Even as ethanol blending is gathering steam, the biodiesel blending programme has failed to take off, due to issues like higher raw material prices, marketing and double taxation by state governments. Investment of around Rs 2,300 crore in creating a biodiesel capacity of 1.2 million tonnes is stuck, according to the Biodiesel Association of India.
“Companies like Emami and Ruchi came forward to invest in creating capacities while the policy was being formulated at the level of Planning Commission. However, the final policy under the stewardship of Ministry of Non-Renewable Energy (MNRE) said that storage, distribution and marketing of biodiesel could only be done through the oil marketing companies. Consequently, the industry cannot even sell to industrial users. At the same time, nationwide blending with diesel is not possible, given the current situation, where the capacity is small and domestic raw material source is yet to be developed,” said Sandeep Chaturvedi, president of the association.
The national biofuel policy, the draft for which was prepared by the MNRE, was cleared by the Union cabinet last December. The policy is aimed at facilitating development of indigenous biomass feedstock for 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 happended between 2006 and 2009 and resumed from November this year, the biodiesel blending could never take off.
The government focused on the usage of indigenous feedstock such as jatropha. Reliance Industries, Indian Oil and Ruchi, among others, have acquired huge tracts of land for jatropha plantation, which will yield crops in the next two-three years, but a market for it is yet to be developed. Moreover, the National Biodiesel Mission, under which investments were to be made for cultivation and research of jatropha, has been dropped.
“The government has not come up with an effective policy on pricing. We cannot produce and sell at the price of Rs 26.50 a litre since cost of raw materials like palm acid oil is high,” said Akhilesh Sarraf, director, Ruchi Biofuels. Ruchi Soya has a 10,000-tonne biodiesel capacity in Kakinada that produced some quantities during 2008 and early 2009. With the cost of palm acid oil moving up from Rs 25 per litre to over Rs 40, the company says producing biodiesel is not feasible. States like Andhra Pradesh and West Bengal also impose VAT on biodiesel, equivalent to that on diesel.
Kolkata-based Emami Group, which had invested Rs 150 crore in setting up a 100,000-tonne biodiesel unit in Haldia, started supplying biodiesel to Calcutta Tramways early last year. However, the petroleum ministry sent a circular to the West Bengal government, saying state governments should ensure that the unauthorised sale and possession of biodiesel was stopped. “Unless the government takes positive steps in respect of pricing and marketing freedom, this programme cannot be successful,” said Emami Biotech Director S K Monda.
Chaturvedi says the government should allow direct sale of biodiesel to industrial consumers so that a market is developed and the existing capacities are utilised. “Retailing should be done through oil companies, but, since it is not happening, the government should allow direct sale of a product like biodiesel which has a high flashpoint and is safe to store and handle,” Chaturvedi said.