India's biodiesel industry wants no connection with petroleum after policy scare

Posted September 8, 2009

In late August, India's Ministry of Petroleum and Natural Gas issued a circular "which virtually bans the sale of biodiesel by producers," the Times of India reported. Sanjeev Gupta, managing director of 50 MMgy Universal Biofuels in the Indian port city of Kakinada was not impressed. "This is not to be taken seriously," Gupta said. "Biodiesel is selling." He further observed that the circular seemed like an intimidation tactic from the state's petrol and gas industries, especially since the petroleum ministry did not have the authority to publish such a statement.

Gupta didn't seem alarmed or nervous about the document in a telephone conversation with Biodiesel Magazine Tuesday morning, and was actually optimistic about the company's prospects following a recent $3 million shipment from its Kakinada port facilty to its "first large European customer."

Universal makes biodiesel from palm oil. Prices have been very low for the controversial commodity over the past few weeks-especially with reports of a record U.S. soy crop-and the margins created a consignment opportunity. "This was successfully done," Gupta said. "It's just the beginning." Sales of palm methyl ester from Asia to Europe have seen some action lately because of soft prices. South Korea, Malaysia, and India have all seen deals in recent weeks.

Meanwhile, the situation with the petroleum ministry is improving. "There is a very high-powered committee that oversees the national biofuels policy, attended by the Cabinet Secretary who is the number one bureaucrat in India-so any changes regarding biodiesel have to have complete approval from the government," said Sandeep Chaturvedi, president of the Biodiesel Association of India, headquartered in Mumbai.

India has promoted the production and use of biodiesel by removing import duties, ending the excise tax on B100 and even giving benefits to blended fuels. In addition, the country has an aggressive jatropha cultivation program, Chaturvedi said, and is creating jobs for the world's second largest population, 25 percent of which live below the poverty line. "It will be a few more years until we see results from jatropha, so we are keeping going with used cooking and industrial oils," he said. "India has a capacity for biodiesel production that is nearly 3,000 tons per day, but we are only operating at about 10 percent of that volume."

The government's biodiesel promotion is part of a plan to respond to a rapidly growing economy that imports 70 percent of its energy. Therefore, India's petroleum companies want to monopolize the marketing of biodiesel now, Chaturvedi said. "Petroleum is a big lobby and they've been historically connected with the ruling parties in France, Germany, the United States. Biodiesel is a small business and we want to stay out of the sights of these sharks."