Plastic Waste to Crude

Sanitation and energy remain two important challenges for India. And it seems a couple of Indian innovators may have a solution. Nitin Bondal and Raghuvendra Rao have set up STEPS, a company that uses Polycrack system developed by the duo to convert all kind of plastic waste to crude. They have recently been featured by BBC and Forbes India. 

STEPS is setting up a 150 tonne a day plant in Mumbai, which will produce 120,000 liters of crude oil every day. India is estimated to generate 1.2 million tonne of municipal waste every day. If all of that can be polycracked we will have an annual production of 2.2 billion barrel of crude, which can cover our entire crude import bill, if the calculations below are correct:

Daily Waste (Tonnes)	1,200,000
Crude Yield (Liters per Tonne of Waste)	800
Daily Crude Potential (Liters)	960,000,000
Daily Crude Potential (Barrels)	6,037,736
Annual Crude Production Potential (Barrels)	2,203,773,585
Dollar Value ($100/Barrel)	US$ 220 billion
India's Crude Import (FY 12)	US$ 160 billion

BBC and Forbes features on STEPS are interesting to read.

http://m.bbc.co.uk/news/technology-18580651

http://forbesindia.com/printcontent/33148

It turns out that there is atleast one other Indian innovator who has a developed a plastic to crude process. Alka Zadgaonkar, a Chemistry professor in Nagpur who has invented a method to turn waste plastic to crude, was featured by The Tribune way back in 2003 - http://www.tribuneindia.com/2003/20030928/spectrum/main4.htm. This also found place in a Government of India press release on 7 February 2004.
http://pib.nic.in/newsite/erelease.aspx?relid=1020

One wonders then, why have these innovations not been commercialized and scaled up, when the evidence is that their economics actually work out. One possible common explanation that emerges from the various articles on these innovators on the www, is that they were afraid that the intellectual property underlying their innovation will not be duly respected, and they wont be duly rewarded.

There is also this issue of credibility. Innovators, given their sense of achievement, possibly overestimate the potential of their innovations. As a result, oftentimes, their claims lack credibility.

Credit Risk Measurement in MFIs

The credit risk measurement systems in MFIs need to evolve substantially in order to sustainably provide collateral-less loans to poor clients. While lending through the group guarantee mechanism has ensured sound portfolio quality for long periods of time, we have in the recent past witnessed situations when there has been a rapid decline in portfolio quality. At times, these have happened without any warning primarily catching the MFI management unaware. The present system of risk monitoring relies heavily on the Portfolio At Risk (PAR) indicator. This is inadequate because of two important reasons discussed below:

Firstly, making an assessment of credit risk inherent in the portfolio on the basis of Portfolio Age reports and PAR is necessary but not sufficient. This is so because potentially all the outstanding amounts with the groups which have hidden delinquency can be lost as within the microfinance sector, there is significant evidence to show that delinquency can rapidly spread from one member of a group to the entire group. Hence it is also important for MFIs to collect data regarding the number of groups that have delinquent clients and the amounts outstanding with them

Secondly, under the group guarantee mechanism, in case an individual is unable to pay her loan installments, other members of the group pool monies and pay up on the individual’s behalf.  As a result the individual’s installment is paid and her loan shows up as being regular, hiding delinquency. This constitutes a risk event for the MFI as a borrower had not been able to pay her installment and guarantee mechanisms had to be enforced in order to make up for the shortfall. However, the MIS of MFIs today do not catch data pertaining to such events. This results in Hidden Delinquency. Therefore, a system is required to correctly capture and classify incidence of hidden delinquency. This should form part of the regular reports generated by MFIs.

Thus, instead of generating only the PAR report portfolio age, there is a need to broaden the analysis to include data on groups which show manifest and hidden delinquency as well as the amounts outstanding with them.