The Hindu Business Line : Biodiesel imports in the offing?

Mumbai March 23 If biodiesel manufacturers are deeply disappointed with the Union Budget 2007-2008 for the absence of any policy support, the worst is yet to come.

With the peak rate of customs duty reduced to 10 per cent, India as a market is open to imported biodiesel. If the buzz doing the rounds of the industry is any indication, a well-known industrial conglomerate, with energy interests, would soon start importing biodiesel for domestic distribution. Palm oil-based biodiesel is currently on offer at about $750 a tonne cost and freight India.

Together with 10 per cent customs duty, the landed cost would be less than Rs 36,500 a tonne. The cost may turn lower if the rupee continues to strengthen and/or overseas prices turn softer.

Manufacturers upset

Biodiesel manufacturers who have already tied up funds for setting up processing facilities are a worried lot. Contrary to initial enthusiasm and expectation, policy support for the sector has not been forthcoming. While some entrepreneurs have put their investment decision on hold, many others are waiting for the haze to clear.

Currently, the easiest source of feedstock is imported crude palm oil and downstream products such as fatty acid distillate. In the absence of an official policy for the domestic market, processors are scouting for export orders, mostly from European countries. Given the poor state of infrastructure in the country, logistics costs would be the crucial determinant of profitability.

More important, as and when overseas processing facilities — Malaysia, Singapore, Indonesia — come on stream, India as a processing centre for supply to European market would lose its importance. South East Asian processors would service European customers directly.

A long-term comprehensive policy for biodiesel is overdue; but it has run into serious bureaucratic red tape, according to industry players. Far too many Ministries seem to be involved in policy formulation, as a result of which there is no forward movement in policymaking, rued an investor.

Alternative sources

If biodiesel imports become a reality, it would further dampen investor interest, it is feared. Almost everyone talks about the potential of jatropha and pungamia crops as feedstock for biodiesel in the country, but there is little forward movement in actual plantation taking place because of various uncertainties including land, agronomy, costs and long-term policy support.

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