Startup Mantra: Creating a dependable supply chain for bioenergy
BiofuelCircle provides enhanced economic value from biomass to farmers, supply chain efficiency for bioenergy companies and transformative rural enterprises
With the onset of winter, farmers from Punjab, Haryana and Uttar Pradesh start burning their crop residue or stubble (parali) causing huge air pollution across the northern belt of India. Most of these farmers burn stubble because they don’t find any value in processing or storing it for income gain. On the other hand, industries are in search of reliable and consistent biofuel suppliers. However, bringing these two stakeholders together is not easy because the biomass supply chain is unorganised and fragmented. To bridge this gap, two Pune-based entrepreneurs Suhas Baxi and Ashwin Save developed an online cloud-based marketplace ‘BiofuelCircle’ in June 2020 – designed for biomass and biofuel supply chains – to provide enhanced economic value from biomass to farmers, supply chain efficiency for bioenergy companies and transformative rural enterprises.
In the beginning…
Friends for over 20 years, Baxi and Save first met during a business meeting around 2002. Baxi was working in Triple Point Technology as its business head for Asia Pacific and Save was working at an oil marketing company. Baxi later took leadership roles in Indian and multinational companies while Save joined and stayed with Triple Point Technology till 2015.
Says Baxi, “While I was at the Harvard Business School from 2017 to 2019 as part of the strategic leadership programme, I realised conventional companies and businesses globally will require creating a strategy for digitalisation. Since I had a background in the energy industry, while looking at clean, green and bioenergy, I also realised that the bioenergy industry cannot grow till the time its supply chain becomes organised. Oil, coal or other energy supply chains are organised supply chains. The biomass supply chain is unorganised and fragmented.”
“During one of our meetings, I discussed this issue with Save. We both felt there is an opportunity to do something in the area of bioenergy. In February 2020, we conceptualised a marketplace to provide digitalisation as a service to supply chain companies. We started putting together a framework of ideas. In April-May 2020, we made a few presentations to some companies we knew in this business. We received a positive response from those companies and one of them stated if we develop something on a platform like this, they would be happy to work along. That was a signal of acceptance, validation and traction,” added Baxi.
Research and development
We didn’t want to do something unproven. So, we kept things quiet for a long time. Meanwhile, we hired people, did development, and signed an agreement with our ‘alpha customer.’ We had decided that we will not have external funding till the time we have a product, a paying customer and users willing to pay for the service.
Baxi said, “The alpha product was ready in January 2021 and went live immediately. Our alpha customer (a Pune-based energy and environmental solutions company) ran a trial for the next six months. By end of June 2021, we had to rework on some things but we proved a lot of things.”
Supply chain woes
There are lakhs of farmers in India, but most of them are small landholders. Their main business is to grow and sell the crop to earn a living. However, these farmers don’t see the farm waste as a business or an opportunity to earn ‘extra income.’ On the other hand, the industry is looking at alternate fuels including biomass directly or biomass through solid, liquid or gaseous fuel.
Save said, “Removing inefficiencies in the supply chain means providing delivery linkages, verification mechanisms and creating reliability through the platform. Supply chain efficiency can have an impact on farmers’ income, rural employment, environment as well as our country’s import bill and energy bill can come down.”
“An average Indian farmer does two or three crop seasons and on average, for an acre, the farmer gets two tonnes of agricultural residue (varies from crop to crop). If we want to create this impact, then our marketplace should provide reliable biomass to the industry which means verified sellers and buyers at a fair market price. We figured out that this could act as a big mobiliser for society in the rural area. It’s like delivery services companies. You don’t have to worry about who is delivering, because the platform is organising the delivery. So, we made it easy for people to sell and buy biomass, make sure that prices are driven by market and not affected artificially,” Save added.
Cluster mapping
The duo, along with their team, started with research on agricultural practices and crop patterns in Maharashtra.
Baxi said, “We found that there are 29 different varieties of crops which are biomass friendly, which means the agricultural waste can be converted to fuel. We then mapped the ‘supply-clusters’. Simultaneously, we also mapped the industrial areas (fuel users) in the state which were our ‘demand clusters’. Along with this, we surveyed existing ‘biomass-processors’.”
“Then we created some awareness in a few selected supply and demand clusters. From the demand side, we got companies who are willing to buy from the platform and from the supply side we got briquette and pellet manufacturers. Then we went to rural areas, created awareness through our farmer app and asked farmers whether they want to sell their biomass to the buyers on the platform,” said Baxi.
Auction engine
After creating a tool for farmer participation to enable them to sell to a biomass processor, BiofuelCircle enabled the processors.
Baxi said, “Out of 450 customers we have at present, more than 300 are biomass processors. They are always on the platform wanting to sell. Industries can visit the platform, and check prices put up by sellers. They can complete a transaction if they find the deal worthy. Else, the buyers can put up a counter offer of ‘best buy’ and then the seller may accept or reject or put another counter offer. It is similar to bid and ask mechanism on exchanges.”
“Auction and reverse auction can also be conducted. BiofuelCircle platform makes sure of participation in the auction through awareness in stakeholders. We have developed a special auction engine which essentially nudges buyer and seller to come close to each other. This is driven by an internally patented algorithmic methodology that we have devised,” Save stated.
Rural-industrial connect
Explaining further, Baxi said, “Biomass doesn’t travel long distances. We have to convert it to some kind of biofuel, or compacted biomass which goes for making gaseous biofuel, within a very short distance. So, there has to be an industrial set-up which needs to be created in a distributed fashion. Such setup if encouraged can create local employment, and economic activities in rural areas and margins can stay in rural areas itself. BiofuelCircle platform allows this.”
“Digitalisation can create a roaring biomass business out of rural areas. If fewer farmers burn biomass, then more biomass quantity will be available for processing and a larger number of industrial players may switch from fossil fuels to biofuels. So, we focussed on increasing the supply quantity and bringing it on the platform. We converted commitments into ‘reliable commitments’ delivered from the platform. The buyer doesn’t see who the farmer is because he buys from the platform. Essentially, the industry gets reliability, commitment and visibility of what they are buying. We have been able to create this interesting rural-industrial connect in a small way,” Baxi stated.
Future plans
Sharing their vision, the duo said, “While scaling up BiofuelCircle, we have got huge support from small and medium companies. We have also allied with social organisations and foundations like BAIF which are working in the areas of rural livelihood. The central government through its ministry of renewable energy also helped us to introduce to some stakeholders with whom we are developing the rural supply chain.”
“We started in Pune because we had a strong base in and around Pune. Then we went to Ahmedabad because of the strong customer relationship and later Chennai. We had paused for a year at these locations, but now we are expanding. Each is a local market and we want to develop 50 such local markets in 10 states. Each local market will cater to an area of a 150km radius circle. We are creating two circles in Punjab, Haryana, Uttar Pradesh and North Karnataka. By end of 2022, we will have 10 such local markets and by 2025-end we will have 50 local markets,” they informed.