Malaysian Palm Oil Council India

BIODESEL

Page No. 1. 2. 3.

What is biodiesel?

Biodiesel is the name of a clean burning alternative fuel, produced from domestic, renewable resources. Biodiesel contains no petroleum, but it can be blended at any level with petroleum diesel to create a biodiesel blend. It can be used in compression-ignition (diesel) engines with little or no modifications. Biodiesel is simple to use, biodegradable, nontoxic, and essentially free of sulfur and aromatics.

How is biodiesel made?

Biodiesel is made through a chemical process called transesterification whereby the glycerin is separated from the fat or vegetable oil. The process leaves behind two products -- methyl esters (the chemical name for biodiesel) and glycerin (a valuable byproduct usually sold to be used in soaps and other products).

The Indian demand for energy is growing by leaps and bounds. India's energy demand ranks sixth worldwide. If India continues to consume oil at the current rate, by 2030, it is estimated that 94 per cent of the country's petroleum requirement will have to be met by imports. This is a scary situation.

The annual demand for diesel in India is approximately 52 Million MT (MMT). Even a 5% blending of Bio diesel into petroleum diesel generates a demand for 2.6MMT of Bio diesel. Extending this to 10 % blending, which is technically quite feasible, moves up the annual Bio diesel demand to a staggering 5.2 MMT.

The development of the Bio diesel industry in India is hampered by the lack of a feasible Bio diesel policy by the Government Of India. The Bio-Diesel Association of India (BAI), has made several representations to the Government Of India to rationalize the import duties on imports of feedstock, principally Palm oil, for the manufacture of Bio diesel but have not met with any success. The selling price of Bio diesel is regulated by Government of India which is currently Rs 26.50 per liter. If producers are required to pay full import duty on Palm oil, then Bio diesel cannot be produced and sold at this level.

At present there are four plants with an aggregate capacity of 250 TPD. Another eight plants are planned with an aggregate capacity of 1730 TPD. Unless duty rebates are made available on imported feedstock, these plants are unlikely to produce for local usage. Some of them may enter into toll processing arrangements for exports in which case they could possibly import feedstock without paying any duties.

At the same time, the Government Of India has also been requested to expedite the policy and incentives for the growing of Jatropha seeds in the vast areas of wastelands available in the country. Out of the 55 million hectares of wasteland in the country,43 million hectares of wasteland could be very suitable for Jatropha cultivation. One Ha can produce 1.5 to 2MT of Jatropha oil a year. This would also ease the pressure on edible oils for Bio diesel manufacture.

There seems to be no urgency to formulate a workable bio diesel policy and this will inhibit the growth of this industry. Even if Jatropha plantations are taken up seriously, the gestation period for production to commence, is 5 years. Further, how much area can be planted on an annual basis is to be seen. Till productivity of seeds is improved and best cultivation practices are established, bio-diesel would not be cost-competitive at the national level. There is a need for an incentive pricing policy for Jatropha seed. This would be possible if there is no taxation on bio-diesel since it is an agricultural product and only 5-10 percent blend is recommended at the moment. No taxation on bio-diesel on the pattern of tax holidays for a period of ten years will help in promotion of this programme. Taking all these factors into consideration, the Bio diesel industry does not seem to be going anywhere in a hurry.

Currently, there is no significant production of Jatropha in India to act as feedstock for the bio-diesel production. Since, India is already a significant net importer of veg oils for edible and other non-edible uses, there is no possibility of diverting other locally produced oilseeds towards the production of Bio-diesel. Unless the Government Of India, comes up with some new policy for subsidizing import duties on imported feedstock for bio-diesel manufacture, there does not seem to be any likelihood of significant production of bio-diesel from veg oil feedstock, at least for the next 6-7 years. If petroleum prices were to rise once again above the USD 70 per barrel, India may be forced to give concessionary import duties and other incentives for the manufacture of bio-diesel from palm oil. In this scenario there would be a distinct possibility of increased palm oil imports, specially RBD palm olein and RBD palm oil from Malaysia.

Even if Jatropha cultivation is a long gestation project for India, it is imperative to take steps in that direction soon and Jatropha seems to be the only possible non-edible oilseed which can be produced on a large enough scale for manufacture of bio-diesel. In addition to providing a feedstock for bio-diesel manufacture, it will also provide an excellent opportunity for increased employment.

The order of the day is to find ways and means of increasing the supply of feedstock material for bio-diesel manufacture. The short term needs can be met only by palm oil imports whereas for the long term needs Jatropha cultivation seems to be the only way forward for India

BioDiesel in India is virtually a non-starter. There are many reasons for that. The Main Reasons are non-availability of vegetable oil and government's policies.

>> Next Page