[News forwarded by Shefali Sharma. Thanks Shefali-Moderator.]

Biodiesel sector waits for clarity on benefits from duty cut

Kalpana Pathak / Mumbai July 9, 2009, 0:00 IST
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> The biodiesel industry has welcomed finance minister’s move to reduce
> the customs duty on biodiesel from 7.5 per cent to 2.5 per cent and
> the duty paid on high-speed diesel blended with up to 20 per cent
> biodiesel to be exempted from excise duties. But, it is seeking
> clarity on the benefits the moves would bring.
>
> “We are trying to ascertain if the exemption would be available only
> to blended fuel or if it would be extended to the total product. This
> in any case would mean a huge cost advantage to the oil marketing
> firms. Around 5 per cent blending could mean that entire 95 per cent
> blending of the fuel could be exempted from duty,” said an industry
> expert who advises firms on procuring bio-fuel.
>
> Industry experts say while fossil fuel attracts excise duty, biodiesel
> does not. So a clarity is required on if blended bio-diesel will
> invite any amount of tax. Also, how the details would be worked out
> and what procedure would be followed.
>
> Biodiesel Association of India (BAI) has also written to the finance
> ministry seeking the customs duty concession to be extended on
> feedstock (free fatty acid and non-edible oils) imports to encourage
> running of over a dozen biodiesel processing units in India.
>
> While industry watchers believe the reduction in duty will also
> promote import of biodiesel, producers of biodiesel differ. “India’s
> processing capacity of bio-diesel is estimated at 200,000 tonnes per
> year but a majority of biodiesel units are not operational most of the
> year. What good will abolishing the duties do?” wondered an executive
> from a firm whose plant has been lying idle.
>
> Commercial production and marketing of bio-diesel in India is
> negligible due to the lack of availability of jatropha seed and other
> non-edible oil feedstock.
>
> Most existing bio-diesel producers use mixed feedstock including
> non-edible oilseeds, non-edible oil waste, and animal or fish fat as
> feedstock.
>
> “The existing jatropha plantations are at a very initial stage of
> growth. The total jatropha plantation area in the country is presently
> estimated around 450,000 hectares and, of this, over 70 per cent are
> new plantations and would mature in the next four years,” said an
> Ahmedabad-based industry analyst.
>
> In October 2005, the Ministry of Petroleum and Natural Gas announced a
> “biodiesel purchase policy”, in which oil companies would purchase
> biodiesel and blend it with high-speed diesel (HSD) at a 5 per cent
> blending ratio which was to take place in 20 procurement centres
> across major producing areas in the country from January 2006.
>
> However, owing to the cost of production of bio-diesel, which is said
> to be 20 per cent higher than the pre-determined price (reviewed every
> six months by the ministry), of Rs 26.5 per litre, there are no sales
> of bio-diesel at these centers. The overall cost of production for
> bio-diesel is around Rs 31 per litre today.
>
> *Firms acquire land abroad*
> With the present measures, companies like Emami Biotech, an outfit of
> the Emami group and Hazel Mercantile would benefit which are planning
> to produce and process bio-diesel abroad. Sources close to the
> development said these companies have acquired 10,000 acroes to 25,000
> hectares in Africa for cultivating jatropha and processing bio-diesel.
>
> An official from Emami confirmed the move. Emami last year,
> commissioned its 1,000 tonnes per day edible oil plant at Haldia which
> has the capacity to produce 300 tonnes per day of bio-diesel from palm
> oil.
>
> The plant, however, is lying idle.
>
> Industry experts say that to process bio-fuel, land and other
> resources are more easily available abroad. Thus more and more
> companies are looking to adopting this strategy to enter the bio-fuel
> segment.
>
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nefitsduty-cut/363357/