August 2018 DETAILED PROJECT REPORT ON

40 kW BIO GAS POWER

GENERATION
M/s Sarhad Dairy, Bhuj– Gujarat Dairy Cluster

Submitted to
(Prepared under GEF-UNIDO-BEE Project)

Bureau of Energy Efficiency

4th Floor, Sewa Bhawan, Sector – 1, R. K. Puram, New Delhi - 110066

Prepared by

Confederation of Indian Industry

CII – Sohrabji Godrej Green Business Centre
Survey No. 64, Kothaguda Post, Near HITEC City
Hyderabad 500064
Detailed Project Report

Table of Contents
List of Tables .......................................................................................................................................... 2
List of Figures......................................................................................................................................... 2
List of Abbreviations .............................................................................................................................. 3
ACKNOWLEDGEMENT ............................................................................................................................ 4
1. EXECUTIVE SUMMARY........................................................................................................................ 5
1.1 Brief Unit Profile.................................................................................................................................. 5
1.2 Proposed EE Measure ......................................................................................................................... 6
1.3 Means of Finance ................................................................................................................................ 6
2. INTRODUCTION ABOUT SARHAD DAIRY .............................................................................................. 7
2.1 Unit Profile .......................................................................................................................................... 7
2.2 Production Details............................................................................................................................... 7
2.3 Typical Dairy Process Flow Diagram ................................................................................................... 8
2.3 Energy Profile .................................................................................................................................... 10
3. PROPOSED EE MEASURE – 40 kW Bio Gas Power Generation ............................................................. 12
3.1 Present System ................................................................................................................................. 12
3.2 Recommendation.............................................................................................................................. 15
3.3 Supplier Details ................................................................................................................................. 15
3.4 Savings............................................................................................................................................... 16
4. FINANCIAL ANALYSIS ........................................................................................................................ 17
4.1 Project Cost ....................................................................................................................................... 17
4.2 Assumptions for Financial Analysis ................................................................................................... 17
4.3 Cash Flow Analysis ............................................................................................................................ 17
4.3 Sensitivity Analysis ............................................................................................................................ 18
5. ENERGY EFFICIENCY FINANCING IN MSMEs ....................................................................................... 20
5.2 FI Schemes in Gujarat........................................................................................................................ 20
6. ENVIRONMENTAL AND SOCIAL BENEFIT ............................................................................................ 24
6.1 Environmental Benefit ...................................................................................................................... 24
6.2 Social Benefit..................................................................................................................................... 24
8. ANNEXURE ....................................................................................................................................... 28
8.1 Financial Quotation ........................................................................................................................... 28

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List of Tables
Table 1: Unit Details ...................................................................................................................................... 5
Table 2: Proposed EE Measure ..................................................................................................................... 6
Table 3; Project Finance ................................................................................................................................ 6
Table 4: Unit Profile ...................................................................................................................................... 7
Table 5: Production Capacity ........................................................................................................................ 9
Table 6: Type of fuel used ........................................................................................................................... 10
Table 7: Fuel Consumption Details ............................................................................................................. 10
Table 8: Effluent Characteristics ................................................................................................................. 12
Table 9: Supplier Detail ............................................................................................................................... 15
Table 10: Savings Calculation ...................................................................................................................... 16
Table 11: Project Cost ................................................................................................................................. 17
Table 12: Cash flow of the project .............................................................................................................. 17
Table 13: Capital Structure ......................................................................................................................... 18
Table 14: NPV Calculation ........................................................................................................................... 18
Table 15: Sensitivity analysis: based on energy savings ............................................................................. 18
Table 16: Sensitivity analysis: change in operating hrs............................................................................... 18
Table 17: Sensitivity analysis: change in interest rate ................................................................................ 19
Table 18: FI schemes in Gujarat .................................................................................................................. 21
Table 19: Proposed EE Measure ................................................................................................................. 26
Table 20: Financial Analysis ........................................................................................................................ 26

List of Figures
Figure 1: Milk Processed ............................................................................................................................... 7
Figure 2: Typical process flow of Milk manufacturing .................................................................................. 8
Figure 3: Share of fuel cost ......................................................................................................................... 10
Figure 4: Fuel Cost Electrical vs Thermal .................................................................................................... 11
Figure 5: Process flow of ETP ...................................................................................................................... 13
Figure 6: Equalization Tank and .................................................................................................................. 13
Figure 7: UASB Reactor ............................................................................................................................... 14
Figure 8: Aeration Tank ............................................................................................................................... 14
Figure 9: Proposed System ......................................................................................................................... 15

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List of Abbreviations
BEE Bureau of Energy Efficiency
BOD Biological Oxygen Demand
CS Capital Structure
°C °Celsius
CFM Cubic Feet Minute
CO2 Carbon dioxide
COD Chemical Oxygen Demand
DPR Detailed Project Report
EE Energy Efficiency
ETP Effluent Treatment Plant
FI Financial Institution
GCMMF Gujarat Cooperative Milk Marketing Federation
GEF Global Environmental Facility
IRR Internal Rate of Return
kJ Kilo Joule
KLPD Kilo Litres Per Day
kW Kilo Watt
LSP Local Service Provider
MSME Micro and Medium Scale Industries
NPV Net Present Value
OEM Original Equipment Manufacturer
RE Renewable Energy
SBI State Bank of India
SIDBI Small Industrial Development Bank of India
TOE Tonnes of Oil Equivalent
UASB Uplflow Anaerobic Sludge flow Blank
UNIDO United Nations Industrial Development Organisation
WACC Weighted Average Cost of Capital

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ACKNOWLEDGEMENT
Confederation of Indian Industry (CII) would like to express its sincere thanks to United Nations
Industrial Development Organization (UNIDO), Global Environment Facility (GEF) and Bureau of
Energy Efficiency (BEE) for the role played by them in guiding and steering this prominent
assignment - “Capacity Building of Local Service Providers in Gujarat Dairy Cluster”.

CII is grateful to Mr. Milind Deore, Director, Bureau of Energy Efficiency, Mr. Sanjay Shrestha,
Industrial Development Officer, Industrial Energy Efficiency Unit, Energy and Climate Branch,
UNIDO, Mr. Suresh Kennit, National Project Manager, UNIDO and Mr. Niranjan Rao Deevela,
National Technology Coordinator, Energy Efficiency & Renewable Energy in MSMEs, UNIDO for
their support and guidance during the project.

CII would also like to give special gratitude to Gujarat Cooperative Milk Marketing Federation
(GCMMF) for supporting CII for carrying out this project at Gujarat Dairy Cluster and for their
constant support and coordination throughout the activity. CII team is also grateful to the M/s
Sarhad Dairy especially Mr. Nilesh Jalamkar, Plant Head, Mr. Hardik Kataria, Technical for
showing keen interest in the this implementation of this technology and providing their
wholehearted support and cooperation for the preparation of this Detailed Project Report.

CII also thanks Mr. Falgun Pandya, Cluster leader for Gujarat Dairy cluster for the continuous
support extended all throughout this activity.

We also take this opportunity to express our appreciation to the Original Equipment Suppliers
and Local Service Providers for their support in giving valuable inputs and ideas for the
completion of the Detailed Project Report.

We would also like to mention that the valuable efforts being taken and the enthusiasm
displayed towards energy conservation by the Gujarat Dairy Cluster is appreciable and
admirable.

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1. EXECUTIVE SUMMARY
Bureau of Energy Efficiency (BEE), a statutory body under Ministry of Power, Government of
India, in collaboration with United Nations Industrial Development Organization (UNIDO) is
executing a Global Environment Facility (GEF) funded national project “Promoting energy
efficiency and renewable energy in selected MSME clusters in India”.

The overall aim of the project is to develop and promote a market environment for introducing
energy efficiency and enhanced use of renewable energy technologies in process applications in
12 selected energy-intensive MSME clusters across 5 sectors in India (with expansion to more
clusters later). This will enable improvement in the productivity and competitiveness of units,
as well as reduce overall carbon emissions and improve the local environment.

Key activities involved in the project are shown below

➢ LSP MAPPING: Detailed Mapping of LSPs in the cluster.

➢ TECHNOLOGY FEASIBILITY STUDIES: Preparation of 10 bankable DPRs.
➢ TRAINING MATERIALS: Development of 5 customized training material based on
mapping
➢ TRAINING PROGRAM: Conduct 4 training programs in the cluster for the capacity
building of local service providers.
➢ LSP’s AS LOCAL DISTRIBUTORS: Mapping of LSPs and OEMs so that LSPs can be local
dealers for major OEMs.

1.1 Brief Unit Profile

Table 1: Unit Details
Particulars Details
Name of Plant Sarhad Dairy
Name(s) of the Plant Head Mr. Nilesh Jalamkar
Contact person Mr. Hardik Kataria
Constitution Cooperative Society
MSME Classification Large Scale
Address: S.R. No 208, Lakhond Village, Bhuaj Bhachau Highway, Bhuj
Industry-sector Dairy

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1.2 Proposed EE Measure

After the discussion with the plant team, it has been decided to install bio gas engine with 40
kW bio gas generator for the ETP plant. The details of the proposed EE measure is given in
below table:
Table 2: Proposed EE Measure

Annual Energy Monetary

Investment Payback AnnualTCO
Sl No EE Measure Savings Savings
(Rs. Lakhs) (Months) 2 reduction
(Rs. Lakhs)
kWh TOE
40 kW Bio
1 Gas Power 2,51,989 21.67 16.13 31.86 24 206.63
Generation

1.3 Means of Finance

The details of means of finance for the proposed EE measure is as under:
Table 3; Project Finance
Sl. No. Particulars Unit Value
i Total Investment (Incl of Tax) Rs. Lakh 31.86
ii Means of Finance Self / Bank Finance Self
Iii IRR % 71.44
Iv NPV at 70 % Debt Rs. Lakh 67.14

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2. INTRODUCTION ABOUT SARHAD DAIRY

2.1 Unit Profile
Kutch district co-operative milk producer’s union ltd.”Sarhad dairy” was established in year
2009. Sarhad dairy is the member of “GCMMF” AMUL Anand. Its primary activity is collecting
milk from village co-operative societies, processing milk and make product under the brand
name of “AMUL”. In the beginning Union was collecting milk from the 17 village co-operative
societies but now Sarhad Dairy is collecting milk from more than 550 village co-operative
societies locating in Kutch district which is supplying milk to dairy’s chilling centers and dairy is
collecting milk from dairy’s own various chilling centers located in the Kutch district.

In the month of January 2013 Sarhad Dairy has started processing plant at- Lakhond, Taluka –
Bhuj - Kutch processing milk and making milk pouch under the brand name of “AMUL” currently
it has capacity of 2 Lakh litres per day.
Table 4: Unit Profile
Particulars Details
Name of Plant Sarhad Dairy
Name(s) of the Plant Head Mr. Nilesh Jalamkar
Contact person Mr. Hardik Kataria
Contact Mail Id hardik@sarhaddairy.coop
Contact No 09687655965
Constitution Cooperative Society
MSME Classification SME
No. of years in operation 7
No of operating hrs/day 24
No of operating days/year 365
Address: S.R. No 208, Lakhond Village, Bhuaj Bhachau Highway, Bhuj
Industry-sector Dairy
Type of Products manufactured Milk ,Ghee, Dahi

2.2 Production Details Milk Processed

The various products manufactured in
Lakh Litres Per Month

60
Sarhad dairy are liquid milk, ghee, 50
dahi. The graph shows the milk 40
30
processed during last one year. 20
10
0
Jul-17
Apr-17
May-17
Jun-17

Nov-17

Jan-18
Aug-17
Sep-17

Dec-17

Feb-18
Mar-18
Oct-17

Figure 1: Milk Processed

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2.3 Typical Dairy Process Flow Diagram

Milk Receipt, Filtration and Clarification

Storage

Whole Milk Separation &

Standardization Cream

Skimmed Milk

Pasteurization

Cream
Homogenization Homogenization

Whole Milk Skimmed Milk Cream

Deodorization
Butter Churning

Storage
Butter
Butter Milk

Packing and Storage Packaging and

Freezing

Distribution
Butter

Dairy Products

Figure 2: Typical process flow of Milk manufacturing

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The processes taking place in a typical milk plant after receiving and filtration of milk from the
chilling units includes:

Separation: After being held in storage tanks at the processing site, raw milk is heated to
separation temperature in the regeneration zone of the pasteurizer. The milk (now hot) is
standardized and homogenized by sending it to a centrifugal separator where the cream
fraction is removed. The skim is then usually blended back together with the cream at
predefined ratios so that the end product has the desired fat content. Surplus hot cream is
cooled and usually processed in a separate pasteurizer ready for bulk storage and
transportation to a cream packing plant.

Pasteurization is a process of heating milk to 72°C for 16 seconds then quickly cooling it to 4°.
This process slows spoilage caused by microbial growth in the food. Unlike sterilization,
pasteurization is not intended to kill all micro-organisms in the food. Instead, it aims to reduce
the number of viable pathogens so they are unlikely to cause disease.

Homogenization (if required): Milk must then be homogenized. Without homogenization, the
milk fat would separate from the milk and rise to the top. Milk fat is what gives milk its rich and
creamy taste. Homogenization makes sure that the fat is spread out evenly in the milk so that
every sip of milk has the same delicious flavor and creamy texture. Milk is transferred to a piece
of equipment called a homogenizer. In this machine the milk fat is forced, under high pressure,
through tiny holes that break the fat cells up in to tiny particles, 1/8 their original size. Protein,
contained in the milk, quickly forms around each particle and this prevents the fat from
rejoining. The milk fat cells then stay suspended evenly throughout the milk

Packaging and storage: Milk is pumped through automatic filling machines direct into bags,
cartons and jugs. The machines are carefully sanitized and packages are filled and sealed
without human hands. This keeps outside bacteria out of the milk which helps keep the milk
stay fresh. During the entire time that milk is at the dairy, it is kept at 1°-2°C. This prevents the
development of extra bacteria and keeps the milk fresh.
The table below shows the production capacity of various section in plant daily
Table 5: Production Capacity
Sl No Product UOM Quantity
1 Milk Processing Lakh Litres per Day 2
2 Milk Packaging in Poly Pouches Lakh Litres per Day 2
3 Ghee Manufacturing and Packaging MT/day 4
4 Dahi Milk Product MT/day 7.5

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2.3 Energy Profile

Both electricity and thermal energy are used for carrying out various dairy processing activities.
The following fuels are used in the plant:-
Table 6: Type of fuel used
Sl. No. Type of fuel/Energy used Unit Tariff GCV
1 Electricity Rs./kWh 6.40
2 Briquette Rs/kg 5.00 4500 (kCal/kg )

The steam cost in the plant is Rs 1.48/kg. The table below shows the monthly consumption of
various fuels used in the plant during the last one year
Table 7: Fuel Consumption Details
Month Electricity Consumption (kWh) Fuel Consumption – Briquette (kg)
Apr-17 2,36,656 1,20,000
May-17 2,75,442 1,25,000
Jun-17 2,78,326 1,22,300
Jul-17 2,53,736 1,25,000
Aug-17 2,46,432 1,23,000
Sep-17 2,64,495 1,30,000
Oct-17 2,73,958 1,34,000
Nov-17 2,30,471 1,38,000
Dec-17 2,28,648 1,34,000
Jan-18 2,28,816 1,37,000
Feb-18 2,09,616 1,45,000
Mar-18 2,49,480 1,43,000
Total 17,63,518 15,76,300

The major form of energy used in the plant is electricity which is from grid. For thermal ,plant is
using Briquette as the major fuel. The percentage share of fuel cost is shown below:-
Based on the data collected from the plant, the graph
above shows the variation of fuel cost over the last one
Share of fuel cost
year. Average electricity cost is Rs 15.87 Lakhs/month
whereas the average thermal energy cost is Rs 6.56
29%
Lakhs/month. Electricity Cost
71% Thermal Cost

Figure 3: Share of fuel cost

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Fuel Cost Electricty vs Thermal

20.00
18.00
16.00
Rs Lakhs 14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00

Electrical Thermal

Figure 4: Fuel Cost Electrical vs Thermal

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3. PROPOSED EE MEASURE – 40 kW Bio Gas Power

Generation
3.1 Present System
Sarhad dairy has installed a 300 KLPD ETP plant to treat the effluents from various processes. In
dairy effluent treatment plants, effluents generated from various sections of the production
facilities are first received in a collection tank. Before mixing in an equalization tank, the
effluents are passed through a fat trap unit. The low-density semi-solids, which float in the tank
and contain fats, proteins, packing materials, etc., are known as ‘dairy effluent scum’ and are
removed manually. After removing the dairy effluent scum (top layer), the effluents are further
treated in aerobic or anaerobic conditions. The characteristics of dairy effluent scum vary with
the products being produced in the plant and their relative proportion and the methods of the
operation used.

The ETP contains following unit processes / operations:

• Equalization tank for collection of raw effluent generated from plant for homogenization of
the quantity and quality.
• Anaerobic biological treatment for removal of most of the suspended and dissolved organic
impurities – It includes an Up Flow Anaerobic Sludge Blanket Reactor followed by a settling
tank.
• Aerobic biological treatment unit for polishing of aerobically treated effluent to achieve
statutory disposal norms – It includes an Aeration Tank followed by a Settling tank.
• Polishing treatment units: for further purification of treated effluent - It includes a duel media
pressure filter, an Activated Carbon Filter, a Micron Filtration System, an Ultra-filtration
system and a Reverse Osmosis system.

Effluent Characteristics:
Table 8: Effluent Characteristics
Sl No Parameter Raw Effluent After Anaerobic Treated Effluent

1 Effluent flow rate 300 m3/d 300 m3/d 300 m3/d

2 pH 4.0 – 9.0 7.0 – 8.5 7.0 – 8.5

3 Temperature < 40 C < 35 C < 35 C

4 Chemical Oxygen demand 4,000 mg/L < 600 mg/L < 100 mg/L

5 Biochemical Oxygen demand 2,500 mg/L < 200 mg/L < 30 mg/L

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6 Oil & Grease 50 mg/L < 20 mg/L < 10 mg/L

7 Total Suspended Solids 500 mg/L < 150 mg/L < 50 mg/L

The wastewater generated from the unit will have various pollutants which exert high BOD and
COD load. From the above table it is observed that incoming dairy effluent has a BOD of 2,500
mg/L and COD of 4000 mg/L which after treatment is reduced to less than 30 mg/L and 100
mg/L respectively.

Figure 5: Process flow of ETP

Current Treatment Process:

• 300 m3/d of raw effluent from different trade activities
flows to ETP by gravity.
• It first gets collected in equalization tank for
homogenization of the quantity and quality. Acid / Alkali
solution is added to neutralize the effluent, if required.
Figure 6: Equalization Tank and
Screen Chamber

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• Homogenized and neutralized effluent from

equalization tank is pumped @ 15 m3/h to UASB
reactor bottom and distributed uniformly through
the inlet distribution system.

Figure 7: UASB Reactor

• It passes upwards through the dense anaerobic sludge bed. Organic matter is rapidly utilized
by biomass and converted to methane rich biogas. Upward circulation of water and biogas
purging from the bottom of the reactor keeps the biomass in suspension and break any scum
formation.
• The three-phase separator at the top of the UASB reactor allows effective degasification to
occur. The dense, granular sludge particles, devoid of attached gas bubbles, sink back to the
bottom establishing a return downwards circulation. The treated effluent flows into
collection channels at the top of the settlers for discharge and transferred to the clarifier – 1.
Washed out anaerobic biomass is recovered and recycled to the reactor. Excess biomass
from Anaerobic Process is wasted to sludge dewatering system, if required.
• Biogas is collected in gas collection portion of three phase separator at the top of the reactor
and transferred to waste gas burner.
• Aerobically treated effluent is transferred to Aeration
Tank. A culture of aerobic bacteria decompose organic
impurities in to CO2. A coarse bubble aeration grid is
provided to supply O2 to aerobic bacterial culture. Air
is supplied by the same twin lobe air compressor
system.
• Treated effluent flows through the clarifier - 2 to
retain bacterial culture. The heavy biomass flocs get
settled in the bottom and clear treated effluent flows Figure 8: Aeration Tank
into outlet channel.
• Aerobically treated effluent is collected in a treated effluent collection sump, it is pumped to
Duel media pressure filter for polishing.
Reclaimed water will be is suitable for irrigation or feeding to softener for reuse in boiler and
cooling tower.
Currently the bio gas generated from the ETP is flared out through stack. Total biogas
generated is 400 – 425 m3/d at design loading of 300 m3/d effluent flow and 4,000 mg/L COD
which has a C.F. value equivalent to 5,600 Kcal / m3.

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3.2 Recommendation
From the existing system since the gas production is in the range of 400 -425 m3/day, it is
recommended to install bio gas engine with generator to produce electricity from bio gas rather
than flaring it out. Biogas production will be continuous and for 24 hours.

Anaerobic Bio Gas Bio gas Bio gas

Compressor Receiver Electricity
Reactor Holder purifier Genset

Figure 9: Proposed System

The organic fraction of the solid waste has been recognized as a valuable resource that can be
converted into useful products using microbes. Anaerobic digestion is a well-established
technology for treatment of organic wastes. Biodegradation of the organic wastes in the
absence of oxygen produces biogas, which is a mixture of methane and carbon dioxide as major
components and traces of hydrogen, ammonia, hydrogen sulphide, etc. Biogas can be used for
thermal applications, such as water heating, drying, boiler fuel, etc., or for electricity
generation. The digested material available after the anaerobic treatment may be used as a soil
conditioner after composting/ vermicomposting. Dual benefits reaped using anaerobic
digestion processes for organic solid waste are simultaneous removal of organic pollutants and
waste stabilization as well as production of renewable energy in the form of biogas.
The biogas holder will have about 1 m3 storage volume. This biogas will be transferred to biogas
holder for intermediate storage. Then the gas will be pumped through a compressor and stored
in a biogas capsule. It will be then used in the biogas engine. The estimated potential of
generation is 90 - 950 units per day which is around 40 kW generation considering generator
efficiency of 37 % and gas availability of 85%.

3.3 Supplier Details

Table 9: Supplier Detail
Equipment Detail Bio Gas Power Generator
Supplier Name – Quotation Attached in Annexure Environponics Solutions Pvt Ltd
Address 9, New Natraj Park Society, Bopal Ghuma Road,
Bopal, Near India Colony, Bopal, Ahmedabad,
Gujarat 380058
Contact Person Mr. Deep Modi
Mail Id environponics@yahoo.com
Phone No +91 9825021159

Supplier Name Sun Envrio Technologies Pvt Ltd

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Address Ashok Colony, Plot No. 22, Near Union Bank,

Pratap Nagr, Nagpur - 440 025
Contact Person Ms. Prachi Doye
Mail Id sunenviro@sunenv.com
Phone No +91-712-2282608
3.4 Savings
The expected electricity savings by 40 kW Bio Gas power generator is 2,51,989 kWh annually .
The annual monetary saving for this project is Rs 16.12 Lakhs with an investment of Rs 31.86
lakhs and payback for the project is 24 months.
Detailed savings calculations is given in below table
Table 10: Savings Calculation
Parameters UOM
COD Inlet mg/l 4000
COD after anaerobic Digestion and before polishing mg/l 600
Flow m3/day 300
COD Reduction mg/lit 3400
3
CH4 Generation Potential m /kg COD 0.4
CH4 Generation per day m3/day 408
GCV kCal/m3 5600
Energy Generation per day Kcal/day 2284800
Generator Efficiency % 35
Power Generation kW 38.74
Bio Gas Availability % 85.00
No of operating hours hrs/day 24
No of days Days/year 365
Annual Electricity Generation kWh 2,88,489
Annual Auxiliary Power Consumption @ 100 units per day kWh 36500
Total Electricity Generation kWh/year 2,51,989
Electricity Cost Rs/kWh 6.4
Annual Savings Rs Lakhs 16.12
Investment Rs Lakhs 31.86
Pay Back Months 24

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4. FINANCIAL ANALYSIS
4.1 Project Cost
Table 11: Project Cost
Parameter Amount in Rs Lakhs
Equipment Cost 25.00
Erection, Piping and Commissioning 2.00
GST @18% 4.86
Total Project Cost 31.86

4.2 Assumptions for Financial Analysis

• Interest rate taken as 12 %
• Yearly increase in electricity cost by 2% for cash flow analysis
• Life cycle of the project is taken as 7 years
• Three different Capital Structure considered
o CS1 – 70:30 Debt Equity Ratio
o CS2 – 50:50 Debt Equity Ratio
o CS3 – 100 % Equity
• Return on equity is taken as 15 %
• Depreciation – 40%
• Operation and Maintenance Cost taken as 5% of Initial investment
• For calculating weighted average cost of capital, tax rate is assumed as 30 %

4.3 Cash Flow Analysis

Table 12: Cash flow of the project
Cash flow for the 1 2 3 4 5 6 7
project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Required Investment 31.86
Energy Savings 16.13 16.45 16.78 17.11 17.46 17.81 18.16
O&M Cost -1.59 -1.59 -1.59 -1.59 -1.59 -1.59 -1.59
Depreciation 12.7 7.6 4.59 2.8 1.7 1.0 0.6
Net Cash Flow -31.86 27.28 22.50 19.77 18.27 17.52 17.20 17.16

The table below shows the various capital structure assumed for the project finance.

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Table 13: Capital Structure

Capital Structure
Particulars CS 1 CS 2 CS 3
Debt 70 50 0
Cost of Debt 0.12 0.12 0.12

Equity 30 50 100
Cost of Equity 0.15 0.15 0.15
WACC 10.38 11.7 15

Table 14: NPV Calculation

NPV Calculation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 NPV
NPV at CS 1 (70:30) -31.86 24.7 18.5 14.7 12.3 10.7 9.5 8.6 67.1
NPV at CS 2 (50:50) -31.86 24.4 18.0 14.2 11.7 10.1 8.9 7.9 63.4
NPV at CS 3 (100% Equity) -31.86 23.7 17.0 13.0 10.4 8.7 7.4 6.5 54.9

4.3 Sensitivity Analysis

A sensitivity analysis has been carried out to ascertain how the project financials would behave
in different situations such as
• Change in energy savings
• Change in operating hours
• Change in interest rate
A good sensitivity analysis will help to estimate the behavioral nature thereby helping to
understand the financial viability over a long period of time.

Table 15: Sensitivity analysis: based on energy savings

Based on Savings at 100% Savings at 75% Savings at 50% Savings
NPV at CS 1 (D70:E30) 67.1 46.7 26.3
NPV at CS2 (D50:E50) 63.4 40.1 21.7
NPV at CS3 (D0:E100) 54.9 37.3 19.7
IRR 71% 56% 39%

Table 16: Sensitivity analysis: change in operating hrs

Based on Operating at 100% operating at 90% Operating at 80% Operating
Hours hours hours hours
NPV at CS 1 (D70:E30) 67.1 59.0 50.8
NPV at CS2 (D50:E50) 63.4 55.5 47.7
NPV at CS3 (D0:E100) 54.9 47.9 40.8
IRR 71% 65% 59%

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Table 17: Sensitivity analysis: change in interest rate

Based on at 9.5% at 10.05% at 11% at 12% at 12.5% at 13%
Interest Rate interest interest rate interest Interest Interest Rate Interest
rate rate Rate Rate
NPV (70:30) 70.9 69.3 68.6 67.14 66.42 65.71

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5. ENERGY EFFICIENCY FINANCING IN MSMEs

Financing plays a key role in facilitating procurement and implementation of energy efficient
technologies and products in any industry. Government has given EE financing in MSMEs top
priority since the sector contributes significantly towards India’s economic growth. However,
existing financing options are not sufficient to meet the financing requirement in the sector due
to the large size of the sector. MSMEs using various financing schemes for technological up-
gradation are still very less, as most of them use their own capital fund rather than making use
of external financing models. Although financing models were very successful in some clusters,
the scale-up of such activities is rather slow. This slow pace in implementation of energy
efficiency financing in MSMEs is due to the various sector specific challenges in the sector.

Some of the key barriers to finance EE projects in the sector are:-

• Lack of available capital for investment as EE interventions being small may not get
financed through FIs as they do not qualify as term loans
• Lack of clarity on financing schemes- repayment mechanism and complex procedural
requirements
• Lack of availability of financing model that cater to the particular requirement of the
MSME
• Lack of awareness among MSMEs with respect to benefits of implementing EE
technologies
• FIs consider MSMEs as a high-risk category due to low credit flow to this sector. This is
due to several factors such as poor book-keeping practices, weak balance sheets, poor
credit history and smaller sizes of MSME loans.
• Collateral based lending, advocated by FIs, restricts MSMEs from availing loans
• No formal M&V procedure available to estimate the savings achieved by implementing
EE measure
• Risks associated with repayment of loans which include technical, commercial and
performance risks

5.2 FI Schemes in Gujarat

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Table 18: FI schemes in Gujarat

Sl.N Name of Scheme Purpose Financial Details Contact Address

o
1 SIDBI Make in India • The focus of the scheme is on • Rate of interest is according to credit Ramkrishna Nagar Street
Soft Loan Fund for technology upgradation which helps in rating Number 12, Ram Krishna
Micro, Small & reducing the impacts from process and • Interest rates for soft loans are from Nagar, Rama Krishan Nagar,
Medium operations as the reduction in (8.90 % to 8.95 % pa) and term loans Rajkot, Gujarat 360001
Enterprises (SMILE) resource consumption and are in the range of (9.45% to 9.60% pa) Ph No : : 0281 246 5083
productivity improvements are major • Min loan amount: Rs 25 Lakhs Mail Id: rajkot@sidbi.co.in
outcome of technology upgradation • Term Loan: 75% of the project cost as
• The program aims to bridge the gap debt
by providing financial support to the
companies.
2 4E scheme (End to • The 4E scheme promoted by SIDBI • Interest rate - 2.5% below market Ramkrishna Nagar Street
End Energy aims to assist the industries in interest rate Number 12, Ram Krishna
Efficiency Financing implementation of energy efficiency • Min loan amount: Rs 10 Lakhs Nagar, Rama Krishan Nagar,
scheme) and renewable energy projects. • Max loan amount: Rs 150 Lakhs Rajkot, Gujarat 360001
• The scheme addresses all aspects of • 90% of the project cost as debt Ph No : : 0281 246 5083
energy efficiency in a company from Mail Id: rajkot@sidbi.co.in
assessment and identification of
energy efficiency interventions to
facilitating implementation by
providing technical and financial
support
3 Partial Risk Sharing • The partial risk sharing facility aims at • Term Loan: 12%-15% Ramkrishna Nagar Street
Facility for Energy transforming the energy efficiency • Min loan amount: Rs 10 Lakhs Number 12, Ram Krishna
Efficiency project market in India and promotion of • Max loan amount: Rs 15 Cr Nagar, Rama Krishan Nagar,
(PRSF) Energy Service Contracting Model for • Total Project funding of – USD 43 million Rajkot, Gujarat 360001
the Energy Efficiency. • Risk Sharing facility component of USD Ph No : : 0281 246 5083
• The scheme address barrier related to 37 million to be managed by SIDBI Mail Id: rajkot@sidbi.co.in
the financing aspects for energy • Technical assistance component of USD
efficiency 6 billion to be managed by SIDBI and

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EESL

4 Bank of Baroda’s • Loans of up to 75% of the total project Bank of Baroda

Scheme for cost, subject to maximum of Rs. 1 crore, SME Loan Factory
Financing Energy will be provided. (Minimum amount of 2nd Floor Baroda Towers,
Efficiency Projects Ellisbridge, Ahmedabad
loan Rs. 5 Lakhs
Ph No : 9979867501
• Collateral will be required for all loans. Mail Id :
An interest rate of bank base rate + 4% cpc.sme.ahmedabad@bankofb
will be applicable, to be paid back over a aroda.com
period of 5 years.

5 Canara Bank’s Loan All these Schemes from various banks • The scheme covers up to 90% of project Shop No 1,2,3, Ground Floor,
scheme for Energy (SBI, Bank of Baroda, Canara Bank) have costs of up to INR 1 million (EUR Shyam 80 ft Road, Bhaktinagar
Savings their focus towards technology 13,000). Circle, Rajkot
++++++++++++++++ upgradation. Technology upgradation • Max. loan: INR 10 million (EUR 130,000) Ph No : 0751-2233141/
++++for SMEs can lead to improvement in energy, • Security: collateral free up to INR 5 2431541
productivity, and lower emission from million (EUR 65,000), beyond INR 5 Email Id :
the MSME company. million collateral required as cb3888@canarabank.com
As technology upgradation could be determined by the bank
capital intensive most of the schemes • Margin: 10% of project costs
6 SBI’s Project from banking institutions aim at bridging • SBI identifies industrial clusters with
Uptake for Energy the gaps for access to finance for MSME potential for quick technology Opp. Swaminarayan Gurukul
Efficiency sector upgradation and a supporting Bridge, Gondal Road, Rajkot,
environment. Based on studies in Gujarat 360002
interested units, technology upgradation Ph No : 0281 236 3927
is undertaken if the same in viable. Email Id : sbi.60438@sbi.co.in
• With a ceiling of INR 1 lakh, an amount
equal to that invested by the unit is
provided under this loan. There is a
start-up period of 3 years, with a
repayment period of 5-7 years, at zero
interest.
7 Solar Roof Top The loan scheme is applicable to grid • Interest rate: 9.9% - 10.75% IREDA Camp Office
Financing Scheme interactive, rooftop solar PV plants for • Max. repayment time: 9 years 603, Atlanta Towers
IREDA industries, institutions and commercial • Minimum promoter’s contribution: 30% Near Panchvati Circle,
establishments. Financing can be • The applicant’s minimum capacity needs Gulabi Tekra
to be 1MW Ahmedabad

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accessed for single or aggregated Ph No : 9811889805

investments. Email Id : ashokyadav@ireda.in

8 SBI - World Bank: Loans for financing grid connected • Loan amount is 75% of the project cost Opp. Swaminarayan Gurukul
Grid Connected rooftop solar photovoltaic (GS- RSPV) • Fixed Asset coverage ratio: >1.25 Bridge, Gondal Road, Rajkot,
Rooftop Solar PV • Moratorium period: upto 12 months Gujarat 360002
Program from date of commencement of Ph No : 0281 236 3927
commercial operations Email Id : sbi.60438.in
• Guarantee: in case of sole
proprietorship/partnership
firm/personal guarantee of partners

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6. ENVIRONMENTAL AND SOCIAL BENEFIT

6.1 Environmental Benefit
A resource-efficient business demonstrates a responsibility towards the environment. Energy and
the environment are so closely linked, that, in addition to saving energy and reducing utility
expenses, there are additional and often unreported benefits from conserving energy, saving
natural resources being an important benefit.
Energy efficiency plays a major role, even where company output is increased, energy efficiency
improvements can contribute significantly in most cases to reducing the negative impact of energy
consumption per unit of output. Any increase in pollutant emissions will thus be minimized.
Significant environmental benefits gained by adopting energy efficient technologies and processes
may include lowering the demand for natural resources, reducing the emission of air pollutants,
improving water quality, reducing the accumulation of solid waste and also reducing climate
change impacts. Improving energy conservation at the facility can improve the facility's overall
efficiency, which leads to a cleaner environment.
Reduction in Pollution Parameters
The proposed EE measure of installing Bio Gas power generator would result in annual electricity
savings of 2,51,989 kWh which is equivalent to 21.67 TOE per annum. The proposed EE measure
will result in decrease of CO2 emissions by 206.63 TCO2 annually, thus resulting in reduced GHG
effect.

6.2 Social Benefit

Work Environment
The Factories Act, 1948 covers various aspects relating to working environment maintenance and
improvement. The good maintenance practices, technology up gradation, efficient use of energy
and resource conservation not only contribute to energy and pollutant reduction but also
contributes in ensuring safe and clean working environment to the employees of the organization.
Many units have also been doing review of safety process and have provided access to safe
working environment to the workers. Basic facilities such as first aid kit, PPE gears and many
others have been made available

Skill Improvement
Implementing energy efficiency measures requires mix of people and skills. It involves up skilling
workers at all levels from the shop floor to the board room to understand how companies manage
their energy use—and to identify, evaluate and implement opportunities to improve energy
performance. As the project involved identifying energy saving projects, implementing and
verifying the savings, the unit have understood how to estimate energy savings with respect to
energy saving proposals and also energy wastage have been identified. The activity has been
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successful in bringing the awareness among workers on energy wastage reduction, technology up
gradation possible, etc. Each new technology implemented in a dairy plant will create an impact
on the entire Gujarat Dairy cluster as each dairy unit can replicate the new technology and
promote the concept of energy efficiency in entire Gujarat Dairy Cluster and thus reduce the
overall energy consumption of the cluster as a whole.

Technical skills of persons will be definitely improved. As the training provided by the OEMs on
latest technology will create awareness among the employees on new trends happening in
market. The training also helps in improving the operational and maintenance skills of manpower
required for efficient operation of the equipment.

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7. CONCLUSION
Energy efficiency is an instrument to address the issue of energy crisis and also be employed as a
cost effective means to attain sustainability and business. Cost of energy is considered as a vital
component for industries and warrant judicious use of energy. Amid spiraling power cost energy
efficiency assumes at most importance for the sector to remain competitive.

The GEF, UNIDO and BEE project through its various engagements is able to demonstrate energy
efficiency potential in Gujarat Dairy cluster. The project is able to promote the concept of energy
efficiency and renewable energy in dairy cluster through various capacity building programs for
local service providers, technology feasibility studies in dairy units, training programs on EE/RE
technologies and also helped in penetrating new /latest technologies into the cluster.

The DPR for installation of 40 kW Bio Gas power generator has been prepared after the OEM came
to the dairy and done a detailed feasibility study. The implementation of this measure will
significantly will result in an annual electricity savings of 2,51,989 units with 206.63 TCO2
reduction. The following table gives the overall summary of the savings achieved:
Table 19: Proposed EE Measure
Payba
Monetary
Annual Energy Savings Investment ck AnnualTCO2
Sl No EE Measure Savings
(Rs. Lakhs) (Mont reduction
(Rs. Lakhs)
kWh TOE hs)
40 kW Bio Gas
1 Power 2,51,989 21.67 16.13 31.86 24 206.63
Generator

The summary of financial analysis given in the below table clearly indicates that implementation of
this project is economically and financially viable with an attractive payback period. So it is
recommended to install bio gas power generation system in the plant.
Table 20: Financial Analysis
Sl. No. Particulars Unit Value
i Total Investment (Incl of Tax) Rs. Lakh 31.86
ii Means of Finance Self / Bank Finance Self
Iii IRR % 71.44
Iv NPV at 70 % Debt Rs. Lakh 67.14

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7.1 Replication Potential

Bio methanation and generating power from bio gas has a good replication potential in Gujarat
Dairy cluster. The methane generated from conventional aerobic treatment has negative impact
and all the dairies which have aerobic treatment have good potential of capturing this methane
through various processes. Biogas thus generated have a good calorific value and can be used for
thermal applications, such as water heating, drying, boiler fuel, etc., or for electricity generation.
The digested material available after the anaerobic treatment may be used as a soil conditioner
after composting/ vermicomposting.

The implementation of this project will inspire other units to take up similar energy efficiency
initiatives which eventually will lower the bottom line and increase the top line therefore the
margin increases. Secondly, the very clear specifications on vendor and the cost base is already
available which makes it easy for other units in the Gujarat Dairy cluster to access the technology
and gives them a very good idea about the cost and benefits associated with the projects. Overall,
the holistic approach adopted by the project will be extremely useful in achieving the goal of
improving EE in the cluster.

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8. ANNEXURE
8.1 Financial Quotation

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