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Farm-to-Fuel ecosystem: Circular economy for Agri-waste

Updated: Dec 20, 2022

Published in Agrospectrum | Dec'22 Issue

The government of India has announced to reach net zero emissions by 2070 and to meet 50% of its electricity requirements from renewable energy sources by 2030. This is hugely significant for the global fight against climate change. Such targets can be met through increasing domestic production, adopting biofuels and renewables, applying energy efficiency norms, developing refinery processes, and achieving demand substitution. India has abundant indigenous, non-polluting, and virtually inexhaustible renewable energy resources, which makes biofuel a viable option. This environmentally friendly alternative also brings with it several possibilities to enable a positive transformation.

Why Biomass as Biofuel

India ranks in the top 3 countries by crop production. Agri-waste biomass holds the highest potential for small-scale business development and mass employment in India. Characterized by low-cost technologies and freely available raw materials, biomass as biofuel has the potential to be one of the leading sources of primary energy. Aided by proven end-use technologies, biomass is not only environmentally efficient but also an economically sound option. Unfortunately, with millions of farmers in the workforce, farm waste is not considered as an avenue for extra income in India. Inefficiencies in the ecosystem such as a lack of delivery linkages, an unorganized supply chain, no direct connection of the industry with the source, low benefit to the farmer, and lack of transparent pricing, among others, also exacerbate matters.

India imports nearly 85% of crude oil, which incurs high import costs. On top of it, the air quality in urban India is deteriorating due to the growing vehicular traffic and emissions. This is where biofuel production can make a significant difference as it can seamlessly replace fossil fuels and help reduce the carbon footprint. Biofuels can pave the path to energy self-sufficiency and create a robust rural economy, thus aiding in overall economic development.

Factors enabling a biomass ecosystem

Although there lies a huge opportunity in harnessing the rural markets of biomass, there also is a distinct lack of cohesion and connectivity between the farmers and the industry.

Rural storages

The seasonal availability coupled with round-the-year industrial demand, calls for mechanization and storage-related facilities in biomass catchment areas. The current shortage of mechanization and unavailability of small storage facilities is clearly one of the constraints as far as the supply chain is concerned. Encouraging farmers/ farmer collectives and rural businesses to create small rural storages will help harness biomass and help generate higher value for rural participants.

Small Rural Businesses

Biomass is very low in density. Thus, despite of proven technical value as an energy source, the cost of logistics can make use of biomass uneconomical. Small briquette/ pellet manufacturing units located within 20 Km distance from the source will not only help solve the challenge of logistics but also create stronger rural enterprise and economic value.

Small Business Finance

The challenge of storage and logistics will always call for decentralized small businesses as primary constituents of the biomass supply chain. Small storages, small processors, and small aggregators; all based in rural areas will facilitate India’s drive to use more than 200 million MT of annual Agri- waste. A few thousand such businesses dotting the rural landscape will call for efficient small business finance for this sector. How do we elevate the biomass supply chain to the level of acceptance of say an automotive supply chain? Tier 3 and Tier 4 suppliers of automakers benefit from their association with large OEMs. Capital as well as working capital is available at competitive rates for these suppliers. How do we create a similar supply chain for biomass? Will it be possible for a small rural business to get competitive interest finance because it is a tier 3 supplier to a large credit-rated company?

Supply Quality

A key thing to recognize about biomass is that we are dealing with a natural product. Thus, its quality may vary based on crop type, soil type, weather conditions, and a host of other factors. Industrial end-use though calls for assured uniform quality. Defining quality standards, SOPs for quality assurance, and creating knowledge and skills to deliver uniform quality, will help these rural businesses scale up. Several sectors including the Tea industry have achieved standardization, grading, and price discovery methods that have made it a global industry. There is an urgent need to create a quality ecosystem for similar action in the biomass space.