US imports challenge biodiesel industry

Already under pressure for delayed blending, the domestic biodiesel industry is facing another challenge in the form of imports from the US.

Last July, a shipment of 20,000 tonnes biodiesel from the US reached India. Another shipment of same quantity, at a price of less than $1,000 per tonne (at least $100 cheaper to the domestic price of $900), is on its way to the Visakhapatnam port.

“Whenever dumping happens, it is not good for the economy. The industry is already struggling since blending has not been launched and competition from imported biodiesel will ring the death knell as we will lose customers,” said Bhaskar Chalasani, managing director, Naturol Bioenergy’s Kakinada-based plant, the country’s first biodiesel plant with a capacity to produce 100,000 tonnes of biodiesel per annum.

Once the second shipment arrives sometime this month, the industry plans to make a plea to the ministries of finance and commerce to take measures against imports.

Industry officials said while the government wants to encourage domestic value addition, in the case of biodiesel, the feed stock (such as fatty acids) import duty has been kept at 80 per cent and finished product biodiesel can be brought in at an import duty of 2.5 per cent.

“Raw material duty should be lower than the finished product to encourage value addition and employment within the country,” Chalasani said.

There is no blending of biodiesel and therefore the industry runs at 30-40 per cent capacity and caters to state transport utilities, fleet owners, DG set operators, etc. Some quantity is also imported to Europe. According to biodiesel industry, the US subsidises biodiesel to the extent of $300 per tonne by way of blending credit. The traders in USA avail the said benefits and are able to ship biodiesel at a price below the cost. “This amounts to dumping,” said an executive in a biodiesel company who did not want to be identified.

Over the last year or so, EU nations took cognisance of US dumping and placed punitive tariffs to the extent of ¤450 per tonne on any biodiesel with specific origin from the US to the EU.

The domestic industry has invested Rs 2,300 crore to create a biodiesel capacity of around 1.2 million tonnes. The government’s national biofuel policy, which was introduced in December 2009, was aimed at facilitating the development of indigenous biomass feedstock for the production of biofuels. The policy proposed an indicative target of 20 per cent blending of biofuels — both biodiesel and bioethanol — by 2017. While ethanol blending took place between 2006 and 2009 and resumed from November 2010, biodiesel blending could never take off.