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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 now 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 automobiles industry has estimated that the share of diesel vehicals, 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 biofuel economically attractive.

Indian BioFuel Policy was finally announced on 23rd Dec 2009. It 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 bio-diesel by the Oil Marketing Companies (OMCs) will be linked to the prevailing retail diesel price.

  2. Financial incentives, including subsidies and grants, may be considered upon merit for new and second generation feed stocks, advanced technologies and conversion processes, and production units 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 bio-diesel and bio-ethanol.

  4. Import of Free Fatty Acid (FFA) oils will not be permitted for production of biofuels.

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 have now floated a tender again to buy 840 million liters of BioDiesel. However there are few interested suppliers. They prefer to export, rather than selling 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. Current Tender for BioDiesel is likely to Fail 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 (It 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 it 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 in Europe, Soy in Americas and Palm in South East Asia. Rape seed and soy are grown for its de-oiled meal as cattle feed and oil is not that important. Hence these were in excess, and had to be disposed off at lower prices. Hence initially it 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.

    • Most of the edible oils used currently for manufacture of BioDiesel, are Stable (do not get rancid). 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. Petrol Pump owners along the highways, should 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 developed. Hence most of these seeds lie on the ground (and ultimately get converted into BioFertilizer).

  2. Government's Policies
    • Government of India started BioFuel mission in 2003, but it announced BioFuel Policy on 11th September 2008. The Union Cabinet in its meeting gave its approval for the National Policy on Biofuel prepared by the Ministry of New and Renewable Energy, and also approved for setting up of an empowered National Biofuel Coordination Committee, headed by then Prime Minister of India and a Biofuel Steering Committee headed by Cabinet Secretary.
      Ministry of New and Renewable Energy has been given the responsibility for the National Policy on Biofuels and overall co-ordination by Prime Minister under the Allocation of Business Rules. A proposal on “National Policy on Biofuels & 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 Shri Sharad Pawar, hen Union Minister of Agriculture, Food & Public Distribution. After considering the suggestions of Planning Commission and other Members, the Group of Ministers recommended the National Biofuel Policy to the Cabinet.

        Salient features of the National Biofuel Policy are as under:
      1. An indicative target of 20% by 2017 for the blending of biofuels (bioethanol and bio-diesel) was proposed. (Even 1% is not possible)

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

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

      4. Bio-diesel 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 bio-diesel oil seeds 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 Bio-fuel 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 offered a price of Rupees 34.00 per liter of BioDiesel, which was less than the manufacturing cost of BioDiesel.

    • 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. It 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 it was 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 were generally half the producion costs). Not much happened after initial euphoria. These companies now have plantations in North African Countries. 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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