period (first year) and 80% for the post stabilization (remaining
period).
5.5.2. The Commission asked NSWPMPL to clarify whether 65% CUF (1st Year) and 80%
CUF (2nd
Year onwards) is minimum guaranteed generation? Further, clarify treatment
for under generation and excess generation as against normative PLF based generation as
submitted under Petition.
5.5.3. NSWPMPL submitted that, the proposed plant is designed is based on waste
characteristics study done by NEERI, and the commitment of NMC to supply MSW
quantity of 800TPD (+/-20%). There is a wide range of variations possible in calorific
content of incoming MSW when plant starts its operation. During the first year, the actual
waste characteristics, actual variations in waste quality and quantity, its actual GCV and
its variations; both daily as well as seasonal are observed and studied and the power plant
operating parameters are fine tuned to suit the same.
5.5.4. NSWPMPL further submitted that this is a long term process because seasonal variations
and waste quality/quantity changes are studied over the entire year. To deal with
unanticipated surprises, plant is operated at moderate level during the first year. Further,
there might be more interruptions in the plant operation, which will lead to PLF of 65%.
This PLF is an estimate for the purpose of anticipating energy generation during the first
year. It is not a guaranteed minimum PLF.
5.5.5. Based on the experience of the waste characteristic over the first year, lesser surprises
would be anticipated from the feedstock. The technical parameters of the Project would
be tuned accordingly. This will improve PLF to 80% in the second year. This PLF is an
estimate for the purpose of anticipating energy generation during the first year. It is not a
guaranteed minimum PLF.
5.5.6. Further, the NSWPMPL submitted that as regards to the petition seeking levellised tariff
for the RE Project, the tariff is driven on the parametric estimates considered while
determining tariff. In case the deviation in parameter value different than those
considered while determining tariff, risk is generally borne by the Project developer.
Accordingly, deficit/ excess power generation leading to lower/ higher PLF respectively,
the consequences would be confined to the developer. In such regime, discussion around
scenarios of deviation from the approved norm of one parameter (here, PLF) would not
be meaningful. Similar deviation can happen for other parameters like capital cost, O&M
expenses, and interest on loan, too. For such, there is no remedial process defined in the
Regulations of this Commission.
5.5.7. The parameters considered by NSWPMPL are estimates by nature. Therefore, the
quantum of over/under generation, or any probability cannot be ascertained at this point
of time. Therefore, no specific treatment is anticipated in case of change in PLF.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 44 of 92
Commission’s Analysis and Ruling
5.5.8. NSWPMPL has proposed the CUF that are comparable with CUF norm approved by this
Commission as well as other SERCs for similar MSW Projects as shown in the Table 8
below:
Table 8: Comparative Capacity Utilization factor of MSW Projects
Description
NSWPMPL
Proposed
Project
Case No
87 of
2015,
Kolhapur
Case No
77 of
2014,
Pune
Case No
65 of
2009,
Solapur
Case No
12 of
2016
JSERC
1443 of
2014 ,
Surat,
GERC
Petition
No.
27/2016,
DERC
CUF
(First year ) 65 % 65% 65%
78.9%
65% 60% 65%
CUF
(Second year
Onwards )
80% 80% 75% 75% 85.6% 75%
Accordingly, the Commission has considered the CUF of 65% for the first year and 80%
for the remaining life of the Project, as proposed by NSWPMPL.
5.5.9. The Commission also observes that, NSWPMPL has factored the operational risk of the
MSW Power Plant operations and the same shall be borne by NSWPMPL. The risk of
lower generation and consequent lower CUF cannot be passed on to the Distribution
Licensees/consumers at a later stage. Similarly, the benefit of excess generation beyond
the threshold value of CUF will be allowed to be retained by NSWPMPL.
5.6. Auxiliary Energy Consumption Factor
NSWPMPL’s submission
5.6.1. The overall Plant Auxiliary Consumption has been considered as 18.32% of gross
generation for tariff computation.
5.6.2. The Commission had asked NSWPMPL to submit the justification for considering
Auxiliary Consumption as 18.32% in context of auxiliary consumption for other MSW
Projects of NSWPMPL, referred in the Petition and DPR and in the context of
consumption of additional equipment (such as mechanical separator) considered in the
Project in order to comply with the latest SWM Rules, 2016.
5.6.3. NSWPMPL submitted that, it is operating WtE Project at Jabalpur which does not have
pre-processing facility. It has experienced auxiliary consumption of about 15% of gross
generation. For the proposed Project at Nagpur, the Auxiliary consumption for processing
plant without preprocessing is estimated similar to Jabalpur Project.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 45 of 92
5.6.4. Based on the new SWM Rules 2016, it is mandated to deploy extensive preprocessing
facility for the mixed MSW to remove inert, metals, dust etc. The list of equipment and
their electrical loads and running load is submitted in the Table No.9 as below:
Table 9: Auxiliary Equipment Details submitted by NSWPMPL
Sr. No Feeder Name Connected Load
KW
Running Feeder Load
KW
1 BOILER MCC I/C 320 100
2 TG MCC I/C 345 80
3 ACC MCC I/C 183 92
4 FGT MCC I/C 235 74
5 WTP MCC I/C 175 75
6 ETP MCC I/C 45 10
7 COMMEN AUX MCC & Air
Conditioning 100 37
8 MLDB ( Plant Lighting ) 50 22
9 FIRE MCC 100 15
10 ID FAN VFD 450 344
11 PA FAN VFD 350 285
12 BFP-1 VFD 250 0
13 BFP-2 VFD 250 200
14 ACC-1 VFD 132 75
15 ACC-2 VFD 132 75
16 ACC-3 VFD 132 75
17 GRAB CRANE-1 220 75
18 GRAB CRANE-2 220 75
19 Pre processing
Ballistic Separator(MSW) 165 132
Conveyor 82.5 62
Feeding Hopper 22.5 20
Grab Crane with Gantry 60 51
Lighting System 100 35
LTP 5 3
Misc. 20 15
Transformer Losses 105 80
Total Load kW 4249 2107
As % of gross generation of
11.5 MW 18.32%
5.6.5. Further, NSWPMPL, has envisaged pre-processing work for 16 hours per day with
balance 8 hours for cleaning and maintenance. This 16 hours working has been factored
into auxiliary consumption calculation and accordingly the overall auxiliary consumption
worked out as 18.32%.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 46 of 92
5.6.6. The proposed Project would have air cooled condenser. Air cooled condenser based
Projects have typically higher auxiliary consumption than that of water cooled condenser.
Water availability for cooling power plants is a major issue in the proposed Project due to
frequent water shortages. Corporations give first priority to provide drinking water to
citizens and since most of them are already facing water shortage coupled with the fact
that seasonal monsoon rains are unpredictable, it becomes necessary to use Air Cooled
Condenser for Waste to Energy Power plants. All the WtE Projects of NSWPMPL are
designed to use Air cooled condenser.
5.6.7. The transformer losses also have been considered for the auxiliary power. Therefore, the
total auxiliary consumption for Nagpur plant with preprocessing worked out as 18.32%
of gross generation.
5.6.8. Though auxiliary consumption is a project specific phenomenon, as asked by the
Commission, NSWPMPL has referred to the past orders issued by this Commission in the
Case No. 87 of 2015, 77 of 2014 and 65 of 2009 for auxiliary consumption as shown in
the Table No. 10 below:
Table 10: Comparison of Auxiliary Consumption of various similar projects
Description NSWPMPL’s
MSW Project
Case No 87 of
2015, Kolhapur
Case No 77-
2014, Pune
Case No 65 -
2009, Solapur
Auxiliary
Consumption
18.32% ( with
processing )
20% ( without
processing)
17% ( with
processing)
17%( with
processing)
Technology Type Mass Incineration Mass
Incineration Pyrolysis
thermophilic
bio-methanation
Capacity 800 TPD,11.5
MW
180 TPD, 1.8
MW
700 TPD,8.97
MW
150 TPD, 2.83
MW
5.6.9. Above table indicates that though auxiliary consumption for the Solapur and Pune
Projects are less than that proposed for Nagpur MSW power project, their technologies
are completely different. Pune Project includes pre-processing facility - primary and
secondary shredding with heating. Therefore, the auxiliary consumption for
preprocessing at Pune plant is higher i.e. 8% as compared to 2.8% proposed for Nagpur
Project. Solapur Project‟s auxiliary consumption with preprocessing is 17%, and without
preprocessing is 12.32%. This corresponds to preprocessing auxiliary consumption of
4.68%. Nagpur MSW power project has much lower auxiliary consumption of 2.8% for
preprocessing.
Commission’s Analysis and Ruling
5.6.10. The Commission observes that while the NSWPMPL has claimed auxiliary consumption
of 18.32% in capacity (kW) terms, for the purpose of gross/net generation, the auxiliary
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 47 of 92
consumption factor will have to be factored in energy terms (kWh) taking into
consideration the operational parameters and running load conditions of various auxiliary
units, drives and pre-processing facilities. The Commission has verified the assumptions
made by NSWPMPL and recomputed the Auxiliary consumption factor as provided in
the Table No.11 below:
Table 11: Auxiliary Consumption as considered by Commission
Feeder Name
Connected
Load KW
Running Feeder Load
KW
Energy consumption
considered by the
Commission in MUs
Boiler MCC I/C 320 100 0.70
TG MCC I/C 345 80 0.56
ACC MCC I/C 183 92 0.64
FGT MCC I/C 235 74 0.52
WTP MCC I/C 175 75 0.53
ETP MCC I/C 45 10 0.07
Common AUX MCC &
Air Conditioning 100 37 0.26
MLDB ( Plant Lighting ) 50 22 0.15
Fire MCC 100 15 0.11
ID FAN VFD 450 344 2.41
PA FAN VFD 350 285 2.00
BFP-1 VFD 250 0 0.00
BFP-2 VFD 250 200 1.40
ACC-1 VFD 132 75 0.53
ACC-2 VFD 132 75 0.53
ACC-3 VFD 132 75 0.53
GRAB CRANE-1 220 75 0.53
GRAB CRANE-2 220 75 0.53
Pre processing
Ballistic Separator(MSW) 165 132 0.62
Conveyor 82.5 62 0.29
Feeding Hopper 22.5 20 0.09
Grab Crane with Gantry 60 51 0.24
Lighting System 100 35 0.16
LTP 5 3 0.01
Misc. 20 15 0.07
Transformer Losses 105 80 0.37
Total Load kW 4249 2107
Total Capacity (in MW) 11.5 18.32% 17.17%
Total Gross Energy
Generation (in MU) 80.59
Total Auxiliary
Consumption (in MU) 13.84
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 48 of 92
The Commission considered 80% CUF for computation of Auxiliary consumption of
Plant and considered two shift operation for preprocessing treatment for MSW which
works out as 13.84 MUs per year. Accordingly, auxiliary consumption amounts to
17.17% of Gross generation from second year onwards.
5.7. Capital Cost
NSWPMPL’s submission
5.7.1. NSWPMPL has submitted that it has estimated the Capital Cost for the plant as Rs.
218.81 Crore and part of the same amounting to Rs. 70 Crore would be funded by way of
Viability Gap Fund (VGF) as committed by NMC. The capital cost as estimated by
NSWPMPL is presented in the Table No. 12 below
Table 12: Break-up of Capital Cost as Submitted by NSWPMPL
Particulars Cost (in Rs. Lakh)
Plant & Machinery 13,078.80
Building & Civil Cost (Inc. land preparation) 2,481.50
Engineering Expense 700.00
Transmission Cost 477.75
SLF (Inc. ash disposal) 1,029.00
Rehabilitation of existing SLF/ Land Capping 441.00
Total Hard Cost 18,208.05
Contingency Cost 546.24
Consultancy charges 455.20
PMC Charges 273.12
Preoperative expenses 182.08
Financing cost 364.16
Project Development Fee paid to NMC 218.00
IDC 1,633.72
Total Cost of Project 21,880.58
5.7.2. NSWPMPL has further submitted that due to location specific Project parameters along
with obligations stipulated in the Concession Agreement, the capital cost of the plant is
higher than the standardized norms followed by Commission.
5.7.3. The Commission asked NSWPMPL to provide detailed break up of parameters such as
plant and machinery, civil and building cost considered in the capital cost of plant and
break up of cost of supply for imported component and cost of supply of indigenous
component, break up of taxes and duties separately for imported component and
indigenous component.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 49 of 92
5.7.4. NSWPMPL submitted that, it has selected Hitachi Zosen as technology partner, which
has most successful and commercially viable Projects under operation. Hitachi Zosen has
provided the quotation for cost to be incurred towards plant and machinery, civil works
and engineering services.
5.7.5. NSWPMPL has submitted the detailed break up of quotation provided by M/s Hitachi
Zosen India Pvt. Ltd. is as below:
Table 13: Quotation for Plant & Machinery Cost (as per Hitachi-Zosen India Pvt. Ltd.)
Sr.
No.
Description (Local Plus 1x 600 TPD) Price (Rs.
Lakh)
Taxes and
Duties (Rs.
Lakh)
1 Price on FOR Site basis for 11.5 MW WTE Plant
with
Indigenous components with Design, Engineering
and supply along with a pre-processing plant of 800
TPD input and 600 TPD as output to WTE facility
10950.00 890.00
Supply of imported components on FOR site basis. 81.0 7.00
Total of supply along with applicable taxes and
duties
11928.00
2 Erection and commissioning of
Erection and commissioning at Nagpur site for 11.5
MW WTE plant along with pre-processing facility
1000.00 150.00
Total of Erection and commissioning with
applicable taxes and duties 1150.00
3 Total Price on FOR site basis for design,
Engineering and supply of equipment towards
11.5 MW WTE plant along with pre-processing
facility including applicable taxes and duties in
Rs. Lakh
13078.00
Cost of Civil Works:
5.7.6. NSWPMPL submitted that, Civil Works include construction of works like Boiler and
Steam Turbine foundations, construction of effluent treatment plant, and construction of
chimney foundation. The cost also includes heavy construction of MSW storage bunker
that is an integral part of handling the MSW, mixing of MSW, prevention of leachate
pollution for isolating odors. Normally, this structure is not applicable for other type of
plants including the waste handling cranes. This part also has heavy foundation for load
bearing members of grab cranes, RCC ramps for unloading of trucks etc. And thus the
Cost of Civil works is higher than conventional biomass based or thermal power plants.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 50 of 92
The site provided by the Municipal Corporation is marshy area and the soil has a very
low bearing capacity.
5.7.7. The Commission asked NSWPMPL to confirm the competitive bidding process to be
followed for award of contract for erection/civil works. NSWPMPL submitted that, the
civil cost is based on estimates as the Project is in design stage. The civil cost includes
erection of Boiler-Turbine-Generator equipment and cost of MSW storage bunker for
holding capacity of 4 days. Details of quotation received for civil work of MSW plant are
as submitted in the Table below:
Table 14: Details of Quotations received for Civil work of MSW Plant
Sr. No. Details Price (Rs. Lakh)
Civil work of 11.50
MW WtE Plant at
Nagpur
S S Enterprises Global
Engineering
Ujjwal
Construction
2707.19 2590.15 2481.50
M/S. Ujjwal was found to be most competitive for civil works, hence considered for
estimation purpose.
Engineering expenses
5.7.8. These include detail engineering services covering process design, civil, mechanical,
piping, electrical, instrumentation, automation including structural design using software,
piping isometric drawings using software and other related activities as applicable.
Transmission Cost
5.7.9. The transmission cost includes evacuation of power that shall be carried out by installing
a 33kV bay at MSEDCL‟s sub-station and laying 33 kV transmission line between plant
and the MSEDCL‟s 33/11 kV sub-station which is at a distance of 3Km from the power
plant. The NSWPMPL has submitted that the sub-station has full capability to receive the
power, i.e. 9.39 MW. The sub-station has also adequate land available for installation of
33kV bay link facilities for the Project.
5.7.10. The Commission asked NSWPMPL to submit the breakup of Rs. 477.75 Lakh considered
towards the Transmission cost as cost upto interconnection point and cost beyond
interconnection point. NSWPMPL submitted that, Rs. 126 Lakh are estimated as cost
upto interconnection point and Rs. 351.75 Lakh are pertained to cost beyond
interconnection point.
5.7.11. NSWPMPL has included cost of transmission line in the evacuation expenses, as
development of evacuation infrastructure is required to be ready at least 2 months before
commissioning of the Project and it may become critical for timely commissioning of the
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 51 of 92
Project. Delay in the Project commissioning on account of evacuation arrangement may
lead to increase in IDC and delay in staring power generation. Further, NSWPMPL, may
fail to honor time lines as specified in the Concession Agreement.
Developing Scientific Landfill (SLF)
5.7.12. MSW plants have higher ash generation due to presence of inert material, dirt, stones and
other debris resulting in requirement of ash disposal arrangement. As per clause 2.1 (f) of
Concession Agreement the scope of work covers as under: -
“2.1 (f) Design, construction and operation of Scientific Landfill and disposal of process
remnants and Residual Inert Matters.”
5.7.13. NSWPMPL would create new SLF by spending Rs. 1029 Lakh along with the
development of the Project Facility. The SLF would consist of 3 cells. Each cell of SLF
would be used sequentially up to its storage capacity. Accordingly, use of cells would
commence from CoD, 4th
year of CoD and 8th
of CoD.
Rehabilitation of existing SLF/ Capping of Existing Landfill
5.7.14. As per SWM Rules, 2016 [rule 15 (w), (zi), 16 (1) (b) (e), 16 (4)], following provisions
are mandated for SLF‟s,
“(A) Criteria for site selection. -
…
(ii) The sanitary landfill site shall be planned, designed and developed with proper
documentation of construction plan as well as a closure planning a phased manner. In case a
new landfill facility is being established adjoining an existing landfill site, the closure plan of
existing landfill should form a part of the proposal of such new landfill.” [Emphasis added]
NSWPMPL has estimated Rs. 441 Lakh to be incurred in the process of capping of
existing landfill.
Soft costs:
5.7.15. Contingency: Contingency is planned to tide over any escalation in Project cost or
unforeseen expenditure. Further, a significant portion of the capital expenditure of plant
& machinery is on the key imported equipment, there is a currency risk. Total
contingency cost is Rs. 546.24 Lakh or approximately 3% of total hard cost.
5.7.16. Consultancy services and Project management consultancy services: Consultancy
charges along with the Project Management Cost include support services in different
activities that align the Project to achieve the program goals and allows for optimized or
integrated cost, schedule and effort. This also includes expat services required for the
Project. Total consultancy and PMC (including expat services) charges are Rs. 455.20
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 52 of 92
Lakh and Rs. 273.12 Lakh respectively, which amount to 2.5% and 1.5% of the Project
hard cost respectively.
5.7.17. Pre-operative expenses: The pre-operative and preliminary expenses are incurred in
Project feasibility studies, technical & commercial studies and related activities for
conceptualizing the Project, expenses on ecology & topological survey, soil investigation
study, land fencing, pre-construction office cost, technology selection and EPC contractor
selection, visits to the working plants, cost for preparation of DPRs etc. Since this is a
generation Project, these studies are very important to determine Project viability.
Estimated preoperative expenses are estimated as Rs. 182.08 Lakh.
5.7.18. Financing cost: Financing cost includes up-front fees, processing fees, Project appraisal
fees, fees of lender‟s legal counsel, lender‟s independent engineer, syndicator, and
lender‟s insurance advisor. Estimated financing cost of the Project is Rs. 364.16 Lakh
which is 2% of Project hard cost.
5.7.19. Interest during construction: As the Project is under construction, IDC cost as well as
other soft costs can only be estimated at this point of time. NSWPMPL has estimated
IDC as Rs. 1,633.72 Lakh. NSWPMPL would be able to produce further details before
the Commission after achieving COD.
5.7.20. NSWPMPL submitted that such power Projects utilize pre-processed MSW, which
consists of highly corrosive and combustible chloride which is also highly volatile.
Therefore, specially designed low pressure boilers with tubes of better quality are
required to be used. Also, the requirement of equipment for de-stoning, shredding and
drying of pre-processed waste and additional pollution protection equipment are to be
accounted for. Pollution control / FGT also contributes to higher cost. Due to this, the
cost of equipment will be more than for the boilers used for generation of steam from
other renewable sources such as Biomass.
5.7.21. Even though the cost of producing electricity from such waste to energy Project is higher
than power from conventional sources, the benefits expected from the Projects are much
higher in terms of waste management in a most efficient and environment friendly
manner, reduced land requirement of landfill etc.
5.7.22. NSWPMPL further submitted that the capital cost estimated by NSWPMPL is based on
highly proven incineration technology for processing MSW. The following factors
arising due to the location specific Project parameters along with obligations stipulated in
the Concession Agreement render the capital cost for NSWPMPL‟s plant higher as
compared to the standardised norms of this Commission:
Additional cost related pre-processing activity that will be used to pre-process
MSW
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 53 of 92
Additional cost related to Leachate treatment plant
Additional cost related to Land capping for closure of SLF
Commission’s Analysis and Ruling
5.7.23. The Commission has considered the documents and replies to data gaps as submitted by
NSWPMPL. Further, the Commission observes that CERC in its Generic Tariff Order for
MSW/WTE Projects for 2015-16, has considered a capital cost of Rs. 1500 lakh/MW,
excluding land cost which was continued even after FY 2016-17 as well. Further, GERC
in its Order dated 4 August, 2015 has determined the Project-specific Tariff for the 11.5
MW MSW based power plant considering capital cost of Rs 1778 lakh/MW based on
mass-burn combustion technology. A comparative table of recently approved capital
costs for WtE Projects by various Regulatory Commissions in India with the capital cost
proposed in the present case is presented in the Table No. 15 below:
Table 15: Comparative Capital Cost of MSW Projects
Sr. No Waste to Energy Project Capital Cost
(in Rs. Lakh) MW
Capital Cost
/ MW (In Rs.
Lakh)
Technology
1
MERC, Case No 158 of 2017
(Proposed by NSWPMPL - case
under consideration)
21880.58 11.5 1902.6 Mass
Combustion
2 MERC, Case No. 87 of 2015
(KGEPL) 2482.7 1.8 1379.3
Mass
Combustion
3 MERC, Case No. 65 of 2009
(Solapur Bioenergy) 3614.6 2.8 1277.2 Gasification
4 MERC, Case No. 77 of 2014
(Rochem Pune, RGEPL) 12949.9 9.0 1443.7 Gasification
5 GERC, Case No. 1433 of 2014
(RGE Surat Pvt. Ltd.) 20448.0 11.5 1778.1
Mass
Combustion
6 CERC (Generic, SM/03/2015) 1500.0 Combustion
7 BERC, Case No. 22 of 2015
(PGEPL, Patna) 20542.8 11.5 1786.3 Combustion
8 Jabalpur MSW (MP Pollution
Control Board) 17250.00 11.5 1500.00
Mass
Combustion
9 Ranchi MSW (Jharkhand ERC) 18631.00 11.5 1620.00 Mass
Combustion
5.7.24. Considering the above comparative analysis of capital costs for WTE Projects, the
Commission finds the capital cost proposed by NSWPMPL is on higher side. The
Commission has also noted the submission of NSWPMPL regarding Pre-processing
activities and post-closure activities which has found part of overall Capital Cost in line
with provisions under Concession Agreement and in pursuance of SWM Rules, 2016.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 54 of 92
Accordingly, the Commission has recomputed the capital cost considering the capital cost
considered by other SERCs for similar MSW Projects and also taking into account the
replies to the data gaps submitted by NSWPMPL.
5.7.25. NSWPMPL has formed consortium with M/s Hitachi Zosen India Pvt. Ltd. and adopted
its mass incineration technology for its Nagpur MSW Project. The budgetary offer of M/s
Hitachi Zosen India Pvt. Ltd. has considered for estimation of plant and machinery.
Similarly, for Building and Civil work also NSWPMPL has considered budgetary offered
received from market and proposed that, this work will be carried out by inviting
competitive bids.
5.7.26. The Commission has scrutinized the DPR for various Cost components and technical
justification provided therein. Based on provisions of DPR and submissions of
NSWPMPL, the Commission notes that the components considered by NSWPMPL for
engineering services expenses and creation of SLF including ash disposal plant as Rs.
700 Lakh and Rs. 1029.00 Lakh respectively, are based on the price offered to
NSWPMPL by technology provider M/s Hitachi Zosen India Pvt. Ltd.
5.7.27. Regarding consideration of transmission/Evacuation expenses in the evacuation cost,
Regulation 13 of RE Tariff Regulations,2015 specifies the Capital Cost to be considered
for Tariff determination as below:
“13. Capital Cost
The norms for Capital Cost as specified in the subsequent RE technology-specific
Chapters shall be inclusive of all capital works, including land cost, plant and
machinery, civil works, erection and commissioning, financing costs, preliminary
and pre-operative expenses, interest during construction, and evacuation
infrastructure up to the inter-connection point:
Provided that a Petition for Project-specific tariff determination shall provide the
break-up of Capital Cost items in the manner specified in Regulation 9.”
5.7.28. Further, Regulation 15 of RPO-REC Regulations,2016 specifics the provision of grid
connectivity framework as below:
“15 Grid Connectivity Framework
The concerned Licensee shall be responsible for development of evacuation
infrastructure beyond the inter-connection point, while the Generating Company shall
develop evacuation infrastructure from generation facility up to the inter-connection
point at its own expense;
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 55 of 92
Provided that, the evacuation infrastructure cost beyond the Inter-connection Point shall
be borne by the Licensee and shall be recovered from its Consumers as per the pricing
framework developed by the State Commission;”
5.7.29. Above provisions of the Regulations, specifies that, the transmission cost beyond
interconnection point shall not considered as a part of Capital Cost and concerned
licensee shall develop the transmission network at its own expenses and same shall be
recovered through suitable pricing mechanism such as Aggregate Revenue Requirement
(ARR) of concerned Licensee.
5.7.30. NSWPMPL has submitted that, cost upto interconnection point has been estimated as Rs.
126 Lakh, whereas evacuation cost beyond interconnection point has been estimated to
be Rs. 351.75 Lakh. Hence, the Commission has considered Rs. 126 Lakh towards
evacuation expenses as a part of Capital Cost of the Project and directs NSWPMPL, to
approach the concerned Licensee for expediting the work of transmission line for timely
availability of connectivity for its MSW Project.
5.7.31. The Commission has observed that, NSWPMPL has considered 3% of total hard cost
towards contingency cost. Further, NSWPMPL has justified its claim of contingency to
be factored in Project Capital Cost as each Project may have some unknown risks which
the Project developer cannot perceive at the time of determining the Project cost and to
mitigate such risks he needs to have reasonable resources.
5.7.32. However, in the present case, NSWPMPL has formed consortium with Hitachi Zosen and
the budgetary offer of Hitachi Zosen has been considered for estimation of plant and
machinery. The Commission is of the view that, the risk of variation in plant and
machinery cost which is almost 71% of total hard cost would be limited and besides there
would be scope for savings in these Costs at the time of award through competitive
process and negotiations; since the present cost estimates are based on budgetary
estimates. Further the Commission has noted the quotation of M/s Hitachi Zosen India
Pvt. Ltd. for plant and machinery which includes imported components of only Rs. 81
Lakh which is less than 7% of the total supply cost. Hence, the Commission is of the
view that, the impact of variation in exchange rate, if any would by very marginal and
specific provision of contingencies would amount to overestimation of capital cost.
5.7.33. NSWPMPL has considered 2.5% of total hard cost towards consultancy cost, 1.5% of
total hard cost towards PMC charges and 2% of total hard cost towards financing cost.
The Commission is of the view that NSWPMPL has technical collaboration with Hitachi
Zosen India Pvt. Ltd. and majority of engineering activities shall be carried out in
consultation with OEM. Further NSWPMPL has estimated pre-operative and preliminary
expenses of about 1% of the total hard cost towards project feasibility studies, technical
& commercial studies and related activities for conceptualizing the Project, expenses on
ecology & topological survey, soil investigation study, land fencing, pre-construction
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 56 of 92
office cost, technology selection and EPC contractor selection, visits to the working
plants, cost for preparation of DPRs etc. Thus, total Soft Cost (excluding IDC) as
estimated by NSWPMPL amounts to Rs. 2038.81 Lakh which is about 11.20% of the
total hard cost.
5.7.34. The Commission has undertaken comparison of soft costs towards various heads as
estimated by NSWPMPL vis-à-vis that considered for similar Projects cases earlier
approved by the Commission and other SERCs as shown in the Table below. The
Commission notes that as against NSWPMPL‟s claim of soft cost of 11.20% of hard
costs, the range of soft costs approved for similar cases by various SERCs varied from
7.46% to 7.88%.
Table 16: Comparison of Soft Cost and Hard Cost of MSW Projects
Particulars
GERC, Case No.
1433 of 2014 (RGE
Surat Pvt. Ltd.)
BERC, Case No. 22
of 2015 (PGEPL,
Patna)
Jabalpur,
MPERC
NSWPMPL
Petition
Hard Cost 167.88 169.63 151.75 182.08
Interest During Construction 23.37 23.15 16.09 16.34
Soft Cost 13.23 12.65 7.54 20.39
Total Cost 204.48 205.43 175.38 218.81
Soft Cost as a % of Hard Cost 7.88% 7.46% 4.97% 11.20%
Accordingly, the Commission has considered the soft cost as 8.20% of the hard cost as
against NSWPMPL‟s claim of 11.20% of the hard cost.
5.7.35. NSWPMPL has also considered about Rs. 1633.71 Lakh towards IDC at the rate of
12.30% p.a. Interest rate. Commission has considered Interest on Loan as 10.99% p.a.,
basis of the same has been elaborated in Para 5.14 of this Order. Considering phasing of
expenditure proposed by NSWPMPL with revised Interest rate of 10.99% p.a., the
Commission has recomputed the IDC which works out as Rs. 1347.42 Lakh.
Table 17: Capital Cost of MSW Projects considered by the Commission
Particulars Capital cost as proposed
by NSWPMPL
(in Rs. Lakh)
Capital Cost considered
by Commission
(in Rs. Lakh)
Plant & Machinery 13,078.80 13,078.80
Building & Civil Cost (Inc. land
preparation) 2,481.50 2,481.50
Engineering Expense 700.00 700.00
Transmission and Evacuation
Cost 477.75 126.05
SLF (Inc. ash disposal) 1,029.00 1,029.00
Rehabilitation of existing SLF/
Land Capping 441.00 441.00
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 57 of 92
Particulars Capital cost as proposed
by NSWPMPL
(in Rs. Lakh)
Capital Cost considered
by Commission
(in Rs. Lakh)
Total Hard Cost 18,208.05 17,856.35
Contingency Cost @ 3% 546.24
8.20% of
the Hard Cost
Consultancy charges@ 2.5% 455.20
PMC Charges @ 1.5% 273.12
Pre-operative expenses @1% 182.08
Financing cost @ 2% 364.16
Project Development Fee paid to
NMC 218.00
Total Soft Cost (excluding
IDC) 2038.81 1467.94
IDC 1633.72 1347.42
Total Cost of Project 21,880.58 20,671.71
5.7.36. In view of the above, the Commission considers Rs. 20671.71 Lakh towards Capital Cost
of NSWPMPL‟s MSW Project for determination of Tariff as against Rs.21880.58 Lakh
proposed by NSWPMPL.
5.7.37. The Commission hereby directs NSWPMPL to submit the detailed break up of actual
Capital Cost of Its Nagpur MSW plant with Pre-processing facility as on Commercial
operation date (CoD) duly certified by Statutory Auditor within six months from CoD of
the Project.
5.8. Viability Gap Funding (VGF)
NSWPMPL’s submission
5.8.1. As per Clause 39.1 of the Concession Agreement NMC has committed for VGF of Rs. 70
Crore.
“VGF support amounting to maximum of Rs. 70 (Seventy) crores, subjected to the terms
and condition as detailed in herewith and Concession Agreement.‟
NSWPMPL has accordingly reduced the capital cost of the Project by the VGF amount
earmarked for setting up of waste to energy Project Facility i.e. Rs. 70 Crore and balance
capital cost is proposed to be funded through debt and equity in the normative ratio of
70:30.
Commission’s Analysis and Ruling
5.8.2. The Commission asked NSWPMPL to confirm the nature and extent of VGF available
for its MSW Project and whether it has been availed or is proposed to be availed.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 58 of 92
5.8.3. NSWPMPL submitted that, at the time when EOI was floated by NMC, there was no
clarity about the availability of funding from GoI / GoM for implementation of waste
management in Nagpur. Over the period the Swachh Bharat Mission- Urban a major
initiative by the central Government was launched to attain vision of “Clean India”.
Under this program Central Government incentive for SWM under SBM was available as
20 % grant or Viability Gap Funding (VGF) and state was to contribute minimum of 25
% funds for SWM Projects. Under Swachh Bharat Mission Integrated Detailed Project
Report (DPR) of scientific management and disposal of MSW of Nagpur city was
submitted, in that WtE Project was one of the major component of the DPR. GoM, High
Power Committee approved the DPR on dated 22 March, 2016 at Mantralaya Mumbai
along with the VGF of Rs. 96.22 Crore for various components of MSW. Out of this, Rs.
70 Crore was allotted to WtE Project.
5.8.4. The Commission has verified the relevant provisions of Concession Agreement for grant
of VGF of Rs. 70.00 Crore by NMC. And accordingly considered the same while
determination of Tariff as proposed by NSWPMPL.
5.8.5. Commission has also asked NSWPMPL, if it has approached MNRE or MEDA for any
Capital subsidy for its MSW power plant. NSWPMPL has confirmed that, it has neither
approached nor any intension to approach in future to MNRE or MEDA for any Capital
subsidy or any financial assistance.
5.9. Useful Life of MSW Plant
NSWPMPL’s submission
5.9.1. NSWPMPL has considered useful life of the MSW Project as 13 years. The Commission
asked NSWPMPL, the rationale behind considering useful life of 13 years. NSWPMPL
submitted that,
a) NMC has awarded Concession Agreement to process MSW generated from the city
for the period of 15 years including construction period of 2 years. This leaves
operating period of only 13 years. For the Waste to energy Projects, the useful life of
the Project is defined by following two factors:
Right to process a feedstock – Operating period under Concession Agreement
Right to sell power – PPA period
If any of the above factor is absent, the Project would cease to be useful. The useful
life of the Nagpur Project is limited by operating period of 13 years, hence, the same
is considered as useful life.
b) Further, the Concession for the Project was awarded by NMC after a competitive
bidding process under DBFOT model. According to the provision 22.2.4 of the
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 59 of 92
Concession Agreement, on completion of the Concession period, the Project
including all movable and immovable infrastructure/ facilities will be transferred to
NMC free of cost. After the transfer, NSWPMPL will not have any rights on the
Project Facility and its infrastructure. NSWPMPL has to recover the capital costs and
investments made during the operating life of 13 years. Therefore, the useful life of
the Project for the purpose of the tariff petition is considered as 13 years.
c) NSWPMPL submitted that, it would be useful to highlight the provisions of MERC
(Terms and Conditions for Determination of RE Tariff) Regulations, 2015
“2.1 (mm) „Useful Life‟, in relation to a Unit of a Generating Station, including the
evacuation system, means the following duration from the date of commercial operation
(„COD‟) of such generation facility, namely: —
a. Wind Energy Power Projects 25 years
b. Biomass-based Power Project, Non-Fossil Fuel-based 20 years Co-
Generation.
c. Mini/Micro and Small Hydro Power Projects 35 years
d. Solar PV/Solar Thermal Power Projects 25 years
e. Solar Roof-top PV systems Power Projects 25 years
Provided that the Useful Life of other RE Projects shall be as stipulated by the
Commission while determining the Project specific tariff, taking into consideration the
norms of the Central Commission;” [Emphasis Added]
“79. Power to Relax: The Commission may, by general or specific Order, for reasons to
be recorded in writing and after giving an opportunity of hearing to the parties likely to
be affected, relax any of the provisions of these Regulations on its own motion or on an
application made before it by an interested person.” [Emphasis Added]
“82. Power to remove difficulties If any difficulty arises in giving effect to the
provisions of these Regulations, the Commission may, by general or specific Order,
make such provisions, not inconsistent with the provisions of the Act, as may appear to
be necessary for removing the difficulty.” [Emphasis Added]
Evident from above, the Commission‟s Regulations have not expressly defined the
„useful life‟ of the Waste to Energy Projects in the state. The Regulations specifies that
the Commission can stipulate the useful life in its order regarding Project specific tariff
after examining the case specific aspects.
Therefore, NSWPMPL requested the Commission to take into account Project specific
aspects of the proposed Project regarding operating life, transfer of the facility and the
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 60 of 92
period to recover the investments made, while defining the useful life of the Project as 13
years from the date of CoD.
5.9.2. NSWPMPL further submitted that, in view of the Project specific facts, it does not leave
any scope to consider operating life of more than 13 years. SLF proposed for the Project
would be sufficient to accommodate the residues coming from the processing facility
over the period of 13 years only. Post that, new SLF would be needed, for which, no land
is allocated at present. This would lead to difficulty in commercial borrowing by
NSWPMPL.
5.9.3. Further, Concession Agreement mandates closure of all SLFs created and its maintenance
for post-closure period of 15 years. Any extension in the operating life would also lead to
additional capex for creation of new SLF, SLF capping and its maintenance. This will
require higher value of post-closure reserves, than proposed in the Petition. This will lead
to diversion of higher share of tipping fees to reserve account. Presently tipping fees in
the form of non-tariff income have reduced the need for levellised tariff by almost Rs.
1.15/ kWh. If tipping fees available as non-tariff income reduces, levellised tariff for the
Project would increase.
5.9.4. If Tariff design has any divergence with Concession Agreement, it would create
challenges in executing PPA and achieving Financial Closure in timely manner. This
would jeopardise the Project.
Commission’s Analysis and Ruling
5.9.5. The Commission notes that, NSWPMPL has considered useful life of the MSW Project
as 13 years considering the Concession Agreement period of 15 years (2 year for
construction + 13 years for operation) and computed Tariff for a period of 13 years.
5.9.6. Commission notes that, NSWPMPL has developed similar capacity and similar
technology MSW Projects at Jabalpur and Surat. Commission asked NSWPMPL to
submit the information about the useful life considered for both the Projects. NSWPMPL
submitted the information as below:
Table 18: Comparative Useful life of MSW Projects
Useful life Remarks
Nagpur
MSW
15 yrs
(including 2
yrs of const.
period), i.e.
operating life
of 13 yrs
Site provided for developing a new SLF would be sufficient to
accommodate the residues coming from the processing facility
over the period of 13 years only. Post that, new SLF would be
needed, for which, no land is allocated at present.
The useful life is limited by SLF‟s capacity and a period
giving right to process MSW. Therefore, the useful life cannot
be more than 13 years.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 61 of 92
Useful life Remarks
Jabalpur
MSW,
MPERC
20 years from
COD
SLF was provided by JMC. Concessioner was not required to
develop an SLF. The useful life was not limited by SLF‟s
capacity. It was defined by period giving right to process
MSW, and the life of Plant.
Surat,
GERC
25 years from
COD
SLF was provided by SMC. Concessioner was not required to
develop an SLF. The useful life was not limited by SLF‟s
capacity. It was defined by period giving right to process
MSW, and the life of Plant.
BERC 25 years Sanitary landfill has to be developed by the NSWPMPL
Ranchi
MSW
JSERC
Order
20 years Sanitary landfill has to be developed by the NSWPMPL at
Ranchi as per the Concession Agreement. The Commission
has approved the Useful Life on the basis of JERC
Regulations, 2016
5.9.7. The Commission observes that NSWPMPL has considered useful life of 20 years for its
Jabalpur MSW Project whereas 25 years for its Surat MSW Project. Further the
Commission has also issued Tariff Orders for MSW Projects in Solapur, Pune and
Kolhapur, where the Commission has considered 20 years of useful life and also 20 year
of Tariff period.
5.9.8. NSWPMPL has requested to consider 13 years of useful life considering the tenure of
Concession Agreement as 15 years (13 years operation). Though, in case of Pune and
Kolhapur the Concession Agreement period was 30 years, the Commission has
determined the Tariff for 20 year period considering useful life of 20 years. Further,
relevant extracts of provisions of RE Tariff Regulations, 2015 stipulate the „Useful Life‟
as under:
(mm) „Useful Life‟, in relation to a Unit of a Generating Station, including the evacuation
system, means the following duration from the date of commercial operation („COD‟) of
such generation facility, namely: —
a. Wind Energy Power Projects 25 years
b. Biomass-based Power Project, Non-Fossil Fuel-based Co-Generation. 20 years
c. Mini/Micro and Small Hydro Power Projects 35 years
d. Solar PV/Solar Thermal Power Projects 25 years
e. Solar Roof-top PV systems Power Projects 25 years
Provided that the Useful Life of other RE Projects shall be as stipulated by the
Commission while determining the Project specific tariff, taking into consideration
the norms of the Central Commission;
5.9.9. The CERC under its RE Tariff Regulations, 2017 also considers, the useful life of MSW
Projects as 20 years as below:
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 62 of 92
cc) „Useful Life‟ in relation to a unit of a generating station including evacuation system
shall mean the following duration from the date of commercial operation (COD) of such
generation facility, namely: -
(e) Municipal Solid Waste (MSW)/ and Refuse Derived Fuel (RDF)
based power Project 20 years
As shown in the table above, the other SERCs also have considered useful life 20 years
or more and determined the Tariff for 20 years or more period.
5.9.10. The Commission is of the view that, the technical or operational life is to be considered
while determining the useful life of the power plant. Further, the same will have to be
governed as per the provisions of the RE Tariff Regulations, 2015 and it will not be
appropriate to link useful life to the Concession Agreement.
5.9.11. Further, the Commission has noted NMC‟s submission that it will take possession of
Plant post Concession Agreement and shall appoint new agency for operation through
tendering process.
5.9.12. Further, the Commission observes that Useful Life and Tariff Period are two distinct
concepts. Even in case of other RE technologies such as wind energy, biomass power,
non-fossil fuel based cogeneration, small hydel power (above 5 MW) and solar PV, the
Commission has determined Tariff for Tariff Period of 13 years whereas their Useful Life
varied from 20 years to 35 years.
5.9.13. Hence, the Commission considers useful life of NSWPMPL‟s MSW Project as 20 years
and Tariff period as 13 years.
5.10. Debt-Equity Ratio
NSWPMPL’s submission
NSWPMPL has considered a debt-equity ratio of 70:30 and has calculated the interest by
assuming a normative debt of 70% of the Project cost, in line with the methodology
adopted. Further, submitted that NMC has committed a VGF support of Rs. 70 Crore as
per clause 39.1 of the Concession Agreement.
5.10.1. Therefore, NSWPMPL has accordingly reduced the capital cost of the Project by the
grant amount earmarked for setting up of waste to energy facility i.e. Rs. 70 Crore and
has then computed the normative debt and equity in the ratio of 70:30.
Commission’s Analysis and Ruling
5.10.2. Regulation 14 of the RE Tariff Regulations, 2015, specifies as below:
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 63 of 92
“14.2 For Project-specific tariff determination, if the equity actually deployed is more
than 30% of the Capital Cost, the equity in excess of 30% shall be treated as
normative loan:
Provided that, where the equity actually deployed is less than 30% of the Capital
Cost, the actual equity shall be considered for determination of tariff;”
5.10.3. Accordingly, Commission has considered the debt-equity ratio of 70:30 after excluding
VGF of Rs. 7000 Lakh from the Capital cost of Rs. 20,671.71 Lakh.
5.11. Depreciation
NSWPMPL’s submission
5.11.1. NSWPMPL has projected depreciation at the rate of 7% per annum for the first 10 years
of the Tariff Period and at the rate of 6.67% per year for balance period of Concession
Agreement for next 3 years. ( upto 13 years)
5.11.2. Regulation 16 of the MERC RE Tariff Regulations, 2015, pertaining to depreciation is as
follows: -
“16.1 The value base for the purpose of depreciation shall be the capital cost of the
asset as admitted by the Commission. The salvage value of the asset shall be
considered as 10%, and depreciation shall be allowed up to a maximum of 90% of
the capital cost of the asset.
16.2 Annual Depreciation shall be based on the „Differential Depreciation Approach‟
using the „Straight Line Method‟ over two distinct periods comprising loan tenure
and the period beyond loan tenure over the useful life. The depreciation rate for
the first 12 years of the Tariff Period shall be 5.83% per annum, and the
remaining depreciation shall be spread over the remaining useful life of the
Project from the 13th year onwards.
16.3 Depreciation shall be chargeable from the first year of commercial operation.”
5.11.3. NSWPMPL has submitted that the RBI guidelines specifies that the tenor of loan cannot
be more than 80% of the initial Concession Period. Since the Concession period leaves
only 13 years of operating life of the proposed Project, loan tenor of 10 years is
considered in the Tariff Petition. Below is the extract of the provision: -
“The tenor of the Amortization Schedule should not be more than 80% (leaving a
tail of 20%) of the initial Concession period in case of infrastructure Projects
under public private partnership (PPP) model; or 80% of the initial economic life
envisaged at the time of Project appraisal for determining the user charges / tariff
in case of non-PPP infrastructure Projects; or 80% of the initial economic life
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 64 of 92
envisaged at the time of Project appraisal by Lenders Independent Engineer in the
case of other core industries Projects; “
5.11.4. NSWPMPL further submitted that in line with the MERC RE tariff regulations 2015, the
capital expenditure is to be funded with 70% of debt, and the amount towards repayment
of loan by should be funded through depreciation charged on the fixed assets on Straight
Line Method. NSWPMPL has projected depreciation at the rate of 7% per annum for the
first 10 years of the Tariff Period. The remaining depreciation amount (up to 90% of
capital cost) has been spread over the remaining Useful Life of the Project (3 years),
leading to depreciation rate of 6.67% per annum for years 11 till 13 in line with the RE
Tariff Regulations, 2015.
Commission’s Analysis and Ruling
5.11.5. NSWPMPL has considered the useful life as 13 years and proposed to depreciate 90% the
MSW Plant within 13year period. Further, NSWPMPL has also considered Loan
repayment period as 10 years. As discussed in Para 5.9 of this Order, the Commission has
considered useful life of NSWPMPL‟s MSW plant as 20 Years.
5.11.6. Further in this context, the Commission observes that, as per the provisions of
Regulations 8.2 of RE Tariff Regulations, 2015, except Capital Cost and O&M expenses
all other financial norms shall be ceiling norms while determining the Project specific
Tariff.
8. Project-specific tariff
…………..
8.2 The determination of Project-specific tariff for generation of electricity from such
RE sources shall be in accordance with such terms and conditions as may be stipulated
in the relevant Orders of the Commission:
Provided that the financial norms specified in Chapter 2, except with regard to Capital
Cost and O&M expenses, shall be the ceiling norms while determining such Project-
specific tariff.
5.11.7. Further, the Commission in Case No. 87 of 2015, for Kolhapur MSW Project which
operate on similar technology has also considered depreciation at the rate of 5.83% per
annum for the first 12 years of the Tariff Period. The remaining depreciation amount (up
to 90% of capital cost) spread over the remaining Useful Life of the Project (8 years).
5.11.8. Further, Commission observes that even in case of other RE technologies despite Tariff
period and PPA tenure of 13 years, debt service over loan tenure of 12 years has been
considered. Further, as highlighted in earlier paragraphs, the provision for depreciation and
debt repayment will have to be governed as per provisions stipulated under RE Tariff
Regulations, 2015. Further, the Commission observes that there is no provision of advance
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 65 of 92
against depreciation under the RE Tariff Regulations, 2015 as sought to be considered by the
NSWPMPL.
5.11.9. In view of above the Commission considers depreciation at the rate of 5.83% per annum
for the first 12 years of the Tariff Period. The remaining depreciation amount (up to 90%
of capital cost) spread over the remaining Useful Life of the Project (8 years).
5.12. Operation and Maintenance(O&M) Expenses
NSWPMPL’s submission
5.12.1. NSWPMPL has estimated O&M expenses for first year of operation as Rs. 2052.13 Lakh
comprising of O&M expense towards power plant operation as Rs. 1308 Lakh and O&M
expense towards Pre-processing facilities as Rs.744.13 Lakh.
5.12.2. NSWPMPL has estimated the O&M expenses for power block to be Rs. 1,308 Lakh for
the first year of operation as tabulated below.
Table 19: O&M Expenses for the plant as estimated of the by NSWPMPL
S. No Particulars
O&M Cost for Yr-
1(power Plant)
(Rs. Lakh )
A Employee expenses /Expats 473
Admin cost 59
Ash handling and SLF management cost 235
Electricity charges 152
B Administrative and General expenses 446
Maintenance (Electrical and mechanical) 90
LDO (For start-up) 4
Diesel Cost (For SLF) 45
Consumable & Spare parts 78
Activated carbon 50
hydrated lime 112
ETP, R.O, CT, BOILER chemical 10
C Total Repair and Maintenance expenses 389
TOTAL O&M Expenses for the Plant 1308
5.12.3. NSWPMPL has further submitted that the estimated O&M expenses work out to be
5.98% of the capital cost which is within the range anticipated in the National Master
Plan by MNRE, where the comparison of the available technological options in terms of
O&M cost was done.
5.12.4. Further, the technology has pre-processing facility which involves MSW unloading,
manual/ mechanical segregation, pre-processed MSW preparation and bio-drying section
for organic fraction.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 66 of 92
5.12.5. The O&M Cost for the pre-processing Facility at Nagpur has been projected as Rs.
744.13 Lakh incurred during the first year of operation, as tabulated below:
Table 20: O&M Expenses for pre-processing facility as estimated of the by NSWPMPL
S.
No Particulars
O&M Cost (Yr-1) for
Pre-processing facility
(Rs Lakh)
A Employee expenses
Operational and Service Manpower 237.22
B Administrative and General expenses
Admin Cost 148.95
Cost of Inert handling for Pre-processing
plant (including cost of its disposal in SLF) 327.96
C Repair and Maintenance expenses
Maintenance (Electrical & Mechanical ) 30.00
Total O&M Expenses for preprocessing
facility 744.13
5.12.6. NSWPMPL has proposed to escalate this O&M expense for the power plant as well as
pre-processing unit by 5.72% as specified in CERC Regulations. In addition to the above
O& M expense NSWPMPL has also estimated periodic maintenance and overhaul
expenses to be carried out in 5th
year and 10th
year, Accordingly the O&M cost claimed
by NSWPMPL has 3 components-
Power Plant O&M expense of Rs. 1,308.00 Lakh in the first year, escalated every
year by 5.72%.
O&M expense towards pre-processing facility of Rs 744.13 Lakh in the first year,
escalated every year by 5.72%.
Overhaul expense towards periodic maintenance in 5th
year and 10th
year for Rs
1,169.86 Lakh and Rs. 1,423.31 Lakh respectively.
5.12.7. Total O&M cost as estimated by NSWPMPL is summarized in the following table:
Table 21: Summary of O&M expenses proposed by NSWPMPL (Year 1 to 7)
(In Rs. Lakh)
Years 1 2 3 4 5 6 7
O&M expenses of plant 1308.00 1382.82 1461.91 1545.54 1633.94 1727.40 1826.21
O&M expenses of pre-
processing unit 744.13 786.69 831.69 879.27 929.56 982.73 1038.94
Additional O&M expense
for periodic maintenance 1169.86
Total O&M expense 2052.13 2169.51 2293.61 2424.80 3733.36 2710.13 2865.15
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 67 of 92
Table 22: Summary of O&M expenses proposed by NSWPMPL (Year 8 to 13)
(In Rs. Lakh)
Years 8 9 10 11 12 13
O&M expenses of plant 1930.67 2041.10 2157.85 2281.28 2411.77 2549.73
O&M expenses of pre-processing
unit 1098.37 1161.20 1227.62 1297.84 1372.07 1450.56
Additional O&M for periodic
maintenance 1423.31
Total O&M expense 3029.04 3202.30 4808.78 3579.12 3783.85 4000.28
5.12.8. The Commission sought detailed break up of O&M expenses for Power Plant and Pre-
processing facility separately for various heads such as employee expenses for
Import/Expat services and local services, details of A&G Cost such as admin cost, Ash
handling and SLF management cost, details of R&M expenses which includes
maintenance of electrical and mechanical spares, fuel expense, chemicals etc.
NSWPMPL submitted the break up as below.
Table 23: Detailed Break up of O&M expenses as submitted by NSWPMPL
Particulars O&M Expense for Plant O&M expense for
Pre-processing facility
Total
Import/
Expat
Local Sum Import/
Expat
Local Sum
Employee
Expense / Expats
41 432 473.00 0 237.22 237.22 710.22
Admin cost 10 49 59 0 148.95 148.95 207.95
Ash handling and
SLF management
cost
0 235 235 0 327.96 327.96 562.96
Electricity
charges
0 152 152 0 0 0 152.00
Total A&G
Expense
10 436 446.00 0 476.91 476.91 922.91
Maintenance
(Electrical and
mechanical)
42 48 90 0 10 10
LDO ( start-up) 0 4 4 0 0 0
Diesel Cost (SLF) 0 45 45 0 15 15
Consumable &
Spare parts
27 51 78 0 5 5
Activated carbon 0 50 50 0 0 0
hydrated lime 0 112 112 0 0 0
ETP, R.O, CT,
BOILER
chemical
0 10 10 0 0 0
Total R&M
Expense
69 320 389.00 0 30.00 30.00 419.00
TOTAL 120 1188 1308.00 0 744.13 744.13 2052.13
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 68 of 92
5.12.9. NSWPMPL has considered employee expense and expat costs of Rs. 710.22 Lakh for
Plant and Pre-processing facilities. Following are the details of Expat services.
Employee expense:
a) Expat Services for Plant –
Waste to Energy Projects are technologically complex. NSWPMPL has selected a
technology from the vendors with the proven track record. Europe and Japan are the
global leaders for direct controlled combustion of MSW for waste-to-energy and has
maximum number of installation of waste-to-energy plants in the world. These Projects
cannot afford a long down time owing to a need to process huge quantum of incoming
MSW.
5.12.10. NSWPMPL has therefore considered services of expat personnel for plant for the
preventive health checkup of the plant and machinery for the entire Project life. Such
preventive maintenance would involve hiring expats from India and abroad from Japan
and Europe. Such expats will be staying at a site and shall monitor the health checkup of
plant and machinery.
5.12.11. NSWPMPL submitted that it has estimated the employee expense based on manpower
requirement for each activity associated in the execution of the entire project.
NSWPMPL has followed the norms of minimum wages prevalent in the State of
Maharashtra while estimating the expense towards manpower. The details of category
wise break-up of employees proposed by NSWPMPL is tabulated as below:
Table 24: Category wise break-up of Employees as submitted by NSWPMPL
Sr.
No.
Category Power plant
operation
Pre-processing
facility
Total
1 Sr. Management Team 1 1 2
2 Plant Management staff 6 4 10
3 Engineering and Supervisory
Staff
23 8 31
4 Administrative Staff 3 3 6
5 Operating Staff (Skilled) 58 25 83
6 Operating Staff (Semi-skilled
/Unskilled)
90 60 150
Total 181 101 282
5.12.12. NSWPMPL further submitted that, half yearly small duration shutdown is also taken to
check the system to ensure that everything is fine. It is during these shutdowns that Expat
and Indian experts come for inspection of condition of the plant and also for review of
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 69 of 92
plant performance review whenever required during the year. The costs mentioned above
include the costs for Expat Experts, cost of their travel, stay in India, etc.
Administration and General Expense (A&G):
5.12.13. NSWPMPL has considered Administration and General Expense (A&G) of Rs. 922.91
Lakh for the costs associated with the plant and preprocessing section namely for
Administration expense, Ash handling and SLF management and electricity charges
Following are the details of A&G Expenses submitted by NSWPMPL.
Table 25: Detailed break up of A&G expense as submitted by NSWPMPL
Particulars O&M Expense for Plant O&M expense for Pre-
processing facility TOTAL
Import
/Expat Local Sum
Import
/Expat Local Sum
Admin cost 10 49 59 0 148.95 148.95 207.95
Ash handling
and SLF
management
cost
0 235 235 0 327.96 327.96 562.96
Electricity
charges 0 152 152 0 0 0 152
Total A&G
Expense 10 436 446 0 476.91 476.91 922.91
5.12.14. NSWPMPL submitted that, it has estimated Rs. 207.95 Lakh towards administration cost
which includes Rs. 59.00 Lakh for power plant operation and Rs. 148.95 Lakh for pre-
processing facility.
5.12.15. NSWPMPL submitted that, Ash handling and SLF management includes inert and mixed
waste handling at pre-processing section, Bottom ash and Fly ash handling process. A lot
of inert come along with the mixed waste received from the NMC. Pre- processing
section would separate materials such as stones, boulders, glass, bones, etc. accumulate
them to send to SLF. Further, some of inert material which will be fed to the boiler shall
generate the ash after combustion. The ash will be in two forms: bottom ash and fly ash.
Bottom ash is discharged by draining the bed periodically. The fly ash typically amounts
to 10-20% by weight of total ash. Bottom ash and fly ash generated in the processing
plant need to be disposed of in the landfill.
5.12.16. NSWPMPL has submitted that, there will be some electricity consumption during power
generation plant shutdown and also during start-up of generation plant. NSWPMPL has
estimated a demand of 1150 kVA and total power procurement of 1.68 MUs per year
from Distribution Licensee to meet the power requirement of its WtE power plant.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 70 of 92
NSWPMPL has referred the rates approved by the Commission in MYT Order of
MSEDCL for HT-1 category for FY 2016-17 while estimating the electricity charges.
The rates are as provided below:
Category Demand Charge
Rs./kVA/month
Energy charge
Rs/kWh
HT 1 (A):
Industry(General)
235 7.13 7.13
Correspondingly electricity charges have been computed as Rs. 152.00 Lakh per year.
Repair and Maintenance (R&M) Expense:
5.12.17. NSWMPL has considered Repair and Maintenance (R&M) Expense of Rs. 419 Lakh. It
includes the share of costs associated with plant and preprocessing that includes costs for
maintenance, LDO, Diesel, consumables, spares, Activated Carbon, Hydrated Lime and
Boiler chemicals. The Commission asked NSWPMPL to submit the detailed break-up of
the parameters considered under R&M and its basis.
5.12.18. NSWPMPL submitted that, it has considered imported items like Grate control unit, Ram
feeder Control unit, Ram feeder position Measurement unit, Power supply module etc.
which will be expected to replace annually. Similarly, some of the spares of waste crane
shall be replaced regularly. Additionally, Turbine spares, ACC spares, various pumps
will be required to be maintained periodically. Electrical and Mechanical Maintenance
charges considered by NSWPMPL are as below:
For Power Plant For Pre-processing Fig in
Lakh
Import/Expat Local Sum Import/Expat Local Sum Total
Maintenance
(E&M)
42 48 90 0 10 10 100
5.12.19. Regarding requirement of fuel for vehicles NSWPMPL submitted that, for handling large
quantity of ash and inert and its subsequent disposal in landfill, NSWPMPL would
require vehicles along with manpower to perform and supervise the same. Since, the
plant operates round the clock and throughout the year, this handling work is done
continuously and this cannot be stopped even in case of breakdown of some equipment or
vehicle. Excavators and other vehicles are required in the preprocessing section for
handling waste and for turning around organic waste in the drying section.
5.12.20. In addition, bottom ash and fly ash from power plant and inert from the preprocessing
section are transported to the landfill for disposal, where ash and inert have to spread
properly using JCBs/poclains. This handling work will happen throughout the day and
year. The vehicles also need routing and preventive maintenance; especially tires which
are get damaged due to working in harsh environment.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 71 of 92
Commission’s Analysis and Ruling
5.12.21. The Commission scrutinized the O& M expenses submitted by NSWPMPL. NSWPMPL
has submitted the breakup of O&M expenses as below:
Table 26: Detailed Break up of O&M expenses as submitted by NSWMPMPL
Particulars O&M Expense for Plant O&M expense for
Pre-processing facility
Total
Import/
Expat
Local Sum Import/
Expat
Local Sum
Employee
Expense / Expats
41 432 473.00 0 237.22 237.22 710.22
Total A&G
Expense
10 436 446.00 0 476.91 476.91 922.91
Total R&M
Expense
69 320 389.00 0 30.00 30.00 419.00
Total 120 1188 1308.00 0 744.13 744.13 2052.13
% of Capital
Cost
5.97% 3.40% 9.37%
5.12.22. NSWPMPL has considered employee expenses of Rs. 710.22 Lakh as part of O&M
expenses towards 1st year of operation. This includes Rs. 473.00 Lakh towards power
plant operation and Rs. 237.22 Lakh towards pre-processing facility. NSWPMPL has
considered total 181 employees for plant operation and 101 employees for pre-processing
facility. NSWPMPL has also submitted the organization chart which shows that,
elaborate manpower has been considered by NSWPMPL, separately for operation and
maintenance of Power plant and Pre-processing facilities.
5.12.23. The Commission also noted that the DPR (November, 2017) submitted by NSWPMPL
for this Project envisages the requirement of total 93 employees during operational phase
of Plant. This includes both power plant operation and pre-processing facility. Hence, the
Commission observes that, there is discrepancy in the employee requirement submitted
by NSWPMPL in the DPR and subsequent replies to the data gaps. While under the DPR,
NSWPMPL has estimated manpower Cost as Rs. 437.00 Lakh for Power Plant and
Rs.237.22 Lakh for Pre-processing facility (it has estimated total manpower requirement
as 93 for both the activities of Power Plant Operation and Pre-processing facilities.) The
Estimates under DPR has formed basis for filing of Petition and determination of Tariff.
5.12.24. However, in response to data gaps sought by the Commission, NSWPMPL has shown
total manpower requirement as 282 comprising 181 for Power Plant Operation and 101
for Pre-processing facilities. The Commission opines that the estimation of manpower
requirement is significantly higher. In response, NSWPMPL submitted details of actual
manpower of 168 at its currently operational Jabalpur MSW power plant. While Jabalpur
MSW power plant does not have pre-processing facility but its power plant operations are
similar to that proposed for Nagpur MSW power project.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 72 of 92
5.12.25. In view of above and considering the salary expenses as proposed by NSWPMPL, the
revised employee expenses works out as Rs. 670.45 Lakh as against Rs. 710.22 Lakh as
claimed by NSWPMPL. The Commission has considered the employee expenses towards
Import/Expat services and towards pre-processing facility same as proposed by
NSWPMPL.
5.12.26. NSWPMPL has considered Rs. 207.95 Lakh towards administration cost which includes
Rs. 59.00 Lakh for power plant operation and Rs. 148.95 Lakh for pre-processing facility.
Upon seeking clarifications, NSWPMPL submitted that administrative costs for
administration and monitoring of pre-processing operations are significant. The
Commission has considered the admin expenses of Rs. 207.95 Lakh as proposed by
NSWPMPL.
5.12.27. NSWPMPL has considered expenses of Rs.152.00 Lakh towards electrical charges.
NSWPMPL has submitted that, there will be some electricity consumption during power
generation plant shutdown and also during start-up of generation plant. NSWPMPL has
considered total power procurement of 1.68 MUs per year from Distribution Licensee to
meet this power requirement.
5.12.28. The Commission notes that, NSWPMPL has also prayed for waiving off Contract
demand charges for this energy consumption and netting off of energy consumed during
plant shut down and start-up operation.
5.12.29. The Commission vide its MYT Order dated 3 November, 2016 for MSEDCL in Case No.
48 of 2016 has addressed the issue of requirement of Start-up power for generating units.
The Commission has ruled that, the start-up power requirement for power plants may be
availed from the Distribution Licensee through a separate connection or through the
existing evacuation infrastructure. However, if power plants are having PPAs under
Section 62 of the EA, 2003, the energy drawn by such power plants shall be netting off
with the energy injected into the grid.
5.12.30. Since the present proceeding of Tariff determination are under Section 62 of EA, 2003,
Commission accepts the prayer of NSWPMPL for Netting off of the energy consumed
during plant shutdown and start-up power requirement and allows NSWPMPL, to net off
the power drawn from the grid with the power injected into the grid from its MSW power
plant. The Commission has considered this estimated energy consumption of 1.68 MUs
as additional energy consumption during plant shut down and start-up power requirement
and accordingly has reduced the Net energy generation from its MSW power plant.
5.12.31. Considering the provision of netting off is available with NSWPMPL and the
Commission has considered this energy consumption as discussed above, the separate
provision of energy expenses of Rs. 152 Lakh as a part of A&G expenses will not be
required. Hence the Commission has reduced the A&G expenses accordingly.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 73 of 92
5.12.32. Accordingly, the Commission has considered the total Rs. 1860.36 Lakh as against Rs.
2052.13 Lakh towards Operation and Maintenance expenses of the 1st year of the
operation.
5.13. Escalation factor for Annual O&M expenses:
NSWPMPL’s submission
5.13.1. NSWPMPL has proposed to escalate the Regular O&M expenses for the Power Plant as
well as pre-processing unit by 5.72% p.a. as specified in the CERC RE Tariff
Regulations, 2017. Regular O&M expense of Rs. 1,308.00 Lakh in the first year,
escalated every year by 5.72% p.a., O&M expense towards pre-processing facility of Rs.
744.13 Lakh in the first year, escalated every year by 5.72% p.a.
Commission’s Analysis and Ruling
5.13.2. The Commission notes that, the O&M escalation of 5.72 % p.a. considered by
NSWPMPL is not as per the MERC RE Tariff Regulations, 2015.
5.13.3. Regulations 19 of the RE Tariff Regulations stipulates that the Base Year O&M is to be
escalated at the rate specified in the MYT Regulations over the Tariff Period for
determination of the levellised Tariff. The Commission amended the provisions
Regulations 45.1(c), of the MERC (Multi-Year Tariff) Regulations, 2015 („MYT
Regulations‟) vide amendment dated 29 November, 2017. The amended provisions as
applicable for generation projects specify the norms for escalation of O&M expense in
subsequent years beyond the base year as follows:
“ (c) The Operation and Maintenance expenses for each subsequent year shall be determined
by escalating these Base Year expenses of FY 2015-16 by an inflation factor with 50%
weightage to the average yearly inflation derived based on the monthly Wholesale Price
Index of the past five financial years as per the Office of Economic Advisor of Government of
India and 50% weightage to the average yearly inflation derived based on the monthly
Consumer Price Index for Industrial Workers (all-India) of the past five financial years as
per the Labour Bureau, Government of India, as reduced by an efficiency factor of 1% or as
may be stipulated by the Commission from time to time, to arrive at the permissible
Operation and Maintenance expenses for each year of the Control Period:”
5.13.4. Accordingly, the Commission has analyzed the last 5 year average WPI and CPI indices
from FY 2012-13 to FY 2016-17 considering 50% and 50% weightage to WPI and CPI,
which works out to 5.27% per annum.
Average WPI rates for 2012-13 to 2016-17 3.31%
Weightage of WPI 50%
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 74 of 92
Effective Wt. avg. Value of WPI 1.65%
Average CPI rates for 2012-13 to 2016-17 7.23%
Weightage of CPI 50%
Effective Wt. Avg. Value of CPI 3.61%
Wt. Avg. value of inflation rate considering
WPI (50%)+CPI(50%) for 2012-13 to 2016-17
5.27%
Accordingly, the Commission has considered annual escalation factor for projecting
O&M expenses works out to 5.27% per annum.
5.14. Periodic Maintenance expenditure:
NSWPMPL’s submission
NSWPMPL submitted that, it has considered Rs. 1000 Lakh (at current cost) as Periodic
Maintenance cost to be incurred in the 5th
year and 10th
year. The expense for 5th
year and
10th
year works out to be Rs. 1,169.86 Lakh and Rs. 1,423.31 Lakh respectively,
considering 4% p.a. as an inflation escalation factor on such Periodic Maintenance. The
detailed breakup of periodic maintenance activities proposed by NSWPMPL is tabulated
as below:
Periodic Maintenance Amount in Lakh
Refractories 150
Bags, FGT 200
Tubes 100
Grate Elements 50
Grab Cranes, etc. 100
Rotating Equipment 100
Pre-processing Equipment 200
Electrical Instruments 100
Total 1,000
5.14.1. The Commission sought justification from NSWPMPL for consideration of Periodic
Maintenance expenditure of Rs. 1000 Lakh during 5th
and 10th
year of Operation, over
and above the regular O&M expenses.
5.14.2. NSWPMPL stated that this Periodic Maintenance activities of the Plant are over and
above the regular maintenance of the plant. In order to ensure that the plant functions at
its optimum capacity, this Periodic Maintenance expense is essential. NSWPMPL has
estimated to incur such expense at the end of 5th
and 10th
year i.e. after every 5 years.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 75 of 92
Commission’s Analysis and Ruling
5.14.3. The Commission has noted the justification submitted by NSWPMPL for requirement of
Periodic Maintenance expenditure. NSWPMPL has submitted the breakup of activities to
be carried out under periodic maintenance and cost associated with it.
5.14.4. The Commission is of the view that some of the activities such as maintenance of FGD or
replacement of Bag filters, Maintenance of rotating equipment such as compressors,
steam turbines, generator, fans, pumps etc. are expected to be covered under regular
O&M practices and need not require to have separate provision of expenses under
periodic maintenance expenses. However, the Commission notes that experience of
MSW power plant operations in Indian context is limited. The Commission notes the
submission of the NSWPMPL that due to toxic environment, the wear and tear of the
rotating equipment is high necessitating periodic maintenance to be able to accomplish
the operating performance parameters and annual CUF of 80%.
5.14.5. Accordingly, considering the justification submitted by NSWPMPL, the Commission has
considered amount of Rs. 1000 Lakh (at current cost) as proposed by NSWPMPL
towards periodic maintenance expenditure during 5th
and 10th
year of power plant
operation.
5.14.7. Further, with regards to escalation factor for computation of cost of periodic maintenance
expenditure in the 5th
and 10th
year of power plant operation, the Commission notes that,
NSWPMPL has not provided any justification for consideration of 4% as inflation
escalation factor. Since, Wholesale Price Index(WPI) represents the average rate of
Inflation related to equipment/ items of Capital nature, the Commission has considered the
last five year average WPI as shown in the Table No. 27 below:
Table 27: Annual inflation escalation for computation of Capex
Financial Year Annual WPI % Annual
Change in WPI
2012-2013 167.62 7.36%
2013-2014 177.64 5.98%
2014-2015 181.19 2.00%
2015-2016 176.67 -2.49%
2016-2017 183.20 3.70%
Average from FY 2012-13
to FY 2016-17 3.31%
5.14.8. Accordingly, the Commission has considered average rate of last 5 years WPI for
inflation escalation factor which works out as 3.31% for expenditure towards periodic
maintenance as well as for the capex required for Post closure obligations as against 4%
as considered by NSWPMPL.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 76 of 92
5.14.9. Considering annual escalation factor of 3.31% p.a., cost of periodic maintenance
expenditure estimated at Rs. 1000 Lakh (at current cost) works out to Rs. 1139 Lakh in
the 5th
year and works out to Rs 1340 Lakh in the 10th
year. The same has been
considered by the Commission for the purpose of Tariff determination.
5.15. Interest on Term Loan
NSWPMPL’s submission
5.15.1. NSWPMPL has considered a loan repayment period of 10 years. Further NSWPMPL has
taken the interest on long term debt at 300 basis points above the State Bank of India
(SBI) Base Rate for the period of 1st April 2017 to 30
th September 2017. Accordingly, the
Base Rate (9.30%) plus 300 basis points has been applied, and interest on debt computed
as 12.30% per annum.
Commission’s Analysis and Ruling
5.15.2. The Commission notes that, NSWPMPL has not provided copy of the Loan Agreement
or any sanction letter for the terms of loan for its Project. Infact, in response to the
Commission‟s query, NSWPMPL has submitted that Financial Closure is yet to be
achieved pending regulatory process for Tariff determination and hence it has assumed
Interest Rate on normative basis.
5.15.3. Regulation 15.1 specifies a loan tenure of 12 years for determination of the Tariff for RE
Projects. Regulation 15.2 provides for consideration of the rate of interest on loan as
follows:
“For the purpose of computation of tariff, the Base Rate of the State Bank of India
prevailing during the previous year plus 300 basis points shall be considered as the
normative interest rate.
Notwithstanding any moratorium period availed, the repayment of loan shall be
considered from the first year of commercial operation of the Project and shall be equal
to the annual depreciation allowed.”
5.15.4. However, the Commission observes that, the reference rate for sanction of new loan has
been shifted to MCLR instead of SBI Base Rate. Accordingly, the Commission while
determining generic RE Tariff for FY 2017-18 vide its Order dated 28April,2017 in Case
33 of 2017 considered as below:
However, as per the RBI guidelines dated 3 March, 2016 (updated on 29 March, 2016),
“All rupee loans sanctioned and credit limits renewed w.e.f. April 1, 2016 shall be priced
with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which will be
the internal benchmark for such purposes.”
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 77 of 92
SBI will continue to declare its Base Rate for existing loans, but new loans will be
sanctioned on the basis of MCLR.
5.15.5. Considering this difficulty of unavailability of new loan with reference of SBI Base Rate,
the Commission invoked the provision of Regulation 82 of MERC RE Tariff
Regulations,2015 as below:
Regulation 82 of the RE Tariff Regulations empower the Commission as follows:
“82. Power to remove difficulties
If any difficulty arises in giving effect to the provisions of these Regulations, the
Commission may, by general or specific order, make such provisions not inconsistent
with the provisions of the Act, as may appear to be necessary for removing the difficulty.”
The Commission has invoked the provisions of Regulation 82 in view of the change in the
circumstances and dispensation concerning interest rates and the consequent issues in
persisting with consideration based on the SBI Base Rate.
5.15.6. Hence, the Commission determined the Interest Rate as 11% for determination of
Generic RE Tariff for FY 2017-18. Further the Commission also amended the provisions
of MERC (MYT) Regulations, 2016 vide amendment dated 29 November,2017, wherein
the Commission has amended the definition of Base Rate as below:
2. Amendment to Regulation 2.1 (10)
Regulation 2.1 (10) of the principal Regulations shall be substituted by the following:
“Base Rate” shall mean the one-year Marginal Cost of Funds-based Lending Rate
(„MCLR‟) as declared by the State Bank of India from time to time;”
5.15.7. Considering the above discussed difficulties in implementing provisions of RE Tariff
Regulations related to Interest Rate, the Commission invokes the provisions of
Regulation 82 of MERC RE Tariff Regulations, 2015, Power to remove difficulties in
view of the change in the circumstances and dispensation concerning interest rates and
the consequent issues in pursuing rate to be linked to MCLR instead of SBI Base Rate.
Accordingly, the Commission has determined the Interest on loan considering 1-year
average (from January, 2017 to December, 2017) of 1 year MCLR of SBI as shown in the
Table below:
Table 28: Monthly 1 Year MCLR declared by SBI
Date of Revision of 1 Yr MCLR by SBI MCLR by SBI
01-Jan-17 8%
01-Feb-17 8%
01-Mar-17 8%
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 78 of 92
Date of Revision of 1 Yr MCLR by SBI MCLR by SBI
01-Apr-17 8%
01-May-17 8%
01-Jun-17 8%
01-Jul-17 8%
01-Aug-17 8%
01-Sep-17 8%
01-Nov-17 7.95%
01-Dec-17 7.95%
Average 1 year MCLR 7.99%
1 Year MCLR + 300 Basis points 7.99% + 3.00%
=10.99%
5.15.8. Hence, the Commission has considered the Interest on term Loan as 7.99% + 3% =
10.99% for the purpose of determination of Tariff in this Case.
5.16. Interest on Working Capital
NSWPMPL’s submission
5.16.1. NSWPMPL has computed the working capital in accordance with Regulation 18.1 of the
RE Tariff Regulations, 2015 comprising (a) O&M cost for one month, (b) receivables
equivalent to 2 months of tariff for sale of electricity calculated on the normative CUF
and (c) maintenance spares @15% of O&M expenses.
5.16.2. Accordingly, NSWPMPL has considered IoWC as the SBI Base Rate for the period of 1st
April 2017 to 30th
September 2017 plus 350 basis points, which works out to 12.80 %.
Commission’s Analysis and Ruling
5.16.3. Regulation 18.3 provides for computation of the rate of IoWC as follows:
"Interest on Working Capital shall be the average of the Base Rate of State Bank of
India prevalent during the previous year, plus 350 basis points.”
As discussed earlier in Para 5.15, the SBI Base Rate-linked interest rate for working
capital is no longer available for new RE Projects. The Commission has worked our
Average of 1 year MCLR as 7.99%. Hence the Commission considers the Interest on
Working Capital as 7.99% + 3.5% = 11.49 %. In view of the above, as in the case of
Interest on long term Loan, the Commission invokes its powers under Regulation 82 to
remove difficulties and to apply, for the purposes of this Order, interest rate of 11.49% to
the IoWC for NSWPMPL‟s MSW Project.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 79 of 92
5.17. Return on Equity
NSWPMPL’s submission
5.17.1. NSWPMPL has submitted that the Regulation 17 of the MERC RE Tariff Regulations,
2015 allows RoE at the Base Rate of 16%, to be grossed up as per the applicable Income
Tax rate. Accordingly, NSWPMPL has considered a post-tax RoE as 16 %
5.17.2. The Commission asked NSWPMPL to submit the reasons for estimating Pre-Tax ROE
with uniform corporate tax rate of 34.61% over 13 years‟ period for tariff computation,
without consideration of MAT and detail computation of Income Tax considering
accelerated depreciation for income tax purposes and to clarify whether MAT will be
applicable or otherwise.
5.17.3. NSWPMPL submitted that since the provisions of Income Tax Act granting holiday of 10
years for income tax under section 80IA has been discontinued from March, 2017. The
Minimum Alternate Tax (MAT) would no longer be the appropriate rate for gross-up to
derive tax expenses. Therefore, NSWPMPL has considered the corporate tax rate of
34.61% for grossing up the RoE. Relevant provision of Clause 4 (iv) of the income tax
notification is as below:
80-IA. (1) Where the gross total income of an assesse includes any profits and gains
derived by an undertaking or an enterprise from any business referred to in sub-
section (4) (such business being hereinafter referred to as the eligible business), there
shall, in accordance with and subject to the provisions of this section, be allowed, in
computing the total income of the assesse, a deduction of an amount equal to hundred
per cent of the profits and gains derived from such business for ten consecutive
assessment years.
(4) This section applies to—
(iv) an undertaking which, —(a) is set up in any part of India for the generation or
generation and distribution of power if it begins to generate power at any time during
the period beginning on the 1st day of April, 1993 and ending on the 31st day of
March, 80[2017];
Commission’s Analysis and Ruling
5.17.4. The regulation 17 of RE Tariff Regulations,2015 specifies that
“17.1 The value base for the equity shall be 30% of the Capital Cost, or the actual equity
(in case of Project-specific tariff determination) as determined under Regulation 14.
17.2 The Return on Equity shall be computed at the base rate of 16%, to be grossed up as
per the applicable tax rate.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 80 of 92
17.3 The rate of Return on Equity shall be computed by grossing up the base rate with
the tax rate equivalent to the weighted average of the Minimum Alternate Tax („MAT‟)
during the year for the first 10 years from COD, and the weighted average of normal tax
rate during the year for the remaining years of Project life.”
5.17.5. The Commission notes that while benefit of Tax holiday under Section 80IA of Income
Tax Act may not be available but the benefit of accelerated tax depreciation and
provisions of Minimum Alternate Tax continue to be applicable.
5.17.6. Accordingly, the Commission has considered the RoE as 16% Post Tax and grossed up
the same with MAT rate of 21.34% for initial 10 years of operation and IT rate of 34.61%
for remaining useful life of the Project in accordance with provisions under MERC RE
Tariff Regulations, 2015.
5.18. Tipping Fee and Other Income
NSWPMPL’s submission
5.18.1. NSWPMPL has submitted that as per the clause 17.1.1 of the Concession Agreement, a
Tipping Fee of Rs 225 per MT for the first year with an annual rise of 4.5% on
negotiation, shall be payable by NMC. Tipping Fee shall be payable from the COD and
shall be payable for the remaining period of Concession Agreement.
5.18.2. Concession Agreement mandates closure of all SLFs created and its maintenance for
post-closure period of 15 years. There will be no source of revenue for NSWPMPL for
funding the post closure capex and O&M during post closure period. Therefore,
NSWPMPL has proposed to fund those expenses from the reserves created from the
receipt of Tipping Fees from NMC under the Concession Agreement.
5.18.3. NSWPMPL has proposed to set aside Tipping fee of Rs. 95.90 Lakh per year to post
closure reserve account to meet its post closure obligations. Accordingly, the expenses
for post closure maintenance are not claimed separately for tariff determination.
5.18.4. NSWPMPL has considered remaining Tipping Fee as Non-Tariff income to offset the
revenue required from electricity tariff. Tipping fees in the form of non-tariff income
have reduced the need for levellised tariff by almost Rs. 1.15/ kWh.
Commission’s Analysis and Ruling
5.18.5. The Commission has noted that, the provision of Tipping fee was the basis of bidding
process carried out by NMC for selection of developer for its MSW Project. Provision of
Tipping fee and post closure obligations of NSWPMPL are also provided in the
Concession Agreement.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 81 of 92
5.18.6. The Commission also noted the post closure obligations of NSWPMPL and its proposed
provisions for creating reserve for meeting post closure obligations after 13 years.
Further, the Commission has considered escalation factor of 3.31% (5 years WPI as
discussed in Para 5.14.7 and 5.14.8 of this Order) as against 4% as considered by
NSWPMPL for estimation of Capital Cost and Operating expense towards Post-Closure
Operations. Accordingly, fund requirement to be set aside for Post-closure operations
have been considered by the Commission at Rs.90.13 Lakh per year instead of Rs.95.90
Lakh per year as estimated by NSWPMPL. The computation of revenue from Tipping
fees and creation of reserve are as shown in the Table below:
Table 29: Computation of Revenue from tipping fees
As submitted by
NSWPMPL
As considered by the
Commission
Parameter Year-1 Sum for 13
years Year-1
Sum for 13
years
Quantity of waste (MT) 292,000 3,796,000 292,000 3,796,000
Tipping fee (Rs. per MT) 225.00 escalation
of 4.5%
p.a.
225.00 escalation
of 4.5%
p.a.
Income from Tipping fee (Rs. Lakh) 657.00 11274.06 657.00 11274.06
Amount set aside to post closure reserve
account (Rs. Lakh)
95.90 1246.70 90.13 1171.60
Net income from Tipping fee considered for
Tariff determination (Rs. Lakh)
561.10 10027.36 566.87 10102.43
Total Capex and Opex required for meeting
post closure obligations upto 28 years. (Rs
Lakh)
95.90 1246.70 90.13 1171.60
5.18.7. Accordingly, the Commission has considered Net revenue of Rs. 566.89 Lakh for the first
year of Tariff determination and Rs. 10102.43 Lakh for 13 years Tariff period as against
Rs. 561.10 Lakh (Yr-1) and Rs. 10027.36 Lakh for 13 years as considered by
NSWPMPL.
5.18.8. Further the Commission also asked NSWPMPL regarding any options studied for
utilization of bottom ash and fly ash from MSW power plant. NSWPMPL submitted that,
the total ash generated due to combustion of waste in the plant is estimated to be 192
TPD on wet basis. Out of this 192 TPD ash, 80% i.e. 154 TPD is bottom ash and balance
20% i.e. 38 TPD is fly ash.
5.18.9. NSWPMPL submitted that only nontoxic bottom ash can be used in road embankments
and pavement blocks, provided due chemical treatment to remove toxic elements is
performed. If toxic metals exceed the permissible limit in ash, it becomes unfit for any
application.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 82 of 92
5.18.10. NSWPMPL has carried out Toxicity assessment test for its already operating WtE
Project. It is found that both bottom ash as well as fly ash contained high toxicity on
account of the contaminated material. Further, bottom ash is also hygroscopic in nature
i.e. it is porous in nature and if it comes in contact with water, it absorbs the water in its
pores and undergoes volumetric expansion. Volumetric expansion of bottom ash also
causes cracking in roads if used for filling. Also, the water picks up the toxic elements in
bottom ash and this leachate when mixes with ground water or surrounding water bodies,
it pollutes them. Therefore, treatment to remove bottom ash toxicity is essential before
any use and this treatment is very costly and yet to be commercially tested in India.
Therefore, for the proposed Project, they shall be sent to the SLF for proper disposal.
5.18.11. NSWPMPL has confirmed that, there will not be any non-tariff income from selling
bottom ash or fly ash generated from its MSW Power Plant. Accordingly, Commission
has not considered any non-tariff income from Ash generated from the MSW power
plant.
5.19. Discount Rate
NSWPMPL’S submission
5.19.1. NSWPMPL has considered a discount rate of 8.75% which is the weighted average cost
of capital for determination of levellised tariff as per Regulation 11.2 of RE Tariff
Regulations, 2015.
Commission’s Analysis and Ruling
5.19.2. With regards to determination of levellised Tariff, Regulation 11.2 and Regulation 11.3
of MERC RE Tariff Regulations, 2015 specifies as below:
11.2 For the purpose of computation of levellised tariff, a discount factor equivalent to
the normative post-tax weighted average cost of capital shall be considered.
“11.3 Levellisation shall be carried out for the „useful life‟ of the RE Project, while
tariff shall be determined for the period equivalent to the Tariff Period.”
5.19.3. In accordance with Regulation 11.3, the Commission has undertaken levellisation for the
entire Useful Life of 20 years, however Tariff for NSWPMPL‟s MSW Project is
determined for 13 years Period.
5.19.4. Further, in accordance with Regulation 11.2 of the RE Tariff Regulations, 2015, for
levellised tariff computation, the Commission has taken the discount rate as equivalent to
the weighted average cost of capital, which works out to 9.83% considering the interest
rate of 10.99% and post-tax RoE of 16% as approved in this Order.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 83 of 92
5.20. Status of Statutory Clearances:
NSWPMPL’S submission
5.20.1. The Commission sought NSWPMPL to clarify the status update for availing all statutory
clearances as mentioned in clause 2.1.1 of the Concession Agreement. NSWPMPL
submitted that, it is required to obtain certain clearances prior to the Appointed Date.
Accordingly, the clearances as tabulated below are to be obtained before achieving
financial closure for the proposed Project. The land for the proposed Project is handed
over to NSWPMPL on 17 November, 2017. NSWPMPL would initiate the process for
obtaining clearances as tabulated below:
Table 30: Status of Statutory Clearances
Approval/Clearance Concerned agency Consent to establish under Air and water act MPCB
Airport authority clearance ATC/AAI
Electricity Approval Distribution Company/MSEDCL
Environmental clearance MPCB
Site Authorization under MSW rules MPCB
License in accordance with the rules and
provisions of Labour (Regulation and
Abolition)Act 1970
MOLE
Consent to operate under Air and water act MPCB
NOC from Maharashtra fire services Director of fire services
Disaster management plan Maharashtra State Disaster
Management authority
Vehicle registration RTO
Power generation and purchase MERC / Distribution Licensee
Industrial set up approval Department of Industries, GoM
All drawings and document approval Authority
Water supply Authority
Commission’s Analysis and Ruling
5.20.2. The Commission notes that, NSWPMPL has considered the requirement of various
statutory clearance for its MSW power plant and same has been stipulated as Condition
Precedent in the Concession Agreement as well. The Commission hereby rules that, the
applicability of the Tariff determined under this Order shall be subject to the availability
of all the statutory clearances specified in the Concession Agreement between
NSWPMPL and NMC.
5.21. The summary of various parameters and assumptions
5.21.1. Following table covers capital cost, financial parameters, operating parameters and
performance parameters, as considered for the Project-specific Tariff determination in
this Order, as summarized below:
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 84 of 92
Table 31: Summary of Project Specific Parameters
Sl.
No.
Assumption
Head Sub-Head Sub-Head (2) Unit
NSWPMPL
(submission)
Approved by
Commission
1 Power
Generation
Capacity Installed Power Generation
Capacity MW 11.5 11.5
Auxiliary Consumption during
plant operation % 18.32% 17.17%
Annual Energy Consumption
during start-up and plant shut-down MUs 1.68* 1.68
PLF(during 1st year) % 65% 65%
PLF(2nd
year onwards) % 80% 80%
Useful Life Years 13 20
Tariff Period Years 13 13
2 Project Cost Capital
Cost/MW Per MW Capital Cost
Rs.
lakh/MW 1,877.76 1,797.54
Total Hard Cost Rs. lakh 18,208.05 17,856.35
Total Soft Cost(Excl. IDC) Rs. lakh 2,038.81 1,467.94
IDC Rs. lakh 1,633.72 1,347.42
Capital Cost Rs. lakh 21,880.57 20,671.71
Capital Subsidy (or VGF), if any Rs. lakh 7,000.00 7,000.00
Net Capital Cost Rs. lakh 14,880.57 13,671.71
3 Financial
Assumptions
Debt: Equity Debt % 70% 70%
Equity % 30% 30%
Total Debt Amount Rs lakh 10,416.40 9,570.20
Total Equity Amount Rs lakh 4,464.17 4,101.51
Debt
Component
Loan Amount Rs lakh 10,416.40 9,570.20
Moratorium Period years 0.00 0.00
Repayment Period years 10 12
Interest Rate % 12.30% 10.99%
Equity
Component
Equity amount Rs lakh 4,464.17 4,101.51
RoE for first 10 years (grossed up
for I. Tax) % p.a. 21.54% 20.34%
RoE 10th
year onwards (grossed up
for I. Tax) % p.a. 21.54% 24.47%
Discount rate % 8.75% 9.83%
Depreciation Depreciation rate % 7.00% 5.83%
Depreciation rate for balance useful
life % 6.67% 2.50%
Incentive Generation based Incentives, if any Rs. L p.a. Not applicable Not applicable
Period for GBI Years Not applicable Not applicable
4 Operation &
Maintenance O&M
Expenses Power Plant (year-1)
Rs. Lakh
in the
first year
1308 1116.23
Pre-Processing facility (year-1)
Rs. Lakh
in the
first year
744.13 744.13
Total O&M during 1st year of Rs. Lakh 2,052.13 1,860.36
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 85 of 92
Sl.
No.
Assumption
Head Sub-Head Sub-Head (2) Unit
NSWPMPL
(submission)
Approved by
Commission
Operation in the
first year
O&M as % of Capital Cost % 9.37% 8.87%
Annual
Escalation
Factor
2nd
year onwards % 5.72% 5.27%
Periodic
Maintenance
expenditure
To be carried out in 5th
& 10th
year
Rs. Lakh
Current
cost
1,000 1000
Annual
Escalation
Factor
For periodic maintenance
expenditure 2nd
year onwards % 4.00% 3.31%
O&M
Expenses of
Post closure
of new SLF-3
cells
To be incurred till 30th
year
Rs. Lakh/
cell for
the first
year
15.0 15.0
O&M
Expenses of
Post closure
of existing
SLF
To be incurred till 15th
year
Rs. Lakh
for the
first year
25.0 25.0
Annual
Escalation
Factor
During Post Closure Period % 5.72% 5.27%
Fixed Lease
Rent and
Premium
Rs.
Lakh/yea
r
2.61 2.61
5 Working
Capital
O&M
Expense Months 1 1
Maintenance
Spare (% of O&M expenses) % 15.00% 15.00%
Receivables
Months 2 2
Fuel Stock Months - -
Interest On
Working
Capital
% p.a. 12.80% 11.49%
6 Tipping Fee Tipping Fee yr-1 Rs/MT 225.00 225.00
Annual increment % p.a. 4.50% 4.50%
Tipping fees set aside for post
closure reserve account
Rs.
Lakh/ye
ar
95.09 90.13
7
Post Closure Post Closure
period Years 15.00 15.00
Capital To be incurred in 5th, 10
th Year Rs. 60.00 60.00
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 86 of 92
Sl.
No.
Assumption
Head Sub-Head Sub-Head (2) Unit
NSWPMPL
(submission)
Approved by
Commission
Expenditure
for Post
Closure
obligation
each (estimated at current cost) lakh/clo
sure at
present
cost
Annual
Inflation rate
on Capex
amount
For post closure obligation % 4% 3.31%
8 Fuel Related Fuel type MSW as fuel % 100% 100%
GCV of pre-processed MSW kCal/kg 1,800 1,800
5.22. Tariff Rate and Other Conditions
5.22.1. Based on the parameters, assumptions and methodology outlined in earlier paragraphs,
the Commission has determined the Levellised Tariff for the Project as Rs.7.00/ kWh,
which shall be applicable over a Tariff Period of 13 years from date of commercial
operation or for tenure of Concession Agreement, whichever is earlier. The computations
are shown in Annexure-1 of this Order.
5.22.2. NSWPMPL shall be responsible for generation of power from the Waste to Energy Plant
and sell the power to Distribution Licensee(s) in the State as per the terms and conditions
of the PPA, to be in line with the conditions and provisions as stipulated under this Order.
5.23. Other Commercial aspects:
Must Run Status, and Exemption from Merit Order Despatch
NSWPMPL’S submission
5.23.1. NSWPMPL has prayed to grant exemption to the proposed power plant from Merit Order
Dispatch (MoD) principles and grant it “Must Run” status like other RE projects. MSW
being challenging fuel for power generation, and need for highly sophisticated effluent
treatment system makes its cost of operation so high that it cannot compete with thermal
power plants to get selected under merit order despatch. Further, the incoming quantity
and quality of MSW is beyond the control of the Project developer.
Commission’s Analysis and Ruling
5.23.2. NSWPMPL‟s MSW Power Plant is considered as RE power plant and Regulation 12.1 of
MERC RE Tariff Regulations, 2015 specifies that, “Subject to the provisions of the
Indian Electricity Grid Code and the State Electricity Grid Code, all RE Power Projects,
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 87 of 92
except for Biomass-based Power Projects and Co-Generation Project, shall be treated as
„Must Run‟ Projects and shall not be subjected to „Merit Order Despatch‟.”
5.23.3. Further, the Commission also notes that, the basic purpose of operation of the MSW
based Waste to Energy plants is to dispose and mange waste in scientific manner as
envisaged under SWM Rules, 2016.
5.23.4. Hence, as per the provisions of RE Tariff Regulations, 2015, NSWPMPL‟s Nagpur MSW
power plant shall be treated as a “Must Run” Power Plant and shall not be subject to
Merit Order Despatch (MOD) principles but shall be subject to scheduling and despatch
requirements as per State Grid Code.
CSS and Additional Surcharge
NSWPMPL’S submission
5.23.5. The cross-subsidy surcharge and additional surcharge be waived to promote the
development of the waste-to-energy Project even for third-party sale as the Project is
required to support sustainable urban development by building Solid Waste Management
disposal and processing capacity.
Commission’s Analysis and Ruling
5.23.6. NSWPMPL has filed the present Petition for determination of Tariff for its MSW power
plant for generation and sale of entire power to Distribution Licensee(s) in the State.
Hence, the question of applicability of CSS and additional surcharge does not arise, under
present circumstances. The Commission is of the view that, NSWPMPL‟s prayer is not
relevant with the present proceedings of determination of Tariff for sale of electricity to
Distribution Licensee(s).
Netting off of power drawn during plant shut down and start-up power and Zero
Contract Demand Charges for power drawn:
NSWPMPL’S submission
5.23.7. Waste-to-Energy plants are subject to frequent shutdowns for periodic cleaning and
maintenance due to corrosive nature of MSW. Keeping in perspective the operational
requirements and the need for such Projects in the context of promoting sustainable waste
processing and disposal and development of waste to energy, such Projects should get the
benefit of zero contract demand charges.
5.23.8. Power drawn during shut-down or start-up should be net metered instead of charging as
consumers as a promotional measure for waste to energy Project owing to plant being
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 88 of 92
subject to frequent shut-downs for periodic cleaning and maintenance. The above facility
is also requested for third party sale.
Commission’s Analysis and Ruling
5.23.9. The Commission vide Para 5.12.30 and 5.12.31 of this Order has already accepted the
prayer of NSWPMPL and specified the treatment to the power drawn during plant shut
down and start-up power. Since the present Tariff Determination is under Section 62 of
the EA,2003, the Commission has considered that, the energy consumed by the MSW
plant shall be net off with the energy injected into the grid by the MSW plant.
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 89 of 92
6. SUMMARY OF COMMISSION’S DIRECTIVES AND APPLICABILITY OF
ORDER
6.1.1. In pursuance of Regulation 8 of MERC RE Tariff Regulations,2015 the Commission
hereby determines the project specific levellised Tariff for the said MSW-based power
project of NSWPMPL as Rs 7.00/ kWh, which shall be applicable over a period of 13
years from the date of Commercial Operation of said Project or for tenure of Concession
Agreement, whichever is earlier. This Tariff Order shall be valid subject to fulfillment of
Condition Precedent as outlined under Concession Agreement with NMC.
6.1.2. The Commission hereby directs NSWPMPL to submit the detailed break up of actual
Capital Cost of its Nagpur MSW plant with Pre-processing facility as on Commercial
operation date (CoD) duly certified by Statutory Auditor within six months from CoD of
the Project.
6.1.3. The Commission rules that, in case any additional subsidy or grant is received by
NSWPMPL other than VGF of Rs 70 Crore to be received from NMC, NSWPMPL and
MEDA shall inform the Distribution Licensee(s) regarding any such grant, subsidy or
incentives received by a NSWPMPL and Distribution Licensee(s) shall deduct any such
grant, subsidy or incentives received by a NSWPMPL in subsequent bills raised by
NSWPMPL towards sale of electricity in suitable installments or within such period as
may be stipulated by the Commission.
6.1.4. The said Project shall be treated as a “Must Run” Power Plant and shall not be subject to
MoD) principles but shall be subject to scheduling and despatch requirements as per the
provisions of State Grid Code.
6.1.5. NSWPMPL‟s prayer to waive off cross-subsidy surcharge and additional surcharge is
not relevant with the present proceedings of determination of Tariff for sale of electricity
to Distribution Licensee(s). Hence, the question of applicability of CSS and additional
surcharge does not arise, under present circumstances.
6.1.6. The energy consumed by NSWPMPL‟s MSW Plant during Plant shut down and start-up
power shall be netted off with the energy injected into the grid by the said Plant.
In view of above, the Petition of M/s Nagpur Solid Waste Processing & Management Pvt. Ltd.
(NSWPMPL) in Case No. 158 of 2017 stands disposed of accordingly.
Sd/- Sd/-
(Deepak Lad) (Anand B. Kulkarni)
Member Chairperson
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 90 of 92
Appendix – 1
List of persons at the Technical Validation Session held on 22 November, 2017
Sr. No. Name Organisation
1. A. Vidhyavathsal NMSWPMPL
2. Mahesh Ghagare NMSWPMPL
3. Jeevan Sonawane NMSWPMPL
4. Nitin Upadhye NMSWPMPL
5. Brijesh Kumar NMSWPMPL
6. Aastha Bhatia PWC, Consultant to the NSWPMPL
7. Ghanshyam Thakkar Reliance Infrastructure
8. Girish Pednekar The Tata Power Company Limited
9. Ajit Pandit Idam Infra- Consultant to the Commission
10. Krishnajith M.U, Idam Infra- Consultant to the Commission
11. Anant Sant Idam Infra- Consultant to the Commission
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 91 of 92
Appendix – 2
List of persons at the Public Hearing held on 29 December 2017
Sr.
No.
Name Organisation
1. Mahesh Ghagare NMSWPMPL
2. Jeewan Sonwane NMSWPMPL
3. Nitin Upadhye NMSWPMPL
4. A. Vidhyavathsal NMSWPMPL
5. Satish Chavan MSEDCL
6. SS Rajput MSEDCL
7. Manish Kharote BEST
8. Ajit Pandit Idam Infra- Consultant to the Commission
9. Anant Sant Idam Infra- Consultant to the Commission
10. Bhagavatheeswaran H. Idam Infra- Consultant to the Commission
11. Ankit Choudhary PWC
12. Sahil Tamarkar Tata Institute of Social Sciences
13. Trishna Roy Tata Institute of Social Sciences
14. Akshita Bansal Tata Institute of Social Sciences
15. Manas Tata Institute of Social Sciences
16. Aruja Pandey Tata Institute of Social Sciences
17. Aditya Menon Tata Institute of Social Sciences
18. Sarthak Shukla Tata Institute of Social Sciences
19. Saurav Suman Tata Institute of Social Sciences
20. Manish Tata Institute of Social Sciences
21. Ila Singh Tata Institute of Social Sciences
22. Joan Shilpa Kiran Tata Institute of Social Sciences
MERC Order for determination of Tariff for 11.5 MW MSW project of NSWPMPL
Order- Case No 158 of 2017 Page 92 of 92
Annexure-1: Summary of Levellised Tariff
2.2 Form Template for (Nagpur MSW based power project): Determination of Tariff Component
Units Generation Unit Year---> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Discount Factor 1.00 0.91 0.83 0.75 0.69 0.63 0.57 0.52 0.47 0.43 0.39 0.36 0.32 0.30 0.27 0.24 0.22 0.20 0.18 0.17
Installed Capacity MW 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50 11.50
Gross Generation MU 65.48 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59 80.59
Elect. Consumption during Start-Up MUs 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68
Auxiliary Consumption MU 11.24 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84 13.84
Net Generation MU 52.56 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08 65.08
Fixed Cost Unit Year---> 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
O&M Expenses Rs Lakh 1,860 1,958 2,062 2,170 3,424 2,405 2,532 2,665 2,806 4,294 3,109 3,273 3,446 3,627 3,819 4,020 4,232 4,455 4,690 4,937
Depreciation Rs Lakh 798 798 798 798 798 798 798 798 798 798 798 798 342 342 342 342 342 342 342 342
Interest on term loan Rs Lakh 1,008 920 833 745 657 570 482 394 307 219 131 44 -0 0 -0 0 0 -0 0 -0
Interest on working Capital Rs Lakh 113 131 132 140 146 136 138 139 146 156 145 147 152 67 69 71 73 75 77 79
Return on Equity Rs Lakh 834 834 834 834 834 834 834 834 834 834 1,004 1,004 1,004 1,004 1,004 1,004 1,004 1,004 1,004 1,004
Total Fixed Cost Rs Lakh 4,613 4,641 4,658 4,687 5,859 4,743 4,784 4,831 4,891 6,301 5,187 5,265 4,943 5,040 5,233 5,436 5,650 5,875 6,112 6,362
Per unit Fixed Cost Rs/kWh 8.78 7.13 7.16 7.20 9.00 7.29 7.35 7.42 7.52 9.68 7.97 8.09 7.60 7.74 8.04 8.35 8.68 9.03 9.39 9.78
Tipping Fees
Less Revenue from Tipping fees Rs Lakhs 567 596 627 660 693 729 765 804 844 886 930 976 1,024 - - - - - - -
Net Fixed Cost Rs. Lakhs 4,046 4,045 4,031 4,028 5,166 4,015 4,018 4,027 4,046 5,415 4,257 4,289 3,919 5,040 5,233 5,436 5,650 5,875 6,112 6,362
Levallised tariff corresponding to Useful life
Per Unit Cost of Generation Unit Levellised 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
O&M expn Rs/kWh 4.45 3.54 3.01 3.17 3.34 5.26 3.70 3.89 4.10 4.31 6.60 4.78 5.03 5.30 5.57 5.87 6.18 6.50 6.85 7.21 7.59
Depreciation Rs/kWh 1.11 1.52 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 1.23 0.53 0.53 0.53 0.53 0.53 0.53 0.53 0.53
Int. on term loan Rs/kWh 0.80 1.92 1.41 1.28 1.14 1.01 0.88 0.74 0.61 0.47 0.34 0.20 0.07 -0.00 0.00 -0.00 0.00 0.00 -0.00 0.00 -0.00
Int. on working capital Rs/kWh 0.20 0.21 0.20 0.20 0.22 0.22 0.21 0.21 0.21 0.22 0.24 0.22 0.23 0.23 0.10 0.11 0.11 0.11 0.11 0.12 0.12
RoE Rs/kWh 1.39 1.59 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.54 1.54 1.54 1.54 1.54 1.54 1.54 1.54 1.54 1.54
Total COG Rs/kWh 7.96 8.78 7.13 7.16 7.20 9.00 7.29 7.35 7.42 7.52 9.68 7.97 8.09 7.60 7.74 8.04 8.35 8.68 9.03 9.39 9.78
Less Revenue from Tipping Fees Rs/kWh -0.95 1.08 0.92 0.96 1.01 1.07 1.12 1.18 1.24 1.30 1.36 1.43 1.50 1.57 - - - - - - -
Net COG adj. tipping fee Rs/kWh 7.00 7.70 6.22 6.19 6.19 7.94 6.17 6.17 6.19 6.22 8.32 6.54 6.59 6.02 7.74 8.04 8.35 8.68 9.03 9.39 9.78
Levellised Tariff Rs/kWh 7.00