Godrej Inds plans to set up biodiesel plant in Malaysia

REPORTS FROM THE MPOB INTERNATIONAL PALM OIL CONGRESS (PIPOC) 2005

Godrej Industries is considering setting up biodiesel plant in Malaysia to cater to the Indian market, said the company managing director Nadir Godrej.

"Initially, it ought to be a small project based in Malaysia - of about 50,000- 100,000 tonne - using crude palm oil or palm stearin. We will be setting it up with a Malaysian partner and are currently scouting for one. The biodiesel that we will produce will be for the Indian market and not European Union (EU)," said Godrej.

He refused to divulge any investment details, saying that the project was in a preliminary stage.

Godrej feels that India can be a lucrative market of biodiesel. "Jatropha is an alternative, but palm oil seems better to us. Firstly, the jatropha yields are likely to be low and secondly, these will be time-taking."

As for palm oil, he said, "Palm stearin is a good option. At Rs 22,000 per tonne, palm stearin is much cheaper than diesel."

Further, as it will come under chemicals, the peak import duty is likely to fall 5 per cent every financial year. "This year, the import duty is 20 per cent. We hope it to go down to 15 per cent from April 2006 and further, to 10 per cent from April 2007. This can even make blending initiatives in India a good prospect."

Replying to a query whether there is too much of hype around biodiesel, Godrej said, "It is more a matter of how one looks at the opportunities available. Biodiesel has the potential indeed. However, if one is not keen on blending, edible oils can even be directly used by making small changes in the vehicle's machinery, as some truckers are doing in EU."

"Further, this time around, crude oil prices are likely to remain high over the next five-six years, unlike for an usual three to four-year period. This is largely due to the fact that the world economy is seeing a slowdown at a time when it is less energy-intensive," he said.

Godrej Industries is not keen on refining business in India. He said there are already two to three large players in India, which does not leave much room for another top player in the space.

He, however, expressed the company's keen interest in the oleochemicals business and informed about its likelihood to expand in the same.

"Firstly, we have imported a second-hand plant, which is going to be set up in Gujarat. The plant, which should restart in December, would produce fatty alcohols. Secondly, we also had a plant manufacturing alpha olefins idle. This will be retrofitted at an investment of Rs 2 crore," Godrej said, but declined to disclose investment details in the oleochemicals business.

Godrej also expressed serious concerns over the shortage in oilseeds production in India, which makes the country increasingly dependent on imports to meet its demand. "We need to understand that high minimum support price for cereals and grains is not required anymore; it's a thing of the past. Instead, we need to focus on oilseeds," he said.

He further said India's edible and non-edible oil imports in the oil year 2004-05 (i.e. the November-October period) are likely to be around 56.5 lakh tonne, up from 47 lakh tonne last year.

Till August this year, the imports have already crossed 48 lakh tonne. Godrej, however, expects imports to slide slightly - to 54 lakh tonne - in the next oil year on the hope of good domestic oilseeds production.

(This correspondent's trip was sponsored by Malaysian Palm Oil Promotion Council)