Home  /  Specials  /  Good Businesses 2017  / Masters of Waste | AUG 18 , 2017

Photographs by RA Chandroo

Good Businesses 2017

Masters of Waste
Carbon Masters is developing a successful business model to commercialise biogas

Himanshu Kakkar

Sustainable profits: (L-R) Kevin Houston and Som Narayan, partners, Carbon Masters

When you step inside the kitchen of Konark Restaurant in Bengaluru, and look at the inflamed stove, there’s nothing to it. It appears just as those caused by any conventional LPG cylinder. But Som Narayan, partner at Carbon Masters, feels there is more to the flame. “Carbonlite burns stronger and for longer compared with LPG. They enable a constant run of gas throughout the cooking process,” says Narayan. Being liquefied, LPG, on the other hand, decreases in its pressure with usage. 

Carbon Masters, a city-based social enterprise, converts wet waste into biogas, which it then bottles and supplies to restaurants such as Konark. The bottles and cylinders bear the Carbonlite brand. “Carbonlite cylinders are priced almost at par with LPG cylinders. But through using the former, there is a minimum savings of 15%, when you think of things like an efficient kitchen and a better cooking performance,” continues Narayan. Currently, the price of a Carbonlite cylinder is at 50.5 per kg, whereas a commercial LPG costs 55 per kg.

Having launched Carbonlite in 2014, Carbon Masters has five more restaurants in the city, which use their cylinders. But that’s not all — the company is also in the process of building onsite biogas plants as well.

Changing tracks
Interestingly, Carbon Masters didn’t begin as a biogas company. Kevin Houston, the Brit partner at Carbon Masters, says, “Som and I first met back in Edinburgh University in 2008 where we were enrolled for a one-year programme in power management. Carbon Masters initially started out as a consultancy firm.” 

The company, which was incubated in the university for a year, audited companies, carried out greenhouse gas analysis and educated companies on ways to cut down on their carbon imprint. The partners worked for two years before Narayan’s visa for the UK ran out and he had to go back to India. This was in 2012. He quickly realised that the business model that was working well in the UK, wasn’t of great interest to organisations in India apart from a few MNCs. Companies here were not as worried about their carbon imprints. 

Narayan counts this as their first challenge. They couldn’t replicate the UK model in India. “We realised we needed to respect the market. They were not going to pay you for carbon control when there was no regulation concerning cutting down on carbon. We had to challenge ourselves and come up with a solution that was in sync with real market conditions,” says Narayan.

Both began looking for solutions. Separately, Houston had been hired by the European commission in Brussels for a project. He looked at how the IT and communication industries could develop a methodology to measure and curb their carbon imprint. 

“In the course of that work, we came across a problem with telecom towers in India. There were lakhs of them in 2012 running on 12-18 hours of grid electricity. Rest of the time, it was on batteries or diesel. We started wondering if there was a solution to that,” says Houston. Around the same time, Narayan came into contact with a farmer who, using his own money and funds from the ministry of new & renewable energy, had built a pilot anaerobic digester plant (the technical name for a biogas plant) in Doddaballapur near Bengaluru that converted wet waste into gas. But the plant was lying idle. 

So, Narayan worked with him to find a way to commercialise it. Started as a pilot project, the duo invested around 50 lakh to build a bottling plant. Under an agreement with the owner, they upgraded it and agreed to buy all the biogas and commercialise it as well as the biofertiliser (made from leftover slurry). “We uniquely created two- and four-cylinder combinations, which meet the requirements of hotels,” says Narayan. And this is how India’s first bottled bio-CNG brand, Carbonlite, was launched in 2014. 

Innovation with formats
Bottling the biogas is only half the story told. In 2016, a peculiar problem cropped up at Bengaluru’s Iskcon temple. Because the charitable institution feeds 1 lakh children daily through Akshaya Patra (an NGO that implements the mid-day meal scheme for children), it generates 1.2 tonne of wet waste — vegetable leftovers, cow dung and so on — at its site. Sending the waste to landfills was not a sustainable solution, since it releases methane, a greenhouse gas, into the atmosphere. 

One more challenge awaited them. “The temple complex was not big enough to build a biogas plant inside. So, we built a fully-functional biogas plant in two used shipping containers, one on top of the other. This took one-third of the space of a conventional biogas plant,” says Houston. The biogas plant was built under the BOT (build-operate-transfer) model with the company investing 30 lakh as initial investment with a payback period of three and a half years. It now generates 50 kg of gas everyday that is sold entirely to Iskcon, which also pays the company an operating fee of 35,000 a month. 

The containers are stacked up in a corner, occupying limited space. It not only tackled the cost of constructing a building resulting in a saving of around 20%, but also ensured it was quickly scalable, since only an additional container is needed to increase capacity.

With restaurants, however, onsite solutions aren’t feasible. “Restaurants create about 100-150 kg of waste everyday. The problem is that you can’t have a small-scale biogas plant. But if we could build a large plant within 40-50 km of the restaurant, we could bring in and process their wet waste and send back bottled gas,” says Narayan. Since 2013, Carbon Masters has been running a 10-tonne capacity bottling plant in Doddaballapur outside Bengaluru, from where it supplies biogas to its customers and converts the remnant slurry into biofertiliser.

Having implemented the onsite project successfully for Iskcon, the company has been tendered by the government as well to build biogas projects for them. Talking about the two projects underway, Houston says, “We are building a similar container-based plant for a biofuel park in Hassan, Karnataka that is located near an agriculture university and would function as a demonstrator for students.” The project cost around 30 lakh, with operations starting in the next couple of weeks. “Other than this,” he continues, “there is also a project for the government’s Frozen Semen Centre in Bengaluru. They were not happy with the way they were managing cow dung. We will be building for them a one-tonne plant to convert that into electricity.” Work on this project, however, is still two months away. The company will only be building both the plants, thereafter teaching the respective agencies how to operate them. 

To augment its capacity and growth, Carbon Masters has taken the route of joint ventures. In FY13, during its pilot project at Doddaballapur while testing to see whether it could commercialise biogas, it helped three Mahindra trucks run on bio-CNG. This caught the attention of Mahindra’s R&D department, who was working on hydrogen as a clean fuel at the time. “Observing that biofuel was equally clean, they decided to invest in our plant. They have recently invested around 7 crore in a plant that can take up to 40 tonne of wet waste a day for a project just outside Bengaluru. “Already, 25 tonne is being fed in. We process that, bottle it and then bring it here to displace LPG for customers such as Konark,” says Houston.  

Mahindra has contributed about 90% of the investment, with Carbon Masters investing in trucks and storage as well as customer-end investment. The agreement between the two entails Carbon Masters managing the operations, the mobilisation of waste and the commercialisation of biogas and fertiliser, the by-product. 

Currently, in the trial phase, the plant is operating at a load of 40-50 tonne a day. The following weeks will see it fully streamlined. The company is aiming to return Mahindra’s capex in five years. When its capacity is fully utilised, the plant can generate up to 1,100 kg gas per day. 

The revenue model of the company comprises of three streams. One, from its engineering division that bids and builds biogas plants and charges for this (for instance, the two plants for the government). Secondly, there are the charges for the plants’ operation (for instance, the Iskcon plant). Lastly, the earnings gleaned from the sale of biogas and fertilisers in the market (through Carbonlite cylinders). Carbon Masters supplies biogas to six restaurants presently, on condition that the price will always be at par with LPG. Says Ram Murthy, MD, Konark group — the owner of Konark Restaurant in Bengaluru, “Biogas burns better than LPG. The yearly savings are estimated to be 3.5 lakh. The annual spending on LPG is usually 25 lakh.” 

Challenges ahead
Currently, Bengaluru emits around 4,000 tonne of wet waste each day and collecting that is a task in itself. But Carbon Masters doesn’t collect the waste. “We depend on six to seven local companies for waste collection. It’s not financially viable to collect waste yourself,” says Narayan. Two waste management companies Saahas Zero Waste and Hasiru Dala, which, instead of letting waste end up in a landfill, give it away for free to companies such as Carbon Masters. Wilma Rodrigues, founder of Saahas, says, “We interface with waste generators such as large tech parks and restaurants. While some of the waste is converted into compost on site, the rest is transferred to players such as Carbon Masters. In a city like Bengaluru, Carbon Masters’ business is more secure than elsewhere since large institutions, companies and tech parks do follow the regulations, and ensure waste is segregated.” Carbon Masters’ own vehicles and the collection trucks of Saahas run on biofuel. 

Houston feels that there has been no dearth of operational challenges. Fortunately, both partners are quite stubborn by nature, which has helped. “We had quality issues in the beginning. The pressure would not maintain, so we invested in a technology to address that,” he adds. This technology is an attachment that sits over the cylinders to maintain the correct pressure for cooking. 

“Then the prices of LPG, to which Carbonlite is benchmarked, fell down during the last two years (from 110 per kg in 2014 to 55 per kg as it is currently) and we had to absorb that,” he continues. This was in the form of an increasing payback period of five to six years. However, considering it is the renewables industry, such a payback period is nonetheless attractive. 

Narayan, on the other hand, feels that scaling up during the past two years has been a challenge in itself. “You have a pilot plant, which has proved itself. With all the right boxes being ticked, you still need funds, as energy is a capital-intensive business. But raising funds itself takes eight to ten months,” he remarks.

In June this year, Carbon Masters raised 4 crore from Indian Angel Network (IAN). Nagaraja Prakasam, an investor from IAN, explains his rationale for investing in Carbon Masters: “Biogas is a 100-year-old technology. India had tried it 30 years ago in the form of gobar gas, but it didn’t take off then because a lot of discipline was required to maintain plants. Besides, the gas it produced wasn’t efficient enough.” Prakasam even gave a term sheet to a company, which had purified biogas, to improve its efficiency, thereby bringing it at par with LPG in terms of calorific value. “However, they couldn’t commercialise it. But Carbon Masters has been successful.”

What next?
Carbon Masters clocked revenue of 50 lakh in FY16, and 70 lakh in FY17. Narayan feels that they can touch 6 crore in the current year, as their joint plant with Mahindra in Malur has just come online. This, together with the company’s project at Doddaballapur brings the overall capacity to 50 tonne. Additionally, the company’s restaurant customers will also increase from six to up to 15 in the coming year.

According to Prakasam, “Social business is a triple bottomline business. The returns are in terms of positive impact — on people, the earth, and on profits. I am very excited about Carbon Masters because some big companies are already keen on partnering with us.” 

With the PNG and CNG pipeline network being augmented across the country, the challenge for them is to push biogas as an environment-friendly alternative. “We need to educate customers more. Apart from being fossil fuels, both LPG and CNG have an import element, too. We can reduce our import dependence by promoting biogas,” says Prakasam. 

India has oodles of biomass, especially in its farms where farmers often burn waste straw. Sadly, the transportation costs of transferring that biomass to plants make the idea economically unviable. Both the founders opine that the government has to support the industry in the collection of biomass from farms. They believe that there is potential for even onsite biogas plants. But that could happen in the long term. In the near term, it’s the urban waste and the urban market that needs to be captured. 

“After Bengaluru, we will be expanding into seven or eight other locations in Karnataka and Andhra Pradesh. While we will never be able to say that we are equivalent to LPG in terms of the distribution and its availability, we want to see if we are able to solve cities’ waste problem, and have enough number of plants in the country’s top cities,” says Narayan. 

For the next six months, their focus is on commercialising the Mahindra plant. “We will be raising another round shortly,” adds Narayan. 

The duo feel that they have very few competitors. “Most build biogas plants. But we build plants, operate them and commercialise them by bottling,” says Narayan. Houston quotes his favourite Elon Musk: “When he was asked why he was giving away all his patents on battery technology, he answered — we all are on the same boat together and the boat is sinking. Why should I be the only guy with the pail to remove the water? In the same way, I want a biogas industry in India to develop, with more and more people jumping in to solve this problem.”

Here's your chance to read the latest issue of Outlook Business for free! Download the Outlook ​Magazines app now. Available on Play Store and App Store
On Stands Now