 "EverEnviro MD Mahesh Girdhar")
India’s first attempt at converting its mounting waste, which is choking cities and the countryside, to cleaner natural gas completely failed – as a standing committee report on Compressed Bio-Gas (CBG) pointed out. Against a target of installing 5,000 CBG plants in six years by 2023-24, only 40 plants have come up – with only 9,000 tons of CBG sold as against an output target of 15 million tons per year by 2023-24, equivalent to 54 million cubic metres of gas a day. At such output levels, India could have eliminated two-thirds of its LNG imports.
A new crop of entrepreneurs led by EverEnviro have now emerged after New Delhi revamped the CBG policy, with an emphasis on pricing and offtake, and actively involving city gas utilities in CBG sourcing.
Inaugurated by Prime Minister Narendra Modi in Feb 2022, EverEnviro's 17 metric tonnes per day capacity Indore CBG facility processes 550 tonnes of organic waste daily. It is located at a landfill, which once contained 2 lakh tons of waste. EverEnviro, which is funded by the governments of the United Kingdom and India, and venture capital, has a 50-50 joint venture with Indian Oil, the country’s biggest refiner, to establish CBG projects nationwide, and has tied up with India’s biggest gas distributor Gail and Torrent Gas for offtake.
EverEnviro Managing Director & Chief Executive Officer Mahesh Girdhar spoke to Business Standard on the company and the CBG industry’s prospects in what can be called India’s second stab at CBG – after an initial attempt to convert waste-to-gas failed.
What is the expected CBG volume from your projects?
The aim is to reach 1000 tonnes per day within the next five years. By the end of March '24, production is anticipated to be around 60 tonnes per day. Specific projects, including those in Sangrur and Patiala in Punjab, are set to commence CBG production, focusing solely on paddy straw as the feedstock. As the projects progress, the target is to have nearly 60 tonnes of CBG production per day by the end of the current financial year.
Are Sangrur and Patiala primarily relying on paddy straw rather than municipal solid waste (MSW)?
That's correct. Both plants are entirely paddy straw-based and are situated in places like Dhuri and Patran. Each of these projects is expected to utilise approximately 100 to 120 tonnes per day (TPD) of paddy straw when they achieve their full intake capacity utilisation. We have already secured the necessary paddy for this year’s production.
I understand that off-take for CBG has been a critical issue so far? What are your off-take arrangements for your plant in Indore and other plants?
It depends on the plant's location and the demand for natural gas. CBG produced at the Indore plant, the country's largest, is supplied to the Indore Municipal Corporation as per the agreement with EverEnviro. Additionally, CBG is supplied to Avantika Gas through pipelines, and to industrial users such as TATA International, L&T. In other regions, we have partnered with city gas companies like GAIL and Torrent Gas on a long-term basis.
How much does a CBG plant cost?
A typical plant with a capacity of 10 tonnes per day output will cost between Rs 80 crore and Rs 100 crore, falling within the average range for setting up such a CBG plant.
CBG projects in India were initiated in 2018 but did not gain traction like ethanol ventures because of offtake and pricing issues. What has changed now that companies such as yours have come forward to invest?
The initial phase posed challenges for the industry, and certain enablers were required, some of which have been activated now, while others need attention from a policy perspective.
One crucial enabler is the CBG off-take mechanism through the CGD sync mechanism and the associated pricing, a recent development pushed by the government, requiring CGD companies to undertake long-term tie-ups. The second enabler is the capital subsidy provided by the central government through MNRE (Ministry of New and Renewable Energy) and in states like UP, where there is a state subsidy on capital.
The third enabler addresses the gap in fermented organic manure (FoM). To ensure project viability, incentives are needed, and the government recently announced marketing incentives for FOM, providing Rs 1,500 per tonne for three years to fertiliser companies or CBG players.
The fourth enabler promoting agricultural mechanisation to handle crop residue in Punjab, Haryana, Uttar Pradesh. These enablers, combined with the government's push to make CBG blending mandatory in CNG and PNG in the next five years, create a positive environment. Additionally, efforts are underway for establishing pipeline connectivity to CBG plants, which, if successful, will provide a captive demand.
Has the government mandated CBG blending?
The CGD for the district needs to be off-take, whether it's Indian Oil, HPCL, Torrent Gas, or any other private or PSU. The government has mandated blending of CBG in CNG and PNG supplies. The move provides the necessary stability for CBG developers to make substantial investments in infrastructure.
Is the CBG price of fuel set by the government, as it happens in the case of ethanol?
The price is determined under the CGD-CBG sync scheme, which has a pricing formula. It is linked to the CNG price, and the CBG players receive the net price after subtracting the marketing margin from the CNG price.
But under SATAT pricing was set by the government, right? Do you fall under it?
We have the option to tie up either under the SATAT scheme or the CGD-CBG sync scheme. If the net pricing is higher under the sync scheme, we opt for that. The SATAT price provides a certain minimum amount, initially Rs 46 and now revised to above Rs 50. In contrast, the sync pricing mechanism allows for realisations up to Rs 68 to Rs 70 and even higher, linked to the CNG price.
What about inflation? Is it connected to CNG pricing?
CNG pricing is not linked to feedstock prices but rather to alternate fuel prices, specifically the global oil price movement. To sustain or develop the industry, a mechanism of price support in the coming years would be beneficial.
Do you think the government should intervene in procurement cost, not in the final price, right? You mean to say that when you are buying MSW or paddy, you want the government to have a policy that prices don't go beyond a point?
I am not in favour of direct intervention in procurement costs. Controlling the unorganised procurement segment is challenging. Instead, the focus should be on enabling the machinery part, providing continued support to farmers for machinery and processes. Production linked incentives work better than input linked incentives.
What is the subsidy? Do you want some floor price?
In MNRE, the central government provides a maximum of (Rs) 10 crore, equivalent to Rs 83 lakh per tonne of CBG production, with a maximum cap of Rs 10 crore for a 12-tonne plant. In the state of UP, the maximum subsidy can go up to 20 crores (Rs 75 lakhs per ton of CBG generation), depending on the plant's output. If you go to UP, you have an additional capex. subsidy advantage. Other than UP, no other state has significant policy initiatives in this regard.
Do you receive any carbon credits for your projects?
The Indian government is working on a green credit policy, allowing such credits to be sold in the global market based on voluntary or based on compulsory carbon credit requirements. Green credits for industry use and penalties for those using fossil fuel-based molecules can further encourage the adoption of green energy.
But it's essential to consider mechanisms for pricing based on feedstock cost escalation or inflation in the future to ensure sustainability. Lastly, a grid system like solar, allowing CBG production in one location and off-take in another while maintaining the green property of the molecule, could be a game-changer.
Are foreign investors showing interest in Indian CBG ventures?
There is considerable global interest in methane mitigation, as highlighted by initiatives like the Global Methane Pledge (GMP) launched at COP26 by the European Union and the United States.
In the context of our compressed biogas projects, while there are no immediate plans to raise equity, we are experiencing inbound interest from global investors keen on investing in Indian ventures. Our current funding structure involves Eversource equity with additional debt support from multiple banks and financial institutions.
After setting up plants, do you see investors taking equity, like what's happening in solar, where companies set up plants and sell equity? Are such scenarios and valuations expected in this business?
We are still in the early stages, much earlier than solar. I believe that in one or two years, we'll start seeing significant interest from investors in India's green energy sector, especially in the CBG industry.
Do you require different kinds of plants/factories for different feedstocks?
In the case of paddy straw, we bring the straw to our plant, where machines thresh it into smaller particles before entering the digester. For MSW, we set up segregation units before it reaches our plant. The better the segregation, the more beneficial it is for the CBG plant, as it requires less segregation and yields better output by producing CBG solely from the organic fraction of municipal solid waste. Source segregation is essential for efficiency, and fortunately, in the Indore CBG unit, the Indore Municipal Corporation provides us with source-aggregated waste.
Do these plants also produce manure?
Yes, they do. For instance, in the case of paddy straw, we produce 40 per cent manure if we feed 100 tons of paddy straw per day, resulting in 40 tons of manure. In the case of press mud and municipal solid waste, we get about 20 per cent up to 10 to 20 per cent manure per day. In each of these plants, we obtain FOM (Fermented Organic Manure), which is then provided to farmers.
What is the price range for the manure?
Fermented organic manure costs around Rs 5000/ton.
But most of your revenue or profitability comes from CBG, right?
Yes, 80-85 per cent of the revenue comes from CBG, while the rest comes from Fermented Organic Manure (FoM). There is potential to further develop FoM into Biofertiliser, enhancing the economic viability and sustainability of these plants. Soil health is another concern in our country and now we are actively working on product development for FoM.
Collection of feedstock seems to be a big issue, be it paddy or other types; sourcing has been one of the biggest challenges, right? How and what are you doing about that?
Among the three types of feedstock, MSW comes directly from the corporation, while for paddy straw or industrial waste, it comes from the agricultural industry. In the case of agricultural straw, such as paddy straw, we must establish a complete mechanism for collection. For prompt harvesting within a 30-day period to clear farmers' fields quickly we have developed a model of village-level entrepreneurs in the collection and supply of agricultural waste.
