Crude inferno ignites biodiesel interest

Rs 15,000-20,000 cr investments slated over next 5-8 years, apart from RIL’s Kakinada mega plans

HYDERABAD: The move to encourage production and use of biodiesel started off an environment-friendly initiative some five years back in India.

But suddenly it has become an economic urgency with the international crude prices shooting through the roof and domestic fuel prices keeping pace accordingly.

Over the past few days companies, both foreign and Indian, particularly the public sector oil firms have begun taking up their plans in India to produce biodiesel more seriously after international crude prices started going up.

So much so the industry estimates say anywhere between Rs 15,000 crore and Rs 20,000 crore would be pumped into growing non-edible oil seeds and refining them into biodiesel across the country over the next five to eight years.

The figure does not include the money that Reliance Industries will be spending on the 5000 hectares that it has bought in the Kakinada belt in Andhra Pradesh, sources said.

“Talk about biofuels began because of environmental concerns some years back. While the talk has continued for some time it cannot any longer be ignored,” said A K Bansal. executive director (corporate affairs), Bharat Petroleum Corporation Ltd, talking to DNA Money.

BPCL has committed an investment of Rs 2,000 crore to cultivate one million acres of jatropha plantations in Uttar Pradesh over the next three to four years.

Likewise, it has identified Rajasthan, Gujarat, Madhya Pradesh and Orissa to take up similar initiatives.

The company has formed a consortium with integrated neutraceuticals and biotech company Nandan Biomatrix Ltd., and infrastructure company Shapoorji Pallonji to take up the project in UP.

Similarly, Nandan Bio through its Triple-One initiative is talking of investing up to $1 billion across several states in the country to take up jatropha cultivation over 1 million hectares to benefit 1 million families over the next five years.

Likewise it is in talks with various consortium partners including Petronas, Cheveron, the Global Environment Fund and the IFC to take up similar projects in at least nine other countries.

In India, apart from tying up with BPCL and Shapoorji for UP, it is slated to announce this week another such project to be taken up in Orissa with Platinum Energy of Malaysia to take up cultivation of 3200 hectares engaging 2900 farmers in Orissa.

Likewise, IOC has kicked off a pilot project for cultivating and producing biodiesel from non-edible oilseeds with Pantnagar Agricultural University while HPCL too is said to be seriously considering it.

According to industry sources Reliance Industries is slated to be the biggest player in the production of non-edible oilseeds and refining of biodiesel.

The Tatas on their part are said to be investing over Rs 1,500 crore on biodiesel R&D and production over the next five years while the Mahindras, and Ashok Leyland too
are in the fray.

The reasons for this sudden interest are not far to seek.
As Bansal explains, while the demand for non-edible oils obtained from plant species like jatropha curcas and pongamia pinnata, which can be blended with petroleum diesel is huge in the country, none is available at the Rs 26.50 per litre price mandated by the Planning Commission.

Not surprisingly therefore the recommendations of the National Committee on Biodiesel Pricing and Carbon Footprint is awaited by the industry in the hope that it would suggest a higher price tag for non-edible oils as feedstock for biodiesel.

“Given the urgency the issue has taken we expect to present our report by September but what is also required in tandem is the finalisation of the National Biodiesel Policy that has been hanging fire for quite some time,” said Suprotim Ganguly, member secretary of the committee.

While Ganguly did not want to enter into a discussion on the likely pricing to be determined by the committee, the industry has been expecting a price of at least Rs 34-35 per litre which it says is fair given that international crude has already cross the $130 per barrel mark and the farmer and the entrepreneur should get their due price.

But more importantly, the issue is not price but the availability of biodiesel itself. The basic merit of biodiesel is that it can give a partial energy security and save some forex for the oil companies which can be used to mitigate the spike in crude prices, he added.

The country consumes roughly 55 million metric tonnes of diesel every year. And given the initial 5% blend by 2010 mandated by the draft biodiesel policy which is slated to go up to 15-20% in another five years, one can well imaging the savings that will accrue to the country, said B Jaya Kumar, director - technical at Nandan Biomatrix.

Nevertheless, while the sudden interest in biodiesel bodes well for India where energy security and economics for the oil companies are concerned, the country will still have to wait for at least another 3-4 years before it can see the oil actually is pumped out.