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G. Chandrashekhar

Concerns over poorly processed fuel clogging filters

Mumbai , Dec. 5

In the global bio-diesel sector, amid the frenzied activity in the form of unprecedented production capacity expansion, concerns relating to quality of the so-called eco-friendly fuel have begun to surface.

Reports from the US where the popularity of bio-fuels - both bio-ethanol and bio-diesel - is soaring provide evidence of serious quality problems, especially with bio-diesel.

Growing fears

"One-third of the fuel from America's new bio-diesel plants is failing quality tests,'' screamed a report. The problem that was faced with soyabean-based bio-diesel in Minnesota is likely to return on a national-scale this time, it is feared.

With winter approaching, apprehensions that poorly processed fuel might clog filters and stall trucks are growing. Industry representatives are rather worried that the promise of the nascent industry might be jeopardised if the problems are not fixed sooner.

Investment wave

Bio-diesel industry has been riding a great wave of investment, optimism and growth. The US National Bio-diesel Board (NBB) has estimated that production of bio-diesel could reach 250 million gallons in 2006, triple the amount in 2005. The NBB credits state and federal incentives, grants and tax credits for the industry's rapid growth.

Huge capacities are constantly being added not only in the US but also in other parts of the world including Asia (India, Malaysia and others) and the

European Union. These activities have imparted a bullish tendency to global vegetable oil market. Prices have spurted recently despite satisfactory production and large inventory.

Operating plants

In the US alone, according to NBB, as of mid-September, there were 86 operating bio-diesel plants with a total capacity of 580 million gallons per year. Sixty-five more plants are under construction and 13 plants under expansion, enough to add another 1,400 million gallons per year in production capacity.

But the emergence of quality problems suggests that many newly set-up companies may not be adopting stringent quality-control checks. This potentially dangerous trend may scare investors away.

Also, many experts believe, although the industry has been rapidly expanding, falling crude prices and rising feedstock (soyabean oil) prices may hurt the profitability of the bio-diesel industry in the months ahead. To what extent high feedstock prices encourage expansion of raw material production remains to be seen.

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