Study recommends raising biodiesel price in India

By Erin Voegele | January 11, 2011

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. The two organizations ultimately found that the price of jatropha-based biodiesel needs to be increased from 26.5 Indian rupees (Rs.)-per-liter ($2.21 per gallon) to Rs. 36 per liter ($3.01 per gallon) under the country’s biodiesel policy.

If a 2 percent jatropha-based biodiesel blending initiative is achieved during the 2011-2012 timeframe, the study found that India would save approximately Rs. 3000 crores ($660 million) while generating a revenue of nearly Rs. 5500 crores ($1.2 billion) in the rural economy, with an annual investment opportunity of Rs. 1700 crores ($374 million).

According to the study, the Rs. 26.5 per liter procurement price set by the government’s biodiesel policy should be reviewed and corrected. This will create a realistic possibility to sustain investment and necessary growth in the biodiesel industry, the study notes.

The study further recommends that the Indian government create a policy framework to make the price of biodiesel self-sustaining. This includes the development of incentives and grants. In addition, the study noted that an Rs. 6000 ($132)  per ton price for jatropha seeds would ensure that croplands used for food production are not used to produce biodiesel feedstocks while creating a viable business opportunity for the conversion of jatropha seeds into biodiesel. “This will create a pull for biodiesel demand to accelerate the development of the industry, which requires periodic revisits (biannually),” said the organizations in a statement. “These immediate actions will make ‘biodiesel blending’ a sustainable proposition.”

The organizations also state that record fluctuations in the price of oil during recent years have created a threat to India’s crude oil imports, resulting in a financial burden to the economy. However, these events have also created an opportunity to expedite the adaptation and integration of biofuels into the country’s energy portfolio. “To counter and mitigate the security threat in dieselized economy like India, biodiesel may be used as a true supplement to fossil diesel with appropriate technological, financial and policy interventions,” the organizations continued.




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