The industrial requirement for clean fuel has been rising with the increasing government push to switch to clean energy alternatives. Large industries such as tyres, fast moving consumer goods, and chemicals and pharmaceuticals, as well as beverage manufacturers have shifted to using agricultural waste-based briquettes and pellets. However, on the supply side, the industry is highly unorganised and quality is not consistent. This poses a serious production challenge for large industries for which biomass is a critical element of the manufacturing process. Biofuels Junction Private Limited (BJPL) is addressing the market gap for brands such as Hindustan Unilever Limited, Marico and Pepsico.
Biofuels Junction, started in 2016, is an aggregator of biomass briquettes and pellets made from agricultural and wood waste with a presence across the solid biofuels value chain, from raw material to steam contracts. Apart from its own manufacturing at strategic locations, the company has also mapped reliable suppliers to secure briquettes and pellets supply for its enterprise customers over the past four years.
Key initial projects and growth strategy
Biofuels Junction has entered into contractual arrangements with manufacturers and posted teams on the ground for supplier development. Additionally, the company has upgraded and seeded raw material agents to become captive manufacturers. To exploit the untapped sources of biomass raw material, it has deployed equipment in its sourcing zones, which could be scaled up on a pan-Indian basis. This is specifically for cotton stalk as a raw material, which is not yet fully commercialised.
In 2019, the company entered into the production of these clean energy products by acquiring plants in strategic locations, from where the logistical challenge of procuring raw material and transporting the final product to customers could be minimised. Biofuels Junction has a briquette manufacturing factory at Mandangad and Thane in Maharashtra. The company has a state-of-the-art pellet manufacturing facility in Nagpur with a pellet brand named BioSpark.
Biofuels Junction intends to follow an asset-light model in the biomass briquettes domain where the supply ecosystem is distributed currently and is not suitable for achieving economies of scale beyond a certain volume. Pellets are seeing increasing acceptance as an alternative to LPG and diesel. For geographical expansion, the company plans to have more facilities on lease or even on a partnership model. Similarly, for industrial pellets, it plans to go with a partnership model where it can contribute by way of machinery and technical guidance.
The growth drivers for Biofuels Junction would be backward and forward integration to assure raw material supply, and forward integration for demand sustainability with a yearly growth and a production capacity of 50,000 tonnes, as of March 2020. The company plans to scale up its demand side by geographically expanding its focus on the commercial pellet market and boiler management contracts. It is set to achieve higher revenue targets from the current level of about Rs 230 million in the financial year 2020.
Biofuels Junction offers technologies and solutions at the manufacturer as well as the user end. Biofuels are easy and clean to handle vis-à-vis other fuels, especially coal. Being non-inflammable and with moisture levels always below 12-15 per cent, biofuels are safe and predictive in their usage, unlike coal or lignite where the ash and moisture vary with season. A well-equipped laboratory can help monitor fuel quality and hence, boiler performance. For the commercial use of pellets, the equipment is fitted with electronic controls (SCADA system), which take care of the feed rate and hence the technical manpower or other auxiliary requirements are much lower. At the supplier end, Biofuels Junction helps with flash driers and vibrating sieves to reduce moisture for higher productivity and refinement.
Key challenges and outlook
In the present economic and political climate, there is an underlying and strong acceptance of biofuel usage across sectors and geographies. However, incentivising the supply side, which suffers from acute challenges, can help accelerate usage. Being an unorganised and geographically distributed industry, it is difficult for it to achieve economies of scale and hence, it has limited cost benefits. With very low entry barriers and non-targeted government incentives, the industry has had many players coming in and leaving owing to unviability issues. What is needed to incentivise the supply side is a targeted approach towards easing logistics in order to boost actual sales and keep genuine players and manufacturers motivated.