Multi Layered Plastic Recycling: opportunities and challenges

Multi layered plastics (MLP) such as potato wafer packet, chocolate wrapper, wrappers for ready to eat foods and pharma products are criticised for their lack of recyclability, leading to littering of our cities and oceans. However, MLPs remain the cheapest and most viable option for packaging of food and pharma products and it may not be possible to completely replace them atleast in the near term. In this blog, we examine entrepreneurial opportunities available in MLP waste management and challenges faced by these businesses.

How big is the MLP waste problem?

India consumes close to 150001 tonnes of plastics per day, of which only 60% is recycled. Packaging plastics (MLPs and single use plastics such as light weight plastic bags, coffee cups, disposable utensils), contribute to majority of the non-recycled plastics. MLPs cannot be recycled economically, as these are made of two or more layers of plastics and separating the layers is not cost effective.

MLP waste can be broadly divided into two categories: industrial waste and post use waste. Industrial waste refers to the waste generated in the flexible packaging /converting units, this waste is relatively clean and can be converted into products such as plastic ropes/bags or fuel. Post use waste comprises waste generated from households and other consumption centres such as malls, commercial establishments. Such MLPs are contaminated and have high moisture content as they are mixed with the organic waste; it is this waste, which mostly finds its way to the landfill.

Is there a shortage of MLP waste processing capacity?

MLP waste can typically be converted into power or fuel, through a number of processes (see picture 1). Additionally, it can also be used a filler for laying roads.

Picture 1: Laminate waste treatment options
wastetreatment
Among above mentioned methods, co processing in cement plants has taken off to an extent. Currently around 542 cement plants all over the country have made investments in co processing facilities that allows them to use alternate fuel in the kiln. As per Cement Manufacturers Association (CMA), cement plants currently have a Thermal Substitution Rate (TSR) of 4%, indicating that they meet 4 per cent of their fuel requirements from alternate fuels including plastic waste. Cement industry has proposed to increase their TSR to 25% by 2025, which will allow them to consume up to 12 million tonnes of plastic waste. While cement plants can handle contaminated waste, it has to be moisture free as wet waste is difficult to process.

Waste To Energy (WTE) plants burn unsegregated waste to produce power. Currently there are around 7 operational WTE plant, 403 under different stages of construction. WTE plants are ideally meant for processing dry waste, as wet waste (largely organic in nature) has lower calorific value and therefore is ineffective. However, given the lack of availability of segregated waste, they use mixed waste. While these plants have faced issues related to their compliance with pollution control norms, they are still preferred by the municipalities around the country as they can handle large amounts of unsegregated waste.

Pyrolysis refers to the process of converting plastic to oil, which can be used as a fuel. This process also needs clean /moisture free waste. Pyrolysis is yet to take off, largely to due unavailability of clean waste and risks related to the pollution compliance of such units. However, these plans can work well in industrial estates where availability of 2-3 tonnes of clean waste per day is assured.

Plastic has been used to build roads in Chennai, Indore, Pune and Meghalaya. The challenges again are lack of availability of required amount of clean plastic waste.

As such, the key issue that hampers laminate waste management is lack of availability of clean laminates that are fit to be processed and not shortage of waste processing facilities as such. The existing capacity of the cement and waste to energy facilities is enough to meet the needs of the industry.

Where are the opportunities for new businesses?

On the one hand, there is huge amount of MLP and plastic waste which needs recycling and on the other hand waste treatment providers such as cement kilns, WTE and pyrolysis plants don’t get desired quality of waste. Thus, there is a large opportunity to set up businesses that can incentivise households to segregate dry and wet waste, collect the segregated waste and channelize it to recyclers. Given the potential opportunity, a number of companies (see Table 1) have started aggregating household waste and supplying it to recyclers.

Table 1: Waste Management companies
CompanyLocationRemarks
Lets recycleAhmedabadWaste management, waste handling and reporting services for corporates, also owns recycling facilities, funded by impact investors such as Aavishkaar and Asha impact
Waste venturesHyderabadWaste collection, segregation and channelization , has been funded by Vilcap investments
Karo SambhavGurugram, HaryanaE waste PRO, funded by IFC, clients includes HP, Apple Del and Xiaomi
GEM enviroDelhiPlastic waste PRO, counts Bislery, Pepsi, Coco Cola among its clients
Raddi ConnectMumbaiWaste collection and channelization
Thekabadiwala.comBhopalDoorstep waste collection and channelizing the waste,  recently raised angel funding of Rs. 3 crores
Saahas zero wasteBangaloreWaste management, EPR and consulting services, has raised funds from India Angels network
Rudra Environmental SolutionsPuneCollects plastic waste and converts it to fuel in their own pyrolysis plant. Has been acquired by Blue Planet environmental solutions Pte limited, Singapore
Source: FineTrain research

Further, changing regulatory landscape in plastic waste management sector has boosted the viability of this sector. The regulations on plastic waste management are evolving and EPR (extended producer responsibility) was introduced in 2016. EPR makes producers, importers and brand owners responsible for processing of end of life plastic waste generated by their products. These companies can also take services of a Producer Responsibility Organisation (PRO) to manage their waste. Although, EPR for plastic waste is still in its early days, some FMCG companies have started warming up to this idea. For example, Indian Pollution Control Association (IPCA), a Delhi based PRO is implementing a project called “We Care” on behalf of FMCG companies such as PepsiCo , Nestle, Dabur and other to collect MLPS and channelize them to the recyclers. Recognition and acceptance of a PRO in plastic waste management provides a sustainable source of revenue for waste management companies and therefore makes their operations more viable.

Regulation is also slowly making an impact on waste segregation mindset of Indians. For example, in Mumbai and /Bangalore in situ (on site) composting is mandatory for bulk generators who generate more than 100 kg of waste every day as the municipality does not collect wet waste from such bulk generators.

Increasing awareness about consequences of informal recycling on the health of workers and environment is also bringing about a change in the mindset of people to own up their waste and sell it only to authorised recyclers. This in turn is likely to lead to an increase in demand for PROs in the long term.

What are the key challenges?

While the opportunity is large, the waste management companies face challenges related to lack of adequate clean waste and funding.

  1. Competition from informal sector: Almost all companies in formal waste recycling sector including e waste, bio-waste and plastic waste do not get adequate waste. For example more than 90 per cent of4 e waste is handled by informal sector and 50 per cent5of plastic recycling is done by informal sector, resulting in less than adequate availability of waste to the formal recyclers. The informal sector is able to offer higher prices for the waste vis a vis formal recyclers as they their processing costs are lower due to lower operational/manpower costs/capex costs. For example, a formal plastic recycling units needs to invest at at-least Rs. 1 cr in a recycling unit including the processing machinery and pollution control equipment for treating dust and waste water. However, the cost for informal sector are negligible as most of the work is done manually, and without any compliance to pollution control.
  2. Access to funding: The waste related business are working capital intensive, as they need to pay for the waste upfront, while they get paid only after sizable quantity of each type waste is collected, sorted and sent to the recycler. Additionally, they need large godown for waste storage and employ a number of people in sorting the waste. Further, they require funds for conducting awareness campaigns and marketing. Since these businesses do not have large physical assets, traditional channels such as bank are not able to meet their requirements. Similarly, such businesses also find it difficult to attract equity capital, as it is difficult to scale up operations across geographies.
    However, emergence of impact investors and green funds has improved the funding prospects of these businesses. As can be seen in the Table 1, a number of investors including IFC, Aavishkaar, Asha impact and angle investors have invested in waste related businesses.

How can we help?

We are an advisory firm for small and medium enterprises in green industries. We can help you assess viability of your proposed plastic waste related venture including availability of waste, technology selection and market for recycled products. If you already have a waste related business, we can support you in raising capital for your growth plans and also in acquiring green businesses.

Reach us @

Write to us: bchhatre@finetrain.com , admin@finetrain.com
Call us: 800 888 4932

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Bio-CNG: Should you consider entering this business?

Though Biogas has been around for nearly three decades, it has been a small industry, dominated by family size plants used for providing cooking fuel and power. Prospects for Biogas plants are improving slowly but significantly, largely driven by the government policies that have allowed use of Bio-CNG (purified Biogas, also known as Compressed Bio Gas or CBG) in commercial vehicles and availability of subsidy for large scale plants. In September 2018, government of India (GOI) announced a policy on Sustainable Alternative Towards Affordable Transportation (SATAT), which proposes to set up 5,000 new Bio-CNG units across the country by 2025 and generate 15 million tonnes of Bio-CNG.

India is the third largest energy consumer in the world with fossil fuels accounting for over 90 per cent of the energy mix. Renewable fuels such as Bio-CNG present a huge opportunity as they not only reduce our dependence on imports but also offer a solution to tackle the growing amount of organic waste and pollution arising out of crop burning.

No wonder then that Bio-CNG industry is suddenly attracting several entrepreneurs, including existing Biogas facilities that are looking to upgrade to Bio-CNG. Profitability of Bio-CNG businesses depends on a host of factors including macro issues that influence demand for cleaner fuels and local elements such as availability of feedstock, capital requirements and ability of entrepreneurs to market their products. This article analyses four key factors that affect viability of Bio-CNG ventures.

1. Demand for cleaner fuels

Natural gas contributes to around 23% 1of primary energy mix (see Figure 1) in India, with a consumption of around 164 MMSCMD2 (equivalent to 45 million tonnes per annum), growing at around 4 per cent per annum. Power, Fertiliser and City Gas Distribution (CGD) are key consuming sectors (see Figure 2). Since the domestic production of gas has not increased significantly, consumption of imported gas (LNG) has been rising (see Figure 3).

Bio-Chart

Consumption of gas is constrained by the limited availability of infrastructure related to its supply and distribution. Gas distribution network pipelines are available only in 96 districts in Northern and Western parts of country. Similarly, there are only 1424 CNG dispensing stations, 82% of which are located in Maharashtra and Gujarat3. Petroleum and Natural Gas Regulatory Board (PNRB) is expanding City Gas Distribution (CGD) network significantly so as to cover 400 districts and set up additional 9000 CNG pumping stations. The CGD network will be used to supply Bio-CNG also, therefore boosting its demand.

2. Cost competitiveness of Bio-CNG vis-a-vis other fuels

For large scale adoption, Bio-CNG would need to be cost competitive with LNG, commercial LPG and fuel oil that are used by the transport and industrial sectors. As per SATAT, the introductory price (ex- factory) of Bio-CNG is likely to be Rs. 46/kg and retail price could be around Rs. 52-55 per kg ($14–$15 per MBTU).

The prices of LNG have been decreasing of late, and landed prices of LNG in the near term are expected to be around $ 13 per MBTU, thus translating into a price of Rs. 48 per kg. Over the long term, significant decrease in LNG prices, would put pressure on Bio-CNG prices also.


Note: landed prices of LNG have been calculated by adding $5 to the cost of contracted LNG, to account for cost of regasification and distribution

With regard to Bio-CNG’s cost competitiveness with industrial fuels such as LPG and fuel oil, according to CRISIL4 , at an average crude price of $64 per barrel, landed cost of fuel oil and LPG would be $12.1 per MMBtu and $16.9 per MMBtu respectively, as against Bio-CNG’s expected prices of $14-15 per MMBtu. Therefore any significant decline in crude prices from current levels could also put pressure on Bio-CNG prices.

The key question that needs to be analyzed is whether a Bio-CNG plant will be profitable at a price of Rs. 46 /kg (ex-plant). Important components of Bio-CNG cost include feedstock, power, and manpower and capital costs, with feedstock cost accounting up to 40% per cent. Therefore feedstock cost (including transport) and its biogas yield play a critical role in determining viability of Bio-CNG unit. For example, a feedstock such as cow dung has a poorer biogas yield vis-a-vis other sources, resulting in lower Biogas output and higher capital costs. However it may be available free of cost, thus reducing the operating cost and making the operations viable.

Table 1: Bio-CNG cost (Rs/Tonne)
Raw Material 16,931.22
Direct Labour 4,162.26
Power 5,333.33
P
Others
3,153.54
Operating costs 29,580.35
Interest and depreciation 12,195.66
Total cost 41,776.01

An indicative cost structure for a press mud based BIO-CNG unit is provided in Table 1. It has been assumed that the capacity of the plant is 10 TPD of Bio-CNG and its capital cost is Rs. 34 crores, with a subsidy of Rs. 8 crores. The plant procures press mud at a price of Rs. 800 per tonne and press mud yields about 105 cubic meter of Bio gas per tonne.

As can be seen from the Table 2, the cost of Bio-CNG increases from Rs. 39,000 per tonne to Rs. 52,000 per tonne due to an increase in the feedstock cost from Rs. 600 per tonne to Rs. 1100 per tonne.

table-second

As such, to be competitive, the Bio-CNG unit must get feedstock almost free; therefore units with captive access to the feedstocks are more likely to succeed.

3. Capital cost

As a thumb rule, cost of a project that handles around 200 tonnes of waste per day (produces 10 tonnes of Bio-CNG per day) is likely to be around Rs. 30-35 crores. The fixed cost (interest and depreciation) contributes to as much as 30 per cent of the total cost of production and this can vary depending on the cost of land and machinery and timely receipt of subsidy, as described below.

  • Land cost: Around 4 acres of land is required to set up a plant that can handle 200 tonnes of waste per day. The cost can vary hugely depending on the location and whether the land is agricultural or industrial, land cost is typically funded by the entrepreneur.
  • Machinery and civil work: These together contribute to almost 70 % of the cost of a Bio-CNG plant. The machinery comprises biogas holder, scrubber, upgradation unit, plant automation equipment and piping/electricals and its cost can vary a lot across vendors depending on whether they are manufacturing it in house or procuring it from others. Civil work is typically executed through local contractors and its costs may not differ across vendors.
  • Timely receipt of regulatory approvals: A Bio-CNG unit requires a number of permissions including a license from Petroleum and Explosives Safety Organisation (PESO), fire safety certifications and a certification from MNRE (Ministry of New & Renewable Energy). Ability of the company to secure these licenses on time can minimize delays in commissioning of the plant and result in cost savings. Additionally, receipt of subsidy is also subject to project completion and commencement of commercial production and any delay in project commissioning would also delay the subsidy, therefore increasing the interest cost.

Since purity/quality and specifications to standards is of topmost priority for a Bio-CNG unit, quality of machinery/upgradation technology should not be compromised. Significant cost savings can be realised by working directly with OEMs who can provide both biogas fabrication and CBG upgradation technology, instead of engaging with contractors who would outsource critical plant components.

4. Market

While the offtake for Bio CNG from OMC is assured to an extent, it would be important to develop alternate set of customers such as industries/hotels, who can perhaps provide better pricing/payment terms and provide cushion when the demand from OMC declines. Also, the potential for sale of organic fertiliser would need to be assessed. Fertilisers/compost are typically sold through dealer network and require large sales force that can educate farmers on benefits of organic fertilisers. Alternatively, the option of bulk sale to fertiliser companies needs to be explored.

Our view

The need for cleaner fuels is evident given that by 2030, under the Paris Climate Change Agreement, India has committed to meeting 40% of its electricity con from renewable energy sources. While macro environment remains positive, the key risk to a Bio-CNG plant viability is lack of any linkage between the feedstock and final product price and lack of clarity on the price revision mechanism under SATAT. Since Bio-CNG would compete with fossil fuels, its pricing would depend on the price of CNG/LPG, whereas the price of its feedstock may move very differently. This is already the case with biogas based power plants/waste to energy plants that are not able to compete with decreasing tariffs of solar/wind power plants. Therefore, feedstock analysis, availability and long term agreements for purchase of feedstock are critical to the viability of Bio-CNG plants. Industries such as sugar mills, distilleries, and poultry farms that have captive access to feedstock would be most favourably disposed to take advantage of this opportunity.

How can we help?

We can help you assess viability of your proposed Bio-CNG venture and support you in raising capital for the same. If you are looking to purchase/sell an existing Biogas/waste management company, we can identify prospective buyer/ seller and support you throughout the transaction.

Reach us @

Write to us: bchhatre@finetrain.com , admin@finetrain.com
Call us: 800 888 4932

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