The finance minister has announced that customs duty on bio-diesel will be reduced from 7.5 per cent to 2.5 per cent and duty-paid high-speed diesel blended with up to 20 per cent bio-diesel will be fully exempted from excise duties.
This, say industry experts, is a strategic move which will boost use of bio-diesel, considering the fact that diesel accounts for around 40 per cent of fuel consumption in the country.
“India being a net importer of edible oil, the government does not want companies to use edible oil for production of ethanol. Thus this measure will boost companies along with promotion of use of green fuel,” said a sector expert.
Also, this move will encourage oil-marketing companies to go in for more blending of diesel with ethanol. At present, 5 per cent bio-diesel blending is run on a pilot basis in certain markets.
This is primarily because of shortage of bio-diesel in the country. While the total bio-diesel production globally was 7.2 million tonnes in 2006 and could go up to 32 million tonnes in 2012, India's bio-diesel production is less than 10,000 tonnes per year.
Sector experts say that though many Indian companies have taken up cultivation of the jatropha plant on wasteland across India, the gestation period is too long and India would need to import substantial quantities to meet the blending need.
Oil extracted from seeds of jatropha plant is blended with diesel to manufacture bio-diesel. Bio-diesel is also produced with vegetable oils- the primary feedstock for bio-diesel, which is scarce.
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Oil-marketing companies in the country have formed joint ventures with various companies to take up large scale jatropha farming—Indian Oil Corporation and Hindustan Petroleum Corporation have formed a joint venture with the government of Chattisgarh to take up large-scale jatropha farming across 30,000 and 15,000 hectares, respectively.
Bharat Petroleum Corporation too has formed a company called Bharat Renewable Energy in association with Hyderabad-based Nandan Biomatrix, an R&D company, and Shapoorji Pallonji Company— for producing bio-diesel from jatropha in Uttar Pradesh on 70,000 acres of land.
Sector experts say that India has around 10 million hectares of wasteland available for jatropha cultivation. If 10 million tonnes of jatropha production potential could be realised by 2012, it would be sufficient to replace close to 10 per cent of the diesel consumption by then.