November 24, 2006

 

 

USDA: India's biofuel production still in its infancy

 

 

The Government of India recently initiated policies to encourage biofuel production and usage, with the foci on promoting the use of ethanol for blending with gasoline, and the use of biofuels derived from non-edible oils for blending with diesel, says the US Department of Agriculture's November 21 report.

 

The biofuel policies are driven by the need to lower India's dependence on imports of crude oil, provide environmentally friendly alternative fuels, and to support Indian farmers by devising ways to support higher production of sugarcane.

 

The commercial production of ethanol for fuel purposes started in Jan 2003 after the announcement of the ethanol programme to mandate the blending of 5 percent ethanol in gasoline, informs the USDA report.

 

Despite this mandatory requirement, the programme could only be implemented in a staggered manner, as ethanol was not consistently made available by the sugar industry to the oil companies, adds the report.  Sugarcane and sugar production declined sharply in the years 2003/04 (October/September), resulting in a severe shortage of molasses and a consequent increase in alcohol and ethanol prices.

 

Later, the mandatory supply condition was lifted and new pricing conditions came into force in October 2004. 

 

Recently, the petroleum ministry announced plans to implement the second stage of the ethanol programme which aims to supply ethanol-blended gasoline across the country. This would require about 600 million litres of ethanol to blend with gasoline at 5 percent, according to the agency report. The ratio would later go up to 10 percent.

 

Though the government's ethanol policy has been currently doing well to meet the estimated demand, production capacities would have to be enhanced by expanding the molasses based ethanol plants, and by setting up sugarcane juice-based production facilities in order to adopt a 10-percent ethanol blending programme.

 

In October 2005, the government announced a "biodiesel purchase policy," by which oil companies would purchase bio-diesel and blend it with high-speed diesel (HSD) at 5 percent. The procurement price for biodiesel has currently been fixed at Rs 25 per litre (US$ 2.08 per

gallon). 

 

The Jatropha curcus has been identified as the tree-borne oilseed for the production of biodiesel. However, due to the slow progress in Jatropha planting, there has been negligible production of biodiesel until now. 

 

Although there are no quantitative or SPS restrictions on imports of biofuels, high duties on tariff lines have made imports economically unfeasible, says the USDA report. India has neither imported nor exported ethanol nor other biofuels for fuel purposes.

 

Also, it is not economically feasible to produce biodiesel from anything other than molasses owing to the domestic shortage of oilseeds and vegetable oil and the consequent high prices.

 

India's production (of ethanol) for fuel purposes has not been significant enough to impact production and trade of sugar for food, molasses for feed and alcohol for other uses.

 

 

For the full USDA report, click here