SEMINAR PAPER

BIO-DIESEL & IT’S

RELEVANCE IN
INDIA

SIDDHARTH SRIVASTAVA

TELECOM/FINANCE

ROLL NO. 421

Abstract:

This paper talks about bio fuels ( bio diesel in particular) which is a renewable source of
energy, in Indian context. Bio Fuels hold importance for India as they provide the
government with the tool to tackle growing petroleum import bill , pollution & global
warming and dependency on petroleum as a fuel. The extent of government
seriousness over the issue can be gauged from the fact that last year government
introduced a policy on bio fuel, so that India can derive the maximum out of this source.
Hence in this paper we will briefly discuss about bio fuel’s before discussing its
relevance in India.

Introduction:

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India is a energy hungry and energy deficit country. We are majorly dependent on non-
renewable sources like coal and petroleum products to feed our enormous demand. As
India is growing rapidly at more than 7% per annum and is expect to maintain the
momentum for years to come, our energy requirement is bound to increase. With
diminishing oil reserves and coal we today face a huge task in developing a new
renewable source of energy so that this momentum is not hampered.

Also India lacks oil reserves to fulfill the crude oil demands and hence we are
dependent upto 70% of our crude oil on imports. This is resulting in huge outflow of our
forex resulting is high trade deficit. Our oil import bill stood at staggering $ 68 billion in
the year 2007-08. This compromises our energy security and also our trade balance.
Further despite of all the imports and in house production we still face huge energy
shortage which is not only crippling our growth but is also putting doubt over its
sustainability. Tens of thousand village still does not have electricity and the rural and
urban area’s which have them faces acute power cut’s. the situation is also hampering
our industrial sector with forced power cuts and shut downs.

Another problem arising due to our dependence on petroleum products is pollution and
global warming which is making the nature unstable hence resulting in altering of global
temperature, season cycle etc. the problem has grown up to such a proportion that
leaders of the world recently met at a common forum in Copenhagen to tackle the
issue. Global warming if not checked will make the life on the planet unsustainable for
our future generations. India currently emits around 6,000 million metric ton of carbon
dioxide.
As India is a developing country, all the problem stated above will grow manifolds to
such a level that it will be difficult to tackle it later. We are on course to become on the
the largest consumer of petroleum products and polluter in the world in next few
decades. Hence it is the time to look forward to the answer’s to not only reduce our
dependency on petroleum products but also reduce the pollution we are currently
causing.

The answer I feel that can solve the above problem immediately for next decade is BIO-
FUELS. In this seminar paper hence we will discuss as how bio fuels especially bio
diesel can reduce our dependency on petroleum products along with tackling the
pollution issues.

Bio Diesel:

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Bio diesels are derived from the products like vegetable oil, animal fats and form the
seeds of plants like soybean etc. These Bio fuels extracted from the above sources can
either be directly fed as a fuel or can be mixed with petroleum products to form a better
combination. As the current Indian government policy lays emphasis on bio diesel
hence we will from this point discussion on bio fuel will be about bio diesel to make this
paper more relevant to the Indian context.

Characteristics of biodiesel:

Bio diesel can be either used as a stand alone fuel or can be mixed with diesel to obtain
a combination. Nomenclature’s like B10 are used to denote these combination. For
example B10 denotes that the fuel is a mixture of 10% bio diesel in diesel. Bio fuels are
both advantageous and disadvantages in nature, the disadvantages are especially
prominent in case of developing countries like India. These challenges are required to
be tackled by strong and coherent government policies.

Bio fuels provide several advantages over traditional petroleum sources of energy.
These are

- Cetane number of biodiesel is around 52 which is higher than that of petroleum

diesel, making it a better fuel

- They offer energy security via reduced demand for petroleum.

- They are non-toxic in nature and degradable to a much greater extent than
diesel.
 - They provide better lubrication and are denser than diesel hence more suitable
to engines.

- Biodiesels provide lower emission of pollutants .A B20 biodiesel (combination of

80%diesel and 20%biodiesel) emits 30% less hydrocarbon, 20% less carbon
monoxide,15%less particulate. It also does not emit sulphur and nitrogen oxides,
hence It is an eco-friendly fuel.

- Bio diesel generation is much more efficient than other renewable sources of
energy. One unit expended energy in production generates 4.5 units of biodiesel.

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From these characteristics it can be seen that bio diesel can be used as a substitute for
diesel either fully or partially in the form of fuel combinations. The factor that goes in
favour of the bio diesel is that unlike other renewable sources, it does not compromises
on the efficiency or effectiveness of the system in which it is used. Hence bio fuel will be
able to provide immediate relief as a source of alternative fuel till energy sources like
solar or wind can be utilized in the same effective manner.

Indian context:

The importance of bio diesel can be known from the fact that Indian government has
come forward with the national policy on bio fuels to tap its various advantages. but for
a country like india, bio diesels can put forward several disadvantages like

- In the country where several people do not have food to eat, usage of vegetable
oil for fuel generation will create further problem by creating edible oil shortage

- Their will be the need to educate large rural population about the usage,
production methods and benefits of the bio fuels to the nation and the masses

- Bio fuel can only cater to a certain % of the India’s fuel need and thus it is
incapable to radically changing the whole dependence on petroleum

- Bio fuel production will need expertise and subsidies to make the product cost
effective and popular, initial investments are high and it takes around 2 years for
the production of seeds to start.
 - Land requirements are high hence strong government policies are needed to
define and obtain land for the plantation of these crops

Considering the above disadvantage, Indian government decided to promote “Jatropha”

for the generation of bio diesel. Jatropha provides several advantages

- It produces non edible oil and hence the problem of diversion of vegetable oil for
the bio fuel production is removed. As Jatropha produces non edible oil, the
availability of vegetable oil is not effected

- Jatropha can be grown on wastelands and other non agricultural area’s. Thus for
the production of Bio fuels the productive lands are not compromised. It also
hence provide revenue generation source from other wise waste land

- Jatropha is also much more efficient than soybean. It produces 4 times more oil

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than soybean

- Jatropha also helps in tackling issue of global warming as it absorbs around 3

tons of carbon dioxide per acre.

Thus the Jatropha plant along with generation of bio diesel also provides various other
advantages making the generation of bio diesel feasible and mass acceptable. The
latest study have shown that the cost of production of a bio fuel is almost equal to that
of diesel, hence the proposition becomes attractive.

India Bio fuel policy:

India’s bio fuel policy is made to promote the production of bio fuels especially via
development of wastelands with “jatropha” plants. The policy mandates the compulsory
selling of minimum 20% ethanol blended petrol and diesel by 2017. This is done with
the aim to develop market for the bio fuels and promote the investment in the sector.
The bio fuel policy is to be implemented in two steps. The first stage requires large
cultivation of jatropha plants. 400,000 hectares of jatropha is expected to be planted
which will yield around 3.75 tonnes of oil seeds annually. The second stage will involve
the commercialization period.

Various benefits offered under this policy are:

- It is proposed to remove central tax on bio fuels to make it an attractive

investment
 - Low and uniform 4% state sales tax

- The policy also proposes to introduce compulsory addition of bio fuel in

petrol/diesel in a step by step manner

- Minimum support price for the products will be offered and it will be
benchmarked against prevailing retail prices of petrol/diesel

- Government will promote the plantation of Jatropha seeds in the wastelands of

several states to ensure that raw materials are available

The policy though will benefit the bio fuel industry a great deal through the perks and
benefits it is offering but it unclear on issues regarding imports of certain items. Under
the government guidance many PSU’s like IOL having been investing a great deal to
develop land on which “Jatropha” is grown.

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Production of bio fuels in India:

As per the government policy explained above, the bio diesel in India will be produced
by jatropha plantation. The process involved in this step is depicted below

the economy of scale will make production of bio diesel a viable option. The cost of
jatropha seeds have increased from Rs 3 pr kg to Rs 12 per Kg, which has increased
the cost of production. Government is offering minimum support price for the same,
which will take care of any inflationary concerns

*the diagram is taken from united nation document on Indian bio fuel industry.
Market for bio Diesels:

With the incorporation of National policy on bio fuels in 2009, the bio fuels is an
upcoming market. India’s current capacity is around 6,00,000 ton of bio fuel which will
be required to be increased exponentially if B20 fuel is to be adopted by 2017. By 2016-
2017, for a B20 bio diesel the demand is expected to be at 16.72 metric tonne, which at
Rs 34 per liter will generate a market of billions of dollars.

Though jatropha price is high, the subsidies provided by the government and the
impending demand increase, the bio fuels will be a profitable venture. It also provide
huge opportunity to the rural population to develop “jatropha” on the wastelands. There
is around13.4 million hectare land available for jatropha plantation which will generate
around 15 million metric tonnes of bio diesel. As 150 gallons of oil are obtained per
acre, and government is providing minimum price and there is a sustained demand for

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the product, the opportunity are enormous in this sector

Various usages of these bio diesels can be

- To use bio diesel as a fuel with or without adding diesel

- To use bio diesel to generate electricity in rural area’s

- The by-products can be used as manure

Hence bio fuels can be marketed it several ways to target different customer needing it
for various purposes

Ideal generation of Bio fuel (Indian context) :

To make bio fuel concept work in India, it will be necessary to make the proposition
attractive to the farmers who will be providing the raw materials i.e. “jatropha”. Indian
government should provide incentives to these farmers. One of the novel way is to do
the following

- Provide support ( seeds and finance) to the farmer to grow jatropha

- Government should ensure that the raw materials hence produced are bought
timely. They can also offer farmer some oil generated, to be utilized for
household purposes.
 - Price paid to the farmers should be adequate as, initial farming of jatropha is
expensive as seeds are expensive and it requires 2-3 years to give the seed for
the first time

- Government should make these seeds available to the PSU’s and other
companies directly or indirectly so that B20 can be made from it

- Government can also install bio diesel plants locally so that farmers can also
generate fuel for self usage or to generate electricity

If these steps are taken, the whole process will be successful as it be able to involve
rural people in bio diesel production by providing them with various opportunities.

Advantages of bio diesel to India:

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1- It will lower the dependency of the country on petroleum imports as diesel/petrol
will be needed to contain 20% indigenously generated bio fuel

2- Lower imports will reduce the trade deficit of the country

3- Use of bio diesel will ensure lower emission of carbon dioxide and other gases,
hence reducing the global warming and curtailing depletion of ozone layer. It will
also help India to honour its commitment of curtails emissions under Kyoto
protocol.

4- Jatropha plants will result in the utilization of the wastelands and other non
agricultural lands

5- It will provide alternative source of revenue as well as energy to the rural

population and hence providing growth in the rural sector

6- Jatropha plantation provides an opportunity to the rural sector in terms of both

employment and growth. Jatropha plantation generates income of around Rs
25,000 for initial years and Rs 150,000 per hectare per year after 5 years. The
jatropha plantation is expected to generate 127.6 million person days
employment in the initial phase, in the later phases it is expected to generate
employment of 36.8 million person days in seeding and around 3,680 person
year for the extracting in the later phases. Hence jatropha plantation can play a
huge role in the development of the Indian rural masses by providing alternative
source of income.
Recommendations:

Despite the introduction of policy on bio-fuel by government still a lot requires to be

done to make bio fuels reliable, sustainable and efficient source of energy. Various
recommendation proposed in this paper are

1- Government should ensure that the price of jatropha and other elements in he
cost of production of bio diesel should not increase much as it has in the
previous years otherwise the economic viability of the bio diesel policy will come
under doubt

2- Minimum support price should be continuously revised to reflect the inflationary

changes in the cost of production.

3- R&D work should be promoted in the field of bio fuels so that new technologies
and process can be developed to harness the energy in much better way

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4- Government should procure bio fuel plants ( from India or outside) to establish
several local bio fuel generating plants which can be beneficial to the local
population

5- Government should also setup machinery to generate electricity in rural area’s

via bio fuels to promote independent power generation with a view of meeting
energy requirements

6- Participation of panchayat’s and local people should be ensured in planning,

implementation and monitoring of the project.

7- The policy on bio fuels should be properly brought into force and proposals
regarding subsidies and tax benefits should be implemented as soon as possible
so that the benefits are available to the producer of bio fuels as wel as to the
rural people cultivating jatropha

8- Close coordination among centre govt., state govt., panchayat’s, involved

organizations and rural people should be ensured so that any decision or
grievances is timely addressed in a way that benefit of all the stakeholders are
ensured.

9- Policy should also be made clear about issues like import, permissible land for
cultivation of “jatropha” etc.

10-Government should provide support to the farmer in the initial years of the
jatropha plantation as it takes around 2 years for the seeding process to start
 11- Companies must be promoted to use bio fuels and help in it’s production by
providing tax benefits.

12-Community participation must be ensured so that there is a balance between

environment and economic benefit to the government and the rural people

13-Government should ensure that soft loans are available to the people who the
doing the private farming for initial years

Conclusion:

Bio diesel is certainly one of the most efficient forms of renewable source of energy.
The steps taken by the government to promote bio fuels would immensely help the
nation to improve it’s energy security, decrease it’s carbon footprint and reduce it’s
dependency on petroleum products. This initiative though will require continuous

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stimulus from the Government to ensure its acceptability, practicality and success in the
market. Success of bio fuel will also be dependent on the level on involvement of the
rural area’s and companies. This needs to be ensured via government support,
coordination and their involvement in the process. If all these steps are taken, the bio
diesel industry is India is bound to grow at stupendous pace providing benefits to the
people, nature and the Government.

References:

- http://www.unctad.org/en/docs/ditcted20066_en.pdf

- http://www.jatrophabiodiesel.org

- http://www.biodiesel.org

- http://igovernment.in/

- http://www.bioenergy.org.nz