EID Parry, the sugar manufacturing company under Murugappa Group, is in talks with Indian Oil Corporation and other firms to explore opportunities in producing Compressed Biogas (CBG), following the central government's announcement in October to start 5,000 CBG plants to curb oil imports. It may require a long-term contract with the oil marketing firm and an investment partner for this, said senior officials from EID Parry. Oil Marketing firms like Shell and IOCL are trying to tie up with the sugar mills, said the company.
"The raw material source for compressed biogas could be predominantly from press mud, spent wash, bagasse. There is an opportunity, we are now looking at the end to-end to unlock value from the press mud by converting it into the biogas and then selling CBG to Indian Oil or other oil marketing companies," said S Suresh, managing director, EID Parry India in a recent earnings call with analysts.
The oil marketing firms have announced Rs 46 per liter or kg of biogas. The net realisation for a mill will be somewhere around Rs 40. The company needs to mitigate raw material availability with the mills, have a long-term contract with oil marketing companies and find an investment partner. With both the ends tied, it may be able to unlock value from this opportunity, he said.
"We are on the process of evaluating different vendors for this proposal. Once the evaluation is complete, we will be in a position to take a call," said Suresh. "There are vendors like Praj and Carbon Clean, which is based out of Germany and has its own supply offices in India as well. We're analysing the merits and demerits of the different proposals in order to choose a partner in the long run. Some vendors have offered to invest and run the unit, others to build, operate, run and maintain it for us. Different models are being proposed. We are at the evaluation step only," he said.
While this may not be part of its core business, the unit could help the firm to unlock value from the waste or the byproducts from its operations. The company expects that it may take another 3-6 months before it zeroes in on some proposal. There is an opportunity since the government is also talking to all the sugar mills, referring to this plan to have 5,000 plants to the OMCs. Companies like Shell and IOCL are trying to tie up with the sugar mills.
While an investment subsidy is available, it will be only released if the sugar mill is not directly investing. This is where talks with an external investor would help it, if the firm decides to tap the opportunity. For any sugar mill, the quantum of resources available is very limited, the firm said.
In order to produce 100 tonnes of press mud, an investment of around Rs 30 crore will be required. It also may have to look at the byproducts of CBG, including carbon dioxide. There are challenges in terms of the liquid fertiliser during the process of producing CBG. EID Parry is also checking with concerned experts in terms of how it can handle liquid fertilisers as they need to be sold to a marketing partner as well. The process is being evaluated before it take a holistic view on such investments, Suresh said.
The company had earlier hived off its bio-pesticides business to its subsidiary Coromandel International Ltd and the shares it held in Parry America, which was an integral part of the bio business deal. The company posted a profit of Rs 208 crore on the sale of the bio product business and Rs 35 crore on sale of investments in Parry America during the first quarter of the financial year. At present, it is intyo sugar and nutraceuticals, which are part of its core business.