India's reliance on imported fossil fuels, with its inherent energy security risks and price volatility, has long been a concern. But in the midst of these challenges, a Mumbai-based startup, Biofuels Junction Private Limited, founded by finance professionals Ashvin Patil and Chaitanya Korgoankar in 2016, has been quietly working on a solution that could change the game. The company endeavours include harnessing cutting-edge technology to enhance the competitiveness of biofuels, developing innovative strategies for addressing supply chain challenges, and actively contributing to India's energy security.
Since its inception, Biofuels Junction has saved 3 lakh tons of CO2 emissions (equivalent to 3 lakh carbon credits) and over Rs. 1 billion for Corporate India by replacing furnace oil in boilers. They've improved working conditions, particularly in drought and farmer suicide-prone regions. Their IT platform connects 500+ biofuel suppliers, promoting transparency and eco-friendly practices. Their initiatives empower rural entrepreneurs, generate income, aid 35,000+ farmers, and champion biomass feedstock, fostering a cleaner environment.
With a client roster including Hindustan Unilever, Reliance, Mondelez, ITC, and CEAT, Biofuels Junction has not only revolutionized the energy sector but also gained recognition among some of India's leading corporations.
In an enlightening interview with TheCSRUniverse, Mr. Ashvin Patil, Founder and Director of Biofuels Junction Private Limited, provides valuable insights into their journey. He discusses the significance of domestic biofuel production for India's energy security, highlighting advancements that have made biofuels competitive. Mr. Patil also touches on strategies for addressing supply chain challenges and reflects on the positive social and environmental impact of their initiatives. Finally, he outlines Biofuels Junction's vision for the future, emphasizing innovation, expansion, and sustainability within the biofuel industry.
To unravel the world of biofuels and its potential to reshape India's energy landscape, scroll down to read the full interview below.
Q&A
Q. Can you elaborate on the specific energy risks that India faces due to its heavy dependence on imported fossil fuels, and how does promoting domestic biofuel production address these challenges?
A. India is confronted with a multitude of energy challenges due to its heavy reliance on imported fossil fuels, mainly oil and natural gas. These challenges encompass susceptibility to price volatility, geopolitical instability, energy security risks, and environmental concerns. The nation's heavy dependence on energy imports renders its security vulnerable, exposing it to potential disruptions in the global energy supply chain that could wreak havoc on energy needs and overall economic stability. Furthermore, the significant consumption of fossil fuels in India contributes substantially to air pollution and greenhouse gas emissions, resulting in adverse effects on public health, increased healthcare expenses, and long-term harm to the environment.
To mitigate these challenges, the promotion of domestic biofuel production offers several solutions, notably reducing dependence on imported fossil fuels. Biofuels represent a cleaner and more sustainable alternative to conventional fossil fuels, as they are locally produced, ensuring price stability and shielding India from the vagaries of commodity price fluctuations.
India grapples with a substantial natural gas deficit, with production primarily satisfied through imports. Compressed biogas (CBG) has emerged as an almost net-zero emissions substitute for imported fossil natural gas, utilizing various waste and biomass sources.
While India currently has only 46 operational CBG plants out of a planned 5,000 under the SATAT scheme, the government aims to raise the gas proportion in the energy mix to 15% by 2030, with CBG playing a pivotal role in achieving this objective. Additionally, there is a mandate for a 5% CBG blend for all entities involved in natural gas marketing, further advancing CBG adoption.
The Indian government has increasingly turned to ethanol as a crucial element of its strategy to meet biofuel blending targets in the automotive sector. An ethanol blending program, primarily for petrol, has been put into action. This initiative entails mixing a specified percentage of ethanol (typically 5-10%) with petrol to curtail fossil fuel consumption and diminish emissions. E20 petrol, containing 20% ethanol, has been introduced at over 1,900 fuel stations nationwide, showcasing the program's success with petrol. By stimulating ethanol production from domestic sources, India seeks to diminish its reliance on imported crude oil and fossil fuels, thereby bolstering energy security and mitigating the economic repercussions of oil price fluctuations. India has established ambitious targets for biofuel blending, aiming to achieve a 5% biodiesel blend in diesel sales by 2030. Furthermore, ethanol blending in petrol is anticipated to experience substantial growth in the coming years.
Q. Could you provide more details about the technological advancements in biofuel production that have led to improved economics, making it competitive against traditional fossil fuels? How has Biofuels Junction leveraged these advancements?
A. Leveraging technology to establish a marketplace platform in the biofuels industry is pivotal for optimizing supply-demand dynamics and promoting sustainable technologies. Biofuels Junction's has developed an IT platform which connects over 500 suppliers in the biofuels industry. This platform is open to buyers seeking efficient procurement solutions, offering a comprehensive price discovery mechanism and streamlined trade settlement processes. To ensure the highest quality standards are upheld, Biofuels Junction has developed Standard Operating Procedures (SOPs) that govern all aspects of the marketplace.
Additionally, dedicated relationship managers are assigned to clients, facilitating personalized support and ensuring a smooth and mutually beneficial trading experience. This marketplace efficiently connects biofuel producers with manufacturers, saving on transportation costs and minimizing waste. Collaboration and knowledge sharing are facilitated, fostering advancements in biofuel processes.
Moreover, the platform enhances market transparency, provides regulatory insights, and encourages the adoption of eco-friendly practices.
Separately, many Industrial users are moving from imported coal (mainly Indonesian) to biofuels. This again has advantages as above, lower import bill, much lower air pollution and environment protection through greenhouse gas reduction. Additionally, coal has been very volatile in past 12 months (almost 100% price movement) which also is mitigated by shifting to solid biofuels such as Briquettes & Pellets.
Q. Could you delve into the challenges that you initially encountered in terms of supply, and how did the startup successfully overcome these challenges?
A. In the early stages, Biofuels Junction encountered challenges related to scattered biomass supply. One of the primary issues was the seasonal and inconsistent availability of biomass, where crop residues were often burned by farmers. This led to a highly variable and unreliable source of raw materials for biofuel production.
To overcome these supply challenges, Biofuels Junction adopted a multifaceted approach.
First, we actively engaged with suppliers who worked with local farmers and agricultural communities to raise awareness about the value of crop residues as biomass feedstock. By establishing partnerships and educational initiatives, they encouraged farmers to preserve crop residues rather than burn them, creating a more reliable and sustainable biomass supply.
Additionally, Biofuels Junction strategically tied up with suppliers in close proximity to biomass sources. This decision resolved logistical issues associated with long-distance transportation, ensuring a consistent and efficient flow of raw materials to the production facilities.
The current challenges that we recognize which can serve as opportunities for the future:
1) Insufficient investment in farm automation post-harvest,
2) The need for better rural logistics to source agricultural residue for biofuels, and,
3) Promoting energy crops on non-food agricultural land. These challenges, when addressed, open doors to increased efficiency, rural development, sustainable biofuel production, and land diversification, contributing to a more sustainable future.
Q. How does Biofuels Junction's involvement across the solid biofuels value chain contribute to a responsible impact on the environment and rural economy, and could you provide insights into specific initiatives for achieving these long-term goals?
A. Biofuels Junction has achieved significant social and environmental impact, including adding 50+ rural entrepreneurs, creating over 3000 rural jobs, generating over 8 crore in income, supporting 35,000+ farmers with an additional income of Rs 2,500 per farmer and contributing Rs 80-100 million to the rural economy.
Since inception, we have saved 3 lakh tons of CO2 emissions, equivalent to 3 lakh carbon credits, helping Corporate India save over Rs.1 billion by replacing furnace oil in their boilers while improving working conditions, and making a positive impact in agrarian geographies, particularly in drought and farmer suicide-prone regions like Vidarbha, Marathwada, MP, Gujarat, Chhattisgarh, and Karnataka.
Biofuels Junctions investment in state-of-the-art manufacturing facilities, such as the pellet production facility in Nagpur under the brand name BioSpark, underscores our commitment to product quality and innovation. This focus on high-quality biofuels not only meets the needs of their customers but also ensures that the environmental benefits of using these fuels are maximized.
Q. Could you share some inspiring stories or examples of how the initiatives have directly impacted farmers' lives and augmented their income, while contributing to a cleaner environment?
A. Biofuels Junction's initiatives have directly impacted farmers' lives, boosted their income, and contributed to a cleaner environment.
Farmers have been encouraged to stop the practice of burning crop residues. Instead, they now sell these residues as biomass feedstock. This has not only helped farmers generate additional income post harvesting but also provides employment to labourers and MSME suppliers in rural India.
Biofuels Junction has developed many rural aggregators of biomass to become solid biofuel manufacturers. This was a great step for their own development as well as improving the financial status. In this process, Biofuels Junction has not only helped them for offtake assurance of the product but also helped in machine selection to planning and in some cases proving critical equipment too.
Q. Please share examples of how Biofuels Junction established its market reputation for quality, reliability, and compliance, especially among corporate clients, and how these attributes, along with your funding strategy, contributed to its success?
A. Biofuels Junction's commitment to assisting manufacturers in setting up and expanding their plants with cutting-edge technology at minimal costs underscores its dedication to fostering growth and sustainability in the biofuels industry. To ensure quality biofuels, we have a team on the ground to ensure the SOPs are followed by the supply partners across locations. To ensure reliability of supply to the end user, Biofuels Junction has mapped the supply chain to ensure that supply planned is always more than the requirement as a back and route risk is mitigated by different location of supply. An experienced team, which works round the clock, at the head office ensures regular guidance to suppliers to meet the compliance requirements of delivery.
Kaustubh Potdukhe, an entrepreneur from The Packaging Corporation Of India, Dhamangaon, stands as a shining example of our unwavering support in the biofuels sector. He expressed heartfelt gratitude for our instrumental role in establishing his successful briquette business. Kaustubh praised our guidance in selecting the right briquette machine, the seamless procurement of raw materials, and the strategic sales insights that propelled his business to success. His remarkable journey is a testament to our commitment to nurturing entrepreneurs in the biofuels industry.
Biofuels Junction has recently secured a seed round of funding from Schneider Electric and Distuptors Capital. This funding infusion will play a pivotal role in the company's expansion strategy. It will not only support the growth of Biofuels Junction's existing business but also facilitate the launch of the technology platform tailored to meet the specific needs of the biofuels value chain. With over 500 biomass suppliers catering to 120+ marquee clients, this platform facilitates procurement, price discovery, and trade supplements. Our clients include Hindustan Unilever, Reliance, Mondelez, ITC, and CEAT among others.
Q. What are your partnership and collaboration strategies with stakeholders in the biofuel industry? How have these partnerships contributed to the company's growth and impact?
A. Biofuels Junction's dedicated field staff collaborates with over 450 biofuel manufacturers in Maharashtra, Gujarat, Rajasthan, and parts of North India. The company aims to expand its operations into South India, tapping into regions rich in agricultural waste supply. Biofuels Junction currently supplies around 9000 metric tonnes of briquette and pellets per month to its 120 + marquee clients. The company has been profitable since FY19. Its turnover has grown 10 times from FY19 to FY23 and was Rs 66.5 crore last fiscal.
Q. Given the involvement of finance professionals in founding Biofuels Junction, could you discuss the financial aspects of biofuel adoption? How do the economics of biofuel production align with the financial goals of both the company and its partners? How does the company tackle the challenge of changing mindsets and ensuring affordability to encourage the adoption of biofuels in today's energy environment?
A. India generates approximately 500 million tonnes of agricultural residue annually, of which nearly 200 million tonnes go unused and are often burned, representing a potential business worth around Rs 50,000 crore. This presents an untapped resource that can be converted into valuable biofuels.
The cost-effectiveness of biofuels compared to traditional sources like coal, diesel, or furnace oil is a significant driver in the biofuels industry's shift towards adoption. While biofuels may not drastically undercut domestic coal prices, they do offer notable advantages when compared to other fossil fuels. For instance, biofuels are approximately 10 percent cheaper than imported Indonesian coal.
However, the most substantial cost savings are realized when biofuels are compared to furnace oil or diesel, where biofuels can be nearly 40 percent cheaper.
Here's a simplified breakdown of the economics: One liter of diesel, costing Rs 90, produces around 10,500 kilocalories of energy. This can be substituted with wood waste pellets, which yield 4,000 kilocalories. To replace 1 litre of diesel (Rs 90), a plant requires approximately 2.5 kg of pellets, costing around Rs 40 to 50. This represents a significant cost reduction, approximately halving the expenses involved.
In the case of industrial boilers, where one litre of furnace oil costs Rs 65 and generates 9,500 kilocalories of heat, it can be substituted with just 3 kg of briquettes, costing only Rs 24 (approximately Rs 4.5 to Rs 5.5 per kg ex-factory). While there may be additional manpower costs associated with handling solid fuel, the total cost remains substantially lower than that of using furnace oil.
The last two years have witnessed significant volatility in the Indonesian coal market due to geopolitical factors, causing the landed price of Indonesian coal in Mumbai to surge from around 7 to 8 rupees per kg to as high as 15 rupees, subsequently coming down to 12 rupees. This 100% price fluctuation had a substantial impact on industries sensitive to input costs, such as textile processors. Many of these players swiftly transitioned to biomass briquettes purely for cost reasons, seeking a more stable and economical alternative.
On the other hand, small and medium enterprises (SMEs), like farsan makers, caterers, dal and poha meal producers, and bakeries, which had been using diesel or LPG for heating purposes and have adopted pellet-based biomass burners. The shift resulted in approximately 50% cost savings in terms of heat equivalence. Various applications, ranging from the farsan industry to adhesive tape manufacturing and die casting, embraced this change.
Regarding the textile industry, while some players have continued to use biofuels due to their adaptability and stable pricing, others have reverted to coal as Indonesian coal prices have once again dropped to around 8-9 rupees per kg in the Mumbai region. However, the key takeaway is that many businesses have recognized the inherent unpredictability in coal prices, which are influenced by international factors. In contrast, biomass prices have proven to be far more stable, with significantly lower volatility, making biofuels a reliable and attractive long-term option for various industries seeking cost-effective and environmentally sustainable energy sources.
This cost advantage is a compelling reason why many small and medium enterprises are transitioning from diesel and LPG to biofuel pellets for their energy needs. The economic benefits, coupled with environmental considerations and sustainability goals, make biofuels an attractive and viable alternative in various industrial applications, ultimately driving the industry's shift towards biofuel-fired boilers.
Also at the firm level, Biofuels Junction works on an asset light model with tight working capital cycle. This ensures that company maintains the capital efficiency in this commodity product with no so attractive margins.
Q. Amid the dynamic biofuels landscape, what is Biofuels Junction's distinct sustainability framework? What innovative strategies set you apart, driving enduring environmental and socio-economic viability?
A. Biofuels Junction's distinct sustainability framework is characterized by its holistic approach to environmental responsibility, technological innovation, and support for businesses and entrepreneurs in the biofuels sector. Biofuels Junction’s involvement in creating a marketplace platform or ecosystem for biofuel-related technologies fosters innovation, collaboration, and knowledge sharing. By centralizing information about biofuel availability and technology options, the company accelerates the adoption of efficient and sustainable technologies across the manufacturing industry. The company provides critical support to entrepreneurs and manufacturers looking to set up or scale their biofuel production plants. This includes guidance on machinery selection, raw material procurement, and operational efficiency, ensuring that businesses thrive while adhering to sustainable practices.
Q. Looking ahead, what are the key areas of innovation, expansion, or advancement that Biofuels Junction envisions in the biofuel industry, and how does the company plan to stay at the forefront of these developments?
A. Biofuels Junction’s growth strategy hinges on two key drivers: backward and forward integration. Backward integration is pivotal to secure a consistent supply of raw materials, ensuring reliability in the production process.
Meanwhile, forward integration aims to sustain demand by focusing on geographical expansion within the commercial pellet market and forging boiler management contracts. Our core business strategy centers on identifying and nurturing high-quality suppliers, with the aim of empowering them to become significant manufacturers of clean energy products while forming exclusive partnerships with Biofuels Junction.
Additionally, the company intends to expand its manufacturing footprint by strategically establishing its own production facilities in key locations. This strategic approach not only ensures a reliable supply of raw materials but also minimizes logistical challenges associated with procuring these materials and delivering the final products to customers, ultimately enhancing efficiency and competitiveness in the market.
Biofuels Junction plans to expand its geographical presence from North, West and Central parts of India where we are currently present to other parts of India especially to the South. This expansion will enable the company to reach new customers and markets, further driving the adoption of biofuels as a clean energy source. In addition to solid biomass in the form of briquettes and pellets, Biofuels Junction has recently ventured into supply of liquid biodiesel. This liquid biodiesel serves as a sustainable substitute for furnace oil and diesel, derived from sources such as agri residue and plants.
Our core focus ahead lies in adding significant value within the biofuels supply chain emphasis on maintaining the highest levels of quality and consistency throughout its operations, guided by meticulously developed Standard Operating Procedures (SOPs) that ensure rigorous compliance with regulatory standards, including e-invoicing, GST, and TDS.
