FocusIndia mulls new biofuel blending targets

17 June 2008 16:05  [Source: ICIS news]

By Isha Jha

MUMBAI (ICIS news)--India's Ministry of New and Renewable Energy (MNRE) plans to redraft its biofuels policy, focusing on the substitution of conventional fuel with biofuel along with increased local production, senior officials from the government said on Tuesday.

“The draft would lay down targets for the substitution of biofuels in place of conventional fuel with 5% by 2012, 10% by 2017 and 20% by 2017,” an official said.

“It might take about three months for an official policy to be in place, but the government is encouraging the cultivation of jatropha and providing subsidy for research and development centre for renewable energy,” he said.

A 5% ethanol blending mandate was already in place but the availability of feedstock to manufacture biofuel was a challenge, he said.

ICIS news earlier reported that the government was likely to come out with a National Biofuels Policy in March, which would cover the issue of biodiesel blending.

Plantations for alternate feedstock like jatropha takes at least three to four years to yield seeds. Only when feedstock is locally produced and available can the government implement a blending mandate.

Despite a mandate, it might be difficult for companies to sell biodiesel in the domestic market if the pricing was not feasible, the source said.

“The government had set the price for biodiesel at Indian rupees (Rs) 26.50 ($0.62) about two years ago, but now with the price of crude jumping to peak levels this price too should be revised to a more economical and realistic level,” Mr Jadav, director Nandan Biomatrix said.

The Indian government, which subsidises fuel, has fixed the price of biodiesel at Rs26.50 /litre, whereas the cost of production excluding taxes and other duties comes to Rs26-Rs27/litre.

“The government should raise the price for biodiesel, a reasonable price would be around Rs33-34 for biodiesel, which will be in tandem with the global level, so that the biodiesel producers too are able to make some money,” he added.

The Indian state was facing a major shortage in bioethanol post the October 5% mandate, as most of the sugarcane, which is a major feedstock for biofuel cultivation, is used in the alternative, more profitable and less complicated production of sugar and liquor instead of ethanol, another senior government official said.

“Since there are alternative uses available for sugarcane, India, in spite of being the second largest producer of sugarcane, has to face a shortage in its use as feedstock for bioethanol. Therefore the government encourages the cultivation of jatropha as it has limited use apart from bioethanol production,” Jadav added.

“We require a minimum of 13m-14m hectares of jatropha cultivation to be able to sufficiently provide for the mandated ethanol blend,” he added.

“However, a 10% ethanol blend, unlike 5%, would impact vehicle performance and engines would have to be differently designed to perform well with a higher ethanol content,” Jadav added.

“It would be very difficult to achieve the biofuel substitution target due to the non-availability of enough biofuel in the nation,” an analyst said.

The government would have to put in place very stringent policies for biofuel production to ensure its availability in the market and only then should it lay down the substitution targets, he said.

“It would take minimum 8-10 years before India could sustain the biofuel demand that arises of the blending mandate,” he added.

($1 = Rs42.62)

By: Isha Jha
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