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Development

Alternatives
ENTERPRISE MODEL FOR BIOMASS SUPPLY

A PROJECT PROPOSAL

ON

“Community based enterprise model for biomass supply”

A sustainable approach to enhance rural economy

Project location: Datia, (M.P)

Submitted to –

Punjab National Bank (PNB), Datia, (M.P)

Submitted by-

Development Alternatives,Orchha, (M.P)

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INDEX

SR NO. PARTICULARS PAGE


NO.
Executive summery iii
1. Introduction iv-v
2. Problem statement vi
3. Project background, goal and vii-viii
objectives
4. Project location, climate and ix-x
soil
5. Project implementation xi-xii
activities
6. Expected benefits xiii
7. Financials xiv
8. Roles of stakeholders xv
9. Annexure xvi

Executive summery

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India faces severe problems in the power sector resulting in energy shortages. In 2001 this was 8% and

peak demand exceeding supply by about 13%. The industrial sector today consumes approximately 35%

of total electricity generated in the country. At the same time, high quality stable power is required to

attain the higher growth rate projected for this sector. Majority of industries in India require both

electrical and thermal energy. Today, they either buy power from the State Electricity Boards, or generate

their own power largely through diesel generators and meet their thermal energy requirements through

captive means mostly utilizing fossil fuels such as coal, oil or natural gas. As fossil fuels are limited, and

have adverse environmental impact, it would be appropriate to use non-conventional energy sources

including biomass resources such as crop residues and agro-industrial wastes for generation of energy in

the industries mainly through biomass gasification technology for meeting their total / partial

requirements for both electrical and thermal energy.

India, being a tropical country, has tremendous potential for energy generation through biomass and its

residues.

Development Alternatives has taken initiatives to generate electricity through biomass which will further

be a source of electricity generation for micro and small enterprise hub, run by community people.

Promotion of micro and small enterprise will boost the rural economy.

The project involves supply of biomass to the biomass-based power generation plants with a total

capacity of 40 kW for uninterrupted electricity supply to the micro and small enterprise hub. The fuel

used is primarily Ipomea weed, which is abundantly available in the surrounding area of the site. Ipomea,

having calorific value of 3800 kcal per kg and bulk density of 160 kg per cubic meter is a cost-

effective way to generate electricity.

1. Project introduction

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Access to quality, reliable and affordable energy is critical for promoting economic and social
development in rural areas. The energy situation in rural India is characterized by low quality of fuel, low
efficiency of use, un/semi reliability electricity supply and limited access leading to lower productivity of
land, water and human effort, ultimately leading to less development and environmental degradation.
Dependence on centralized grid electricity supply to low-load rural situations is characterized by
fluctuating voltage, unreliable supply and shortage of power in most parts of rural India. Dependence on
coal-based electric power plants (accounting for 70% of power generation) is leading to environmental
degradation; local (land degradation), regional (air, water and soil pollution) and global (greenhouse gas
build-up leading to climate change). There is a realization on the need to search for decentralized and
renewable energy-based options to meet the rural energy needs in a sustainable way. Among all the
renewable energy sources, biomass is the largest, most diverse and readily exploitable resource.
Government of India strongly encourages the utilization of biomass energy.

Biomass Potential

India is a tropical country blessed with abundant sunshine and rains, thus offering an ideal environment
for Biomass production. Further, the vast agricultural produce also makes available large quantities of
agro-residues which can be used to meet energy needs. With an estimated production of about 350 million
tonnes of agricultural waste every year, residual biomass is capable of mitigation of GHG emissions to
the extent of 300 million tonnes / annum.

MNES estimated the biomass power potential in the entire country as 19,500 MW. The estimated
potential of Biomass based renewable energy options in India are as follows:

Biomass Energy 16, 000 MW

Bagasse Co-Generation 3, 500 MW

Total 19, 500 MW

Biomass for electricity generation can be available in various forms like agricultural residues, biomass
from animal waste, forest biomass and municipal wastes. Other sources of biomass are weeds like
Ipomea, cholla, prosopis julifora, lantana camera etc which grow on waste lands and have no or very little
use. Of these weeds, Ipomea is found in abundance in the Datia region, which grows in marshy areas.

Major features of ipomea are given below-

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• On direct combustion, this gives a very pungent odor and hence is not generally used as fuel
wood for cooking purpose.

• For the purpose of gasification, ipomea needs to be harvested from the marshy areas and near
water body.

• It further needs to be chopped in to small pieces of about 2 inches. The chopping is done in the
green condition. It is then sun-dried from an original moisture content of about 85% to 34-38%,
before it can be fed in to the gasifier.

• One hectare yields approximately 160 tonnes of green biomass, which is equivalent to 64
tonnes of useful feed stock for gasifier.

• The calorific value of ipomoea is 3800 kcal per kg and bulk density is 160 kg per cubic
metre.

Biomass power is an important alternative for providing energy in the rural sector. The inherent
advantages in utilization of biomass are that employment opportunities are created even for
cultivation, collection, transportation and storage of biomass.

2. Problem statement

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India’s energy development programme has been put to severe pressure with the ever increasing demand
supply gap (8 to 10%) and mismatch of resources coupled with non-uniform growth curve.

ENERGY SOURCE DEMAND SUPPLY GAP/SHORTAGE

Electricity(Jan 2006) (In million KWh) 5,21,872 4,80,242 (41,630)

Though, SMEs are not a priority sector for State Electricity Boards. Consequently, lack of
quality power and poor voltage conditions compel rural enterprises to look for alternative
sources (captive diesel generator sets) which is very costly. To fill this gap, Development
Alternatives, has demonstrated new Renewable Energy technology (Desi Power) at TARA gram
Datia that can be a source of assured power supply for clusters of new industries manufacturing
building materials based products(bricks, Micro-concrete roofing, Paving blocks,Fly-ash bricks
and Pre-cast door/window frames). Development Alternatives has set-up gasifier of 32 kW
(biomass based renewable energy generation and distribution system) and currently
supplying electricity to these industries. Energy demand for these industries is 3735.78 units
(kWh) per month. To provide assured and uninterrupted power supply to these industries,
700kg/day ipomea is needed as feedstock to the biomass gasifier to run it for at least 10 hrs.

This huge demand of biomass will give rise to another line of business which will be a biomass
based enterprise. In this way biomass sourcing can be treated as an opportunity to create an
alternative source of income generation.

Although it seems to be a remarkable idea, but in this process of supplying dry biomass, there are
certain issues which may reduce the profit of entrepreneur

a) Efficiency of labor to cut biomass due to which quantity of biomass sourced /day is reduced

b) The cost of transportation of biomass from field to the chopping place and from the chopping
place to the endpoint is 32 % of the total cost.

c) Use of motorized gini-cutter will increase the pace of operation. Hence the volume of the
business can be increased.

To make biomass sourcing a convenient and quick process, group of entrepreneurs involved in it
require proper equipments to meet the demand –supply gap of biomass.

3. Project background, goals and objectives

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In order to address the prevailing problem, Development Alternatives proposes to demonstrate


the sustainable enterprise model of dry biomass supply to ensure sustainable income generation
of community by utilizing the natural resources and agro wastes for renewable energy based
electricity generation. These have been visualized as an alternative source of employment for the
community (especially women) development programme through efficient utilization of local
resources by regular and sustainable supply of biomass by the community clusters. In this project
the main focus is to supply biomass which grows on the waste or barren lands and have no other
use, which can further leads to ensure the regular supply of electricity to micro, small and
medium enterprises run by utilizing local resources.

3.1. Business process

Market

Inputs
y
• Govt. fund SHG tricit
(Grant/Subsidy) to Biomas
Or Processed elec
purchase tools
Biomass s g
Electricity
• Govt./Panchayat’s Individ
Usin
permission to
ual
harvest NRM Gasifie
Memb
• DA’s hand holding r (40
er of Money
to stream line KW) at
SHG
Biomass REZ
enterprises Money

Raw/Processed Enterprise or
Biomass Biomass
Farmers/s s
ma
mall Bio
supplier of s
Biomass
ney
Mo

3.2. Project Goal

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To develop community based enterprise for supplying dry biomass to the biomass
gasification plant to ensure regular electricity supply of SMEs .and rural economy
development.

3.3. Project Objective

• To establish biomass supply chain mechanism and demonstrate its socio-commercial and
institutional (SHG run) viability.

• To create an alternative source of livelihood for the rural women of Datia region by
preserving and harvesting natural resources and agro waste

• To ensure sustainable supply of biomass to run the power plant as well as SMEs so as to
ensuring sustainability proposed first REZ in India

3.4. Biomass Supply chain and

Transportation of wet
biomass Chopping of wet Drying up to 50% of
Biomass harvesting biomass moisture content

Cost of
4 labors (@ 4 transportation=Rs
quintals/day) 200/-
=400/- Labor cost = 100/- Labor cost = 100

Transportation of dry
biomass

Cost of
transportation=Rs
350/-

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4. Project location, climate and soil


4.1 Background

Datia had formerly been a state in the Bundelkhand region. The state was administered as part of the
Bundelkhand agency of Central India.The state suffered from famine in 1896-97, and again to a lesser
extent in 1899-1900.

4.2. Project Location

Datia district in the state of Madhya Pradesh, India, is situated near Gwalior and on the border
with Uttar Pradesh (U.P); the town of Jhansi in U.P. is only about 25 km away.

State: Madhya Pradesh


District: Datia
Coordinates: 25°40′N 78°28′E / 25.67, 78.47
Time zone IST (UTC+5:30)
Area Elevation 302 m (991 ft)
Population 627,818 (2001)

The district has an area of 2,038 km², and a population 627,818 (2001 census). The population of
Datia District increased by 26% from 1981 to 1991, and by 22% from 1991 to 2001. The district
has 445 villages and 3 towns, Datia, Seondha, and Bhander. Datia is bounded by the Madhya
Pradesh districts of Bhind to the north, Gwalior to the west, and Shivpuri to the south, and by
Jhansi District of Uttar Pradesh state to the east. The district is part of Gwalior Division.

The project area covers barren and degraded lands and lands such as roadside, canal side and
railway lines, covered with weeds like Ipomea, Cholla, Lantana Camera in geographic regions of
District Datia especially. The project proposes to harvest weeds like Ipomea for green energy
supply. These weeds can be called as green energy plants.

4.3. Soil Type

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The soil erosion and unsustainable land use practices contribute to severe degradation and loss of
soil and soil organic carbon each year and is a major factor contributing to about 50% loss of soil
productivity.

4.4. Socio Economic Profile

As of 2001 India census, Datia had a population of 82,742. Males constitute 53% of the
population and females 47%. Datia has an average literacy rate of 68%, higher than the national
average of 59.5%: male literacy is 75% and, female literacy is 60%. In Datia, 15% of the
population is under 6 years of age.

The project intends to initiate project implementation activities in the following villages of Datia
district –

Estimation of available biomass-

Bio-Mass ( in Tractor Biomass(dry) in


Sr. no. Species Village Loads) (Quintal/s)
1 Ipomea Shyamlal ka Dera 15 240
2 Ipomea Jhakhoria 10 160
3 Ipomea Sitapur 5 80
4 Ipomea Samroli 4 64
5 Ipomea Gari 4 64
6 Ipomea Borgaon 10 160
7 Ipomea Uprai 5 80
8 Ipomea Agora 3 48
9 Ipomea Durgapur 5 80
Ipomea Guliapura 10 160
8 Ipomea Cherula 20 320
Ipomea Rena 5 80
TOTAL 1536

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5. Project implementation activities

Activity 1- Community Mobilization

Activity 2-Ensuring govt grants and subsidy

To purchase certain equipments for making biomass sourcing a lucrative process, villagers or
potential supplier groups need government grants and subsidy.

Activity 3- Identification of potential supplier group.

Potential supplier groups for biomass (ipomea) should be identified according to their
willingness to accept this business model.

Activity 4- MoU with the supplier group for the supply of demanded quantity and quality
of biomass.

To clear the roles and responsibility between demand and supplier group, MoU will be signed
between them.

Activity5 –Purchasing equipments like biomass cutter and Gini-cutter.

Weed like ipomea, when used as biomass for electricity generation needs to be chopped up at
green stage. For this ipomea needs to be brought at chopping place as early as possible. Thus
certain equipments like wood cutter and gini cutter are required to make this process faster .

Activity 6- Assuring supply of biomass at pre-determined time and rate to the location
with a guarantee of substantial profit to biomass supply group.

After biomass chopping/slicing, it is being dried for two to three days. As soon as drying process
completes, biomass will be supplied to DA center, Datia. DA will fix the rate of dried biomass
and disburse the amount within two days to the supplier group.

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GANT CHART

Activities W1 W2 W3 W4 W5

Community Mobilization

Ensuring govt grants and subsidy

Identification of potential supplier group

MoU with the supplier group for the supply


of demanded quantity and quality of
biomass

Purchasing equipments like biomass cutter


and Gini-cutter.

Assuring supply of biomass at pre-


determined time and rate to the location
with a guarantee of substantial profit to
biomass supply group

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6. Expected benefits

The aforesaid proposed enterprise model will lead to the following benefits to the suppliers -

Local employment:-This will create an alternative source of employment for the community
people (especially women) as well as fill the demand-supply gap of electricity generation to run
micro and small enterprises which will boost up the rural economy. Here community plays dual
role both as supplier (biomass supply for electricity generation) and consumer (purchase of
electricity to run enterprises).

Assured power supply:-This project will ensure continuous biomass supply for electricity
generation through gasifier which will assure regular electricity supply to micro and small
enterprise run by community people.

Utilization of waste resources: - Utilization of weeds like weeds like ipomea and Cholla, which
are grown in marshy places, as biomass for electricity generation will increase their economic
value.

Demand-supply gap: - Total demand of biomass (ipomea) /year is 96000 kg (per hour biomass
consumption= 40 kg; working hours= 8 hrs; working days=300) in TARAgram. Available
biomass (ipomea) in the vicinity is 1536 quintals. Hence it can be inferred from the given figures
that biomass demand – supply gap can be fulfilled easily, if the whole system operates in a
mechanized way.

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7. FINANCIALS

Project cost:-

ECONOMICS OF DRY BIOMASS

RAT AMOUN
PARTICULARS E QTY T
Capital Expenditure
Hand cutter 300 5 1500
900
Chopping machine 0 1 9000
Total cost (A) 10,500
WORKING CAPITAL(for one
week)
labors @ 3 qtls/day 100 20 2000
Loading of biomass (1 labor) 100 2 200
Transport from field to farm 300 2 600
Cutting 100 2 200
Transport from farm to firm 350 1 350
Depreciation @ 5% per
annum 525
Total cost (B) 3875
TOTAL PROJECT COST(A+B) 14,375

The total project cost is Rs. 14,375 (Fourteen thousand three hundred seventy five, only).

Projected profitability per supply (within 4 days in a week):-

AMOUN AMOUN AMOUN


PARTICULARS T T T
Week Week
WORKING CAPITAL Weak1 2 3
Labors @ 3 qtls/day 2000 2000 2000
Loading of biomass (1 labor) 200 200 200
Transport from field to farm 600 600 600
Cutting 200 200 200
Transport from farm to firm 350 350 350
Depreciation @ 5% per
annum 525 525 525
Total cost (B) 3875 3875 3875
Revenue generated 4500 4500 4500
Revenue realized 625 625 625

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8. Roles of stakeholders

Role of supplier group

• Supplier group will have a key role in this business as they have to cut, dry and supply

ipomeas according to the consumer (DA) demand.

• Supplier group will ensure for the quality supply of biomass(At 50% or less moisture

content).

Role of DA-

• DA will act as a consumer in this business.

• DA will have the responsibility to measure the dried ipomea (Should not be more than

50%).

• Full Payment to the supplier group will be made on time.

Role of Panchayat/ Other Govt players-

• To provide fund to the biomass suppliers. This support will assist suppliers in

establishing their business.

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Annexure-1

Comparison of the revenue realized by the supplier and the COST TO THE END USER

ECONOMICS OF DRY BIOMASS ECONOMICS OF WET BIOMASS

RAT RAT AMOUN


PARTICULARS E QTY AMOUNT PARTICULARS E QTY T
Capital Expenditure Capital Expenditure
Hand cutter 300 5 1500 Hand cutter 300 4 1200
900
Chopping machine 0 1 9000 Total cost (A) 1200
Total cost (A) 10500 WORKING CAPITAL
WORKING CAPITAL labors @ 4 qtls/day 100 4 400
labors @ 3 qtls/day 100 20 2000 Loading of biomass (1 labor) 100 1 100
Loading of biomass (1
labor) 100 2 200 transport from farm to firm 400 1 400
transport from field to
farm 300 2 600 depreciation @ 5% per annum 60
cutting 100 2 200 Total cost (B) 960
transport from farm to 144
firm 350 1 350 Revenue generated 0.8 0 1152
depriciation @ 5% per
annum 525 Revenue realized by the suppliers 192
Total cost (B) 3875 COST TO THE END USER
300 144
Revenue generated 1.5 0 4500 Amount paid to the supplier 0.8 0 1152
Revenue realized by the
suppliers 625 Cutting cost(1 labor for 2 days) 100 2 200
Loss (5 % of the cost paid to
COST TO THE END USER supplier) 57.6
Amount paid to the 300
supplier 1.5 0 4500 Storing 100 1 100
Storing 100 2 200 TOTAL 1509.6
TOTAL 4700 COST/KG 1.05
4 days by 5 labor 2.0966
COST/KG 1.6 COST/KG After drying
=60 qtl will be cut in 720 67
(1500 kg/day)* 4day

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