Interview: Ashvin Patil

Ashvin Patil,
Founder & Director at Biofuels Junction
 

“Supply Side has to be Incentivised to Keep up the Pace with Demand Side”

We clearly see the demand rising continuously as it’s driven by distinct advantage to the user in terms of cost and environment norms. However, the supply side has to be incentivised to keep up the pace with demand side. There is large occurrence of failure in small manufacturers in this field. This is where the Government support is critical.
In an exclusive interaction series with startup companies in the energy and mobility space, Manu Tayal, Associate Editor, Energetica India, interacted with Ashvin Patil, Founder & Director, Biofuels Junction Pvt Ltd. Here’re the edited excerpts from that interaction:

“Shed some light on Biofuels Junction including its vision.”

Biofuels Junction, started in 2016, is dealing in solid biofuels value chain with presence from raw material to steam contracts. It is positioned as one of the largest aggregators of biomass briquettes & pellets made from agri and wood waste.
In 2019, we entered in production of these clean energy products by acquiring plants in strategic locations from where the logistical challenge of procuring raw materials and transporting the final product to customers can be minimised. We have a briquette manufacturing factory at Mandangarh (Ratnagiri District) and Thane. Our vision is to be a performance leader in the clean energy sector by providing sustainable, socially responsible, energy solutions. Also, we have our pellet manufacturing facility in Nagpur with brand name BioSpark.
The growth drivers for Biofuels Junction would be backward and forward integration, backward integration to assure raw material supply and forward integration demand sustainability, with a yearly growth and a production capacity of 50,000 tons (as of March 2020). We are planning to scale up its demand side by geographically expanding focus on commercial pellet market and boiler management contracts. With a total headcount of 40, Biofuels Junction is set to achieve higher revenue targets from current levels of Rs 21 crore in FY2020.

“What market scope do you see?”

Industry has embraced biofuels as a form of clean energy across applications and geographies. Over the past decade, large corporations have adopted biofuels for lower pollution parameters and cost savings. This shift was spearheaded by the Multinationals (MNCs) and now accepted by the MSMEs too. Thus in terms of replacement it has been replacing usage of Crude Oil derivatives such as Furnace Oil and Gas successfully and has also resulted in cost savings. Recently, the shift has also happened in replacing Coal for pollution related issues. Pharma, Chemical, Tyres and Food Industries were the first one to shift while industries such as Steel and Cement are yet to make a move. We foresee Power sector to be the biggest users of biofuels going ahead – a trend which is in line with developed countries. Hence, biofuels are not a hard sell any more to the industry, but a necessity and convenience.
Briquettes are already accepted by the industry as a means to reduce cost vis-à-vis use of furnace oil and achieve better pollution norms vis-a-vis coal or other fossil fuels. Industrial pellets are also getting acceptance for the benefit of automation and better pollution norms. Commercial grade pellets usage has surged recently as the equipment ecosystem has advanced and a clear advantage is available in terms of better performance against wood or any raw fuel and huge cost savings vis-à-vis LPG and Diesel. Thus we believe commercial grade pellets would be the new growth drivers for the industry.

“In the initial stage did you find any challenges while working?”

Like any entrant, we faced a key challenge of ‘what is your value add?’. We realised that since the industry is barely 20 years old there is ample of scope to improve everything and offer tangible as well as intangible value propositions.
Our challenge was to inculcate our vision into our supply partners and all the efforts are focussed on the same. While our internal practices fell in place with the help of our own work experience before this venture and with the help of experienced and qualified manpower.
Another challenge was to drive the cognizance to the buyer that cost is not everything but reliability and consistency is equally important. That was achieved with few years of exposure with them and testing times such as floods of 2019 and currently the on-going covid situation.

“What are your views on government support for the start-up ecosystem in the country? What are your expectations from the government?”

We clearly see the demand rising continuously as it’s driven by distinct advantage to the user in terms of cost and environment norms. However, the supply side has to be incentivised to keep up the pace with demand side. There is large occurrence of failure in small manufacturers in this field. This is where the Government support is critical.

Government has been supporting rural ventures all along, since we are an agrarian economy and rural India voters decide the fate of Government, having said, the targeted help to this particular industry can be even more evident. Government has been promoting this industry over the past decade by offering capital subsidies through local bodies during the set up stage.
Almost 90% of the supply of solid biofuels comes from rural areas and they face many challenges from establishing the business to running it. Government can help this industry in monitory and non-monitory ways.
One of the ways could be waiving off the GST on Biofuels which is currently at 5%. This will reduce the compliance burden on small manufacturers while make it attractive vis-à-vis fossil fuels such as Coal or Furnace oil. We suggest subsidised rate of electricity to be given to small rural manufacturing units to lower their running cost. Other areas to support the ecosystem would be relaxation in the plant setup processes etc.

“Please share details about investor, funding, capital etc?”

Biofuels raised undisclosed Series A funding last year and will be looking to raise fresh funding this year. We had raised first round from professionals and friends who had confidence in our capabilities and intentions along with strong positive view on this sunrise industry. Now we are looking at the next level of funding for more growth & expansion which is mainly 1) strong supply side with wider manufacturing base, enable franchise or partnership model and own units at strategic locations 2) demand sustainability with forward integration – ie taking more boilers O&M contracts.

“How do you see your journey so far?”

We are clearer on next stage of expansion and growth agenda. We do know what need not to be done and keep the focus intact. We have concluded that this has to be an asset light model on manufacturing or supply side while driven by own strengths on the demand or forward integration side. These lessons from the journey so far have been far valuable and should help us in longer term.

“What will be your business strategy in coming years?”

The Business strategy at Biofuels Junction is to identify good quality suppliers, empower them to become large manufacturers of clean energy products and work exclusively with us. We are also looking to add our own manufacturing plants at strategic locations from where the logistical challenge of procuring raw materials and transporting the final product to customers can be minimised. We have also signed 10 exclusive briquette suppliers, and are targeting Rs 100 crore turnovers by FY2025 and look forward to develop manufacturing plants pan India.

Interview 02/03/2021 by Manu Tayal
 
 
 
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