Raising Biodiesel Price in India

INDIA – A study conducted by the Indian government has determined the price of jatropha-based biodiesel needs to be increased to create an economically sustainable biodiesel industry within the country.

The study, titled, “Realistic Cost of Biodiesel in India,” was completed by The Confederation of Indian Industry and the Ministry of New and Renewable Energy.

This figure has been calculated by a study done by Confederation of Indian industry along with Ministry of New and Renewable Energy (MNRE).

The study estimates that if the blending initiative of two per cent Jatropha based Biodiesel are achieved in year 2011-12, India will save around Rs. 30 billion and will generate revenue of around Rs. 55 billion in the rural economy with an opportunity of investment to the extent of Rs. 17 billion on an annual basis.

This initiative would also help in reduction of Green House Gas emission by 3 Million Metric Tonnes (MMT) on an annual basis.

The CII study recommends that the present procurement price of Rs. 26.50/litre as per the Government declared Biodiesel Policy, should be reviewed and corrected realistically to sustain the investment and required growth of the Biodiesel sectors.

The study says the Government should create a suitable policy framework (incentives, grants etc. and the distribution mechanism) to make this price of Biodiesel self-sustainable and have an average procurement price of Jatropha seeds at Rs 6,000/tonne to ensure no migration of food land for fuel crops and business viability for conversion of seeds to Biodiesel. This will create a pull for Biodiesel demand to accelerate the development of the industry, which requires periodic revisits (bi-annually).

These immediate actions will make “Biodiesel Blending” a sustainable proposition.

Record fluctuation in the oil market pricing in recent years has created a security threat to India’s crude oil imports and resulted in increased financial burden on the global economy. It has also created an opportunity for easier adaptation and integration of Biofuels in the energy portfolio.

To counter and mitigate the security threat in diesel based economy like India, biodiesel may be used as a true supplement to fossil diesel with appropriate technological, financial and policy interventions.

Biodiesel from Jatropha, a non edible Tree Borne Oil (TBO) which generates a significant opportunity of employment, is a potential source of revenue for the farmers without giving rise to the “Food vs Fuel” debate.

Presently, Government has approved the price of Biodiesel conforming to the IS14214 at Rs. 26.50/litre through “Biodiesel Purchase Policy” for blending by Oil Marketing Companies (OMCs). This price is not suitable for the growth of the industry and other stakeholders’.

There are several countries in the World, which have successfully developed their Biofuels sector by suitably addressing and favourably converging the above factors and developing successful and sustainable models for catalyzing its growth. World over second-generation Biofuels are emerging as the solution to the issues faced by first-generation Biofuels, information on which is still scattered.

Background: CII in partnership with MNRE has come out with a report on “Realistic Cost of Biodiesel in India”. The finalisation of the report saw a active participation from all the stakeholders especially by Tariff commission , Ministry of Commerce and Industry and Petroleum Planning and Analysis Cell( PPAC), Ministry Petroleum and Natural Gas which focused on the detailed methodologies and pricing strategy of Biodiesel price in India. Few of the Biodiesel processing units have even closed down their businesses due to lower prices . This situation sparked off the need for a realistic study on the cost of Biodiesel considering the contribution of several elements in the entire value chain.

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