Bangalore, July 27, 2010: Indian biofuel sector covers both bioethanol and biodiesel. The former is in the growing stage and the latter is still in its nascent stage. Prominent measures are needed for the development of the sector. The major effort is needed to strengthen the R&D of the biodiesel crops. The next crucial element is the realistic pricing of biodiesel, which is the major challenge faced by the players of the industry since they intend to achieve cost-effectiveness. Apart from these, other pertinent ones are formulation of procurement policy for biodiesel crops like jatropha, and giving a full-fledged industry status for the sector to make it completely organized. It is high time that the government takes necessary steps to strengthen the biofuel industry.

In India, the indicative blending target given by the Ministry of New and Renewable Energy  is 20 percent by 2017. This 20 percent blending leaves the players with an overall target production of  16 million metric tonnes of biodiesel. Unfortunately, the industry is still at the nascent stage and even now in 2010, the production of biodiesel from non-edible tree borne oilseeds (TBOs) in India is almost negligible. Next to gold, biodiesel is considered to be the most sought-after commodity by many countries including India.

Global trade of biodiesel is not much and as far as India is concerned, exports are not allowed until and unless the domestic demand is sufficed. Biodiesel producers in India are provided no room to trade or market their produce and they are mandated to sell biodiesel only to the oil marketing companies.

According to Mr Sandeep Chaturvedi, President, Bio Diesel Association of India, government's initiative to set up state governing committees to monitor and strengthen biodiesel companies were put forth in 2006, still no steps were taken in this regard. There is an urgent need for initiating a proper road map for the implementation of the guidelines mentioned in the biofuel policy. Lofty blending target without proper road map and mismatch in procurement pricing for biofuel are not good signs. If government is keen on promoting biofuels, it should speed up process of setting up the committees to address the issues faced by the biofuel industries.

Highlighting the needs of the biofuel industries, Mr Rajeev Gulati, Co-Founder of Nova  Biofuels, Haryana, India says, “Considering the increasing price of oil and petroleum products there is a huge market potential for biofuel industries in India. Some hurdles have to be removed to reap the benefits. The purchase price of biodiesel fixed by the Government of India is so low that no one is able to supply biodiesel at that price. On the other hand, there will be some price parity when manufacturers are allowed to sell biodiesel directly in the local market to the bulk consumer. But, according to the  notification issued by the petroleum ministry direct marketing of biodiesel is not allowed. The central government should revise the biofuel policy in this favor to enhance the overall growth of the biofuel industry.”

“In India, there are five large plants that were set up with a capacity of 300,000 liters per day, three medium size plants with a capacity of 30,000 liters per day and a number of small plants with a capacity of 1,000 to 3,000 liters per day. Practically all plants are running at low capacities due to lack of jatropha oil. There are a number of government and private institutions working on biofuel research for the last five years. India has all the practical knowledge as far as jatropha, biodiesel and ethanol are concerned,” says Mr Satish Lele of FICCI.

“The biggest hurdle of biofuels sector is the amount of support the government is willing to provide to the industry. India has a lot of biomass resources that can be used for cellulosic ethanol production.  However, this is an emerging sector that needs government support in order to encourage investment,” adds Mr Krishnan.

All over the world, wherever biofuels are introduced, it is backed up by the government support in terms of incentive to the farmer and industry, which is missing in India. The government purchase price is based on the fuel market in India. “Fuels are sold in India in a subsidized rate. But, Indian government is not keen to pass on same subsidy for biofuels produced in India. At this point, there is a shortage of raw material for biodiesel production in India, hence the industry has to depend upon the import of raw materials. But, there is no import duty relaxation for the manufacturer and he has to pay 31-33 percent import duty on the raw material. Where as the oil companies are allowed to import crude oil by paying five percent duty. In short, biofuels sector is not given much importance by the government of India,” opines Mr Rajeev.

“It is expected that biofuels will grow by more than 100 percent over the next five years. Currently, the challenge is to make it far more sustainable so that the food security does not become an issue.  Second and third generation biofuels, which are from non-food sources or waste, are being looked upon as the promising new source of biofuels,” says Mr Shashank.

Timelines are difficult to be confirmed since the industry is just set for growing and the policy has just been announced. With further strengthening of the policy guidelines, hastening the implementation, initiatives by the state governments, and expansion plans by the private players would be the key drivers for achieving the ambitious target of blending 20 percent of biofuels well before the set deadline of 2017.