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Satish Lele

Biodiesel in India

India is a diesel-deficit nation and demand has far outstriped supply. India's diesel production will not be able to keep pace with the rapidly growing demand. Government's pricing policy allows oil companies to decide prices. Diesel is not much cheaper than petrol any more. Diesel demand in the country is growing at an annual rate of 8%. At this rate India will need a brand new 9 Million Tons per year refinery every year. The automobile industry has estimated that the share of diesel vehicles, in overall vehicle sales has crossed the 40% mark. The price of fuels is now going to be in line with price of crude oil. Hence the Petrol and Diesel prices are now in line with international price levels, which makes BioDiesel economically attractive.

First Indian BioDiesel Policy was announced on 23rd Dec 2009. BioDiesel Policy gives a rough guideline, which was actually proposed many years back. Main stumbling blocks are still not resolved. There are no Figures or Financial commitments. Some of the points are

  1. The Minimum Purchase Price (MPP) for BioDiesel by the Oil Marketing Companies (OMCs) will be linked to the prevailing retail diesel price.

  2. Financial incentives, including subsidies and grants for BioDiesel, may be considered based on merits for new and second generation feed stocks, (Used Cooking Oil and Acid Oil), advanced technologies (Acid or Enzymatic Esterification) and conversion processes for BioDiesel, and production units of BioDiesel, based on new and second generation feed stocks.

  3. Bio-ethanol already enjoys concessional excise duty of 16% and biodiesel is exempted from excise duty. No other Central taxes and duties are proposed to be levied on BioDiesel and bio-ethanol except GST.

  4. Import of Free Fatty Acid (FFA) oils, is possible, by payment of Import Duty of 115%. The price is thus more than Diesel. Duty free imports will be permitted for production of BioDiesel by export oriented units.

New Diesel Cars are Hitting the Road Everyday.

    India's biodiesel processing capacity is estimated at 600,000 tons per year. The government owned Oil Marketing companies had floated tenders again and again to buy 840 million liters of BioDiesel. However there are few interested suppliers. They prefer to sell directly to consumers or export, rather than selling to oil marketing companies in India.
    BioDiesel in India was virtually a non-starter in past. There are many reasons for that. The Main Reasons are non-availability of used vegetable oil, very strict Indian Biodiesel Standard (IS 15607 : 2005) and Government's Policies. Tenders for BioDiesel are likely to Fail again and again, due to

  1. Non Availability of Oil
    • In India Edible oils are in short supply, and country has to import up to 40% of its requirements (import is now partly offset by Bumper Crop of Soy). Hence prices of edible oils are higher than that of Petroleum Diesel. Due to this, these are not viable and hence use of non-edible oils was suggested for BioDiesel manufacture.

    • Even though the consumption of Edible oils in India is high, the availability of used cooking oil is very small as used cooking oil is used till the end.

    • Indian Culture uses vegetable oil lamps for lighting in homes and in temples (like candles in other cultures). When prices of edible oil shot up, some people turned to a bit cheaper non-edible oils. The requirement of this sector is more than 15 million tons (BioKerosine). Since non edible oil seeds can be collected and crushed, using hand operated expellers, in a small scale in far flung villages, the use of non-edible oils for lamps is picking up very fast. This is the best way of use for millions of Rural Indians. This is depriving BioDiesel industry its supply of oil.

    • All over the world Edible oils are used for manufacture of BioDiesel. These are Rape seed oil in Europe, Soy oil in Americas and Palm oil in South East Asia. Rape seed and soy are grown for its de-oiled meal as cattle feed and oil is not important. Hence these oils were in excess in past, and had to be disposed off at lower prices. Hence initially edible oil was a viable raw material for BioDiesel manufacture and a lot of manufacturing units came up in US and Europe, based on these oils. Now excess oil is commited, and fresh sources need to be developed.

    • Collection of non-edible oil seeds is a manual operation, and for large BioDiesel plant collection is a logistical nightmare. In a day, a person can collect up to 80 kilograms of seeds, which can produce 20 to 23 liters of oil. The collection is done for 3 months, once every year. For a 100 tons per day (8 million gallons per year) BioDiesel plant, you need 15,000 people to collect the seeds. Collecting and organizing such a large part time manpower is a challenge.

    • The price of Seeds of Jatropha was very high. At this price, the manufacturing cost of BioDiesel is 3 times the pump price of Petroleum Diesel. Prices are down now and oil is viable as a substitute for kerosine.

    • Most of the edible oils used currently for manufacture of BioDiesel, are Stable (do not get rancid or do not dissoclate to form free fatty acids). These do not decompose much on storage. Hence these are preferred for Trans-Esterification Process. Non-Edible oils are not that stable, and need a lot of pre-treatment adding to the cost of manufacture of BioDiesel. These oils with 50% free fatty acids can be used as lamp oil.

    • The use of lamp oil is increasing rapidly in India, as there is no electrical power supply for 10 to 14 hours a day in rural areas. Soon people will face shortage of these oils for lighting purposes.

    • Cottage Washing soap industry can use vegetable oils with high free fatty acid contents (Acid Oils). Since prices of edible oils have doubled, many soap manufacturers in unorganized sector are using these Acid Oils as these are a bit cheaper.

    • There are billions of other trees (Karanj, Mahua, Neem), all over India, with oil bearing seeds. Traditionally Karanj (Pongamia Pinatta) is planted along the Highways, Railways and Canals to stop erosion of soil. Petrol Pump owners along the highways, buy these oils, pack them in 1 liter bottles and sell as fuel additive. Neem (Azadirachta Indica) is planted everywhere for purification of air. Mahua (Madhuca Indica) and Sal (Shorea robusta) grows wildly in Forests. Collection and Processing mechanism for these seeds is not yet fully developed. Hence most of these seeds lie on the ground (and ultimately get converted into BioFertilizer).

  2. Government's Policies
    • Government of India started BioDiesel mission in 2003, but BioDiesel mission announced BioDiesel Policy on 11th September 2008. The Union Cabinet in its meeting gave its approval for the National Policy on BioDiesel prepared by the Ministry of New and Renewable Energy, and also approved for setting up of an empowered National BioDiesel Coordination Committee, headed by then Prime Minister of India and a BioDiesel Steering Committee headed by Cabinet Secretary.
      Ministry of New and Renewable Energy has been given the responsibility for the National Policy on BioDiesel and overall co-ordination by Prime Minister under the Allocation of Business Rules. A proposal on “National Policy on BioDiesel & its Implementation” was prepared after wide scale consultations and inter-Ministerial deliberations. The draft Policy was considered by a Group of Ministers (GoM) under the Chairmanship of Union Minister of Agriculture, Food & Public Distribution. After considering the suggestions of Planning Commission and other Members, the Group of Ministers recommended the National BioDiesel Policy to the Cabinet.

        Salient features of the National BioDiesel Policy are as under:
      1. An indicative target of 20% by 2017 for the blending of biofuels (Bioethanol and BioDiesel) was proposed. (Even 1% can not be achieved)

      2. BioDiesel production will be taken up from non-edible oil seeds grown in waste / degraded / marginal lands. (This has Failed)

      3. The focus was on indigenous production of BioDiesel feedstock and import of Free Fatty Acid (FFA) of oils, such as palm oil etc. would not be permitted. (Due to this, raw material is not available)

      4. BioDiesel plantations on Community / Government / Forest waste lands would be encouraged while plantation in fertile irrigated lands would not be encouraged. (This has Failed)

      5. Minimum Support Price (MSP) with the provision of periodic revision for oil seeds for BioDiesel manufacture, would be announced to provide fair price to the growers. The details about the MSP mechanism, enshrined in the National Biofuel Policy, would be worked out carefully subsequently and considered by the BioDiesel Steering Committee. (This has Failed due to non remunerative price offered by the oil marketing companies)

      6. Minimum Purchase Price (MPP) for the purchase of bio-ethanol by the Oil Marketing Companies (OMCs) would be based on the actual cost of production and import price of bio-ethanol. In case of BioDiesel, the MPP should be linked to the prevailing retail diesel price. (This was not done)

      7. The National Biofuel Policy envisages that bio-fuels, namely, BioDiesel and Bio-ethanol may be brought under the ambit of “Declared Goods” by the Government to ensure unrestricted movement of biofuels within and outside the States. It is also stated in the Policy that no taxes and duties should be levied on bio-diesel.

    • Oil companies had declared their own BioDiesel Purchase Policy. These companies initially offered a price which was less than the manufacturing cost of BioDiesel.

    • In past only Oil companies had mandate to mix BioDiesel with Diesel and sell it. (Now anybody can mix BioDiesel with Diesel and sell it).

    • Large patches of land are required for plantation of Jatropha. Government holds large tracts of land as Forest Lands and Revenue lands. In some states, like Chattisgarh, these are leased to State owned Oil company like IOC. (It was only for Media Headlines)

    • A big hype was created by UP Jatropha mission of Uttar Pradesh. Jatropha mission was a Joint venture of BPCL, Nandan Biomatrics and Shapoorji Pallonji and was to be supported by UP Government. They were going to tie-up with every Panchayat (Local Body) of selected Districts to plant Jatropha on Panchayat lands. Jatropha seeds were to be bought back by BPCL in long run. Operation of this mission started very slow due to Government's (Politician's) and Panchayat's (Beurocrat's) involvement and because Jatropha mission was to be implemented through National Rural Employment Guarantee Scheme. IOC was also planning to enter in UP as well as some others. Individual farmers were ready to plant Jatropha in their useless and waste lands and want buy-back agreement like contract farming with good price (But price offered was generally half the producion costs). Not much happened after initial euphoria. Bundelkhand area of UP, has lot of waste land (600,000 - 700,000 hectares) which are best suited for Jatropha and on the other hand Districts of Eastern UP have saline and waste lands which are also suitable for plantation, but there no will. Where there is no will, there is no way.

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