1

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY

USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT

POLICY

Date:

GAIN Re port Number:

Approved By:

Prepared By:

Report High lights: Total ethanol supply for ethanol blending program during current fiscal year (2011/12) is anticipated to be just sufficient to meet the 2

- percent blending target while production of biodiesel from jatropha in India is commercially insignificant at present. This stands in contrast to the National Biofuel Policy, which aims to replace 20 percent of petroleum fuel consumption with biofuels by end of 12 th Five

- Year Plan (2016/2017). Amit Aradhey Allan Mustard 

## 2012 Biofuels Annual India IN2081 6/20/2012 Required Report

- public distribution2

Post:

Executive Summary:

Total ethanol supply for ethanol blending program during current fiscal year (2011/12) is anticipated to be just sufficient to meet the 2

- percent blending target while production of biodiesel from jatropha in India is commercially insignificant at present

. This stands in contrast to the National Biofuel Policy approved by the Government of India on December 24, 2009. The policy encourages use of renewable energy resources as alternate fuel to supplement fossil motor fuels and had proposed a target of

rep lacing 20 percent of fossil motor fuel consumption with biofuels (bioethanol and biodiesel) by the

end of the 12 th Five

- Year Plan (2017).

With an outlook for strong sugarcane and sugar production for the third consecutive year [1] , the Indian

governmen t may renew its focus and strongly implement the mandatory 5

- percent ethanol content in petrol, provided there is a consensus among stakeholders on the purchase price of ethanol for the Ethanol Blending Program (EBP). The government‟s current target of a 5

- percent blend of ethanol in gasoline has been partially successful in years of surplus sugar production and below target when sugar production declined. Presently, the contracted ethanol supply for current fiscal would be just sufficient to meet 2 perce nt blending.

Production of biodiesel in India is commercially insignificant and will not soon be commercially deployed as a economically viable biofuel. The government‟s plan to blend diesel fuel with 20 percent content of biodiesel by fiscal year (Apri l

- March) 2011/12 is improbable mostly due to unavailability of high

- yielding, drought

- tolerant jatropha seeds to produce biodiesel.

However, generation of grid

- quality power from biomass continues to play an important role as fuel for sugar and textile mills, and has significant potential in breweries, fertilizer plants, the pulp and paper industry, solvent extraction units, rice mills, and petrochemical plants. The total biomass power potential in India is estimated at 31,000 MW; of which surplus powe r generation through bagasse is
10,000 MW.

[1] Marketing Year Oct

- Sep 2012/13

Author Defined:

OVERVIEW

India is the world‟s fifth largest primary energy consumer and fourth largest petroleum consumer after United States, China and Japan. Des pite the recent global economic slowdown, India‟s economy is expected to continue to grow at 6 to 8 percent per year in the near term. With an outlook for moderate to strong economic growth [1] : and a rising population, growing infrastructural and socio

- e conomic development will stimulate an increase in energy consumption across all major sectors of the Indian New Delhi3

economy.

In the recent past, starting in Indian fiscal year (IFY) 2009/10, imports of gasoline and petroleum products has outgrown total domesti c consumption by more than 14 percent. While India‟s domestic energy base is substantial, the country continues to rely on imports for a considerable amount of its

energy use [2] , consequently escalating India‟s oil import expenditure to over $135 billio n in IFY 2011/12, up 22 percent over the previous year (figure 1). Concurrently, petroleum consumption (Figure 2) in India has also grown in tandem to 148 million tons.

Figure 1. India: Import of Crude Oil and Value of Petroleum

Source: Petrole um Planning and Analysis Cell, Government of India (GOI)

*: estimate

It is estimated that the proportionate consumption of petroleum products in India is as follows ( petroleum consumption ): Transport (Petrol, Diesel, CNG, Aviation Fuel) : 51 percent Industry (Petrol, Diesel, Fuel Oil, Naphtha, Natural Gas): 14 percent Commercial and Others: 13 percent Domestic (LPG and Kerosene): 18 percent Agriculture (Diesel): 4 percent Thus, in terms of end usage, energy demand across the transport sector is greatest. Roads, being one of the dominant infrastructures for transport, carry an estimated 85 to 90 percent of the country‟s passenger traffic and 65 percent of its freight. Traffic on roads is growing at a rate of 7 to 10 percent per year; while the vehicle growth is of the order of 8 to 10 percent per year.

Easy availability, adaptability to individual needs and cost saving are some of the factors which favor road transport. Total registe red motor vehicles in India in fiscal year 2005/06 numbered approximately

90 million [3] and are forecast to exceed 140 million by the end of fiscal 2011/12. Economic growth, increasing urbanization, a rise in consumer spending levels and improved road in frastructure have stimulated new vehicle registrations (particularly four

- wheel as opposed to two

- wheel vehicles). As vehicle ownership expands, petroleum demand in the transport sector is expected to grow in tandem. Diesel and gasoline account for more than 95 percent of the requirement for transportation fuel, and demand is expected to grow at 6 to 8 percent over the coming years.4

Figure 2. India: Consumption of Petroleum Products

Source: Petroleum Planning and A nalysis Cell, Government of India (GOI)

*: Estimate

Given that India is the fourth largest global contributor to carbon emissions, the GOI transport policy has targeted EURO

- III and IV vehicle emission norms [4] for vehicles, which in turn would require adoption of clean and green fuel. The government is seriously concerned about economic, environmental, [5] energy security while looking to alternate fuels to meet energy demand through safe, clean, and convenient forms of ene rgy at least cost in a technically efficient, economically viable and environmentally sustainable manner. To meet these objectives, the Union Cabinet approved the National Policy on Biofuels on December 24, 2009 ( PIB press release ). Endowed with significant potential for generating energy through renewable resources, the Government of India (GOI) is promoting production and use of i) ethanol derived from sugar molasses/juice for blending wi th gasoline and ii) biodiesel derived from inedible oils and oil waste for blending with diesel.

POLICY AND PROGRAM: ‘INDIA’S BIOFUEL POLICY’

SALIENT FEATURES OF INDIA’S BIOFUEL POLICY

National Biofuel Steering Committee (NBSC) under the Prime Minister to set policy. Strengthen India‟s energy security by encouraging use of renewable energy resources to supplement transport fuels. An indicative 20

- percent target for blending of biofuel for both

biodiesel and bioethanol.

Meet the energy need s of India‟s vast rural population, stimulating rural development and creating employment opportunities. Address global concerns about net reduction of carbon emissions through use of environmentally friendly biofuels.

Derive biofuel from inedible fee dstock grown on degraded soils or wastelands unsuited to food or feed production, thus avoiding a possible conflict of fuel

- versus food security.5

Facilitate optimal development and utilization of indigenous biomass feedstock for production of

biofuels. The policy also envisages development of next

- generation, more efficient biofuel conversion technologies based on new feedstock‟s.

Minimum Support Price (MSP) mechanism to ensure a fair price for biodiesel oilseed growers. Implementation of the propo sal would be considered carefully after consultation with stakeholders, central and state governments, Biofuel Steering Committee, and a final decision by

the National Biofuel Coordination Committee.

The state

- owned Indian oil marketing companies propo se to purchase bioethanol at a Minimum Purchase Price (MPP) based on the actual cost of production and import price of bioethanol. In the case of biodiesel, the MPP should be linked to the prevailing retail diesel price.

If necessary, the GOI proposes to create a National Biofuel Fund for providing financial incentives, including subsidies and grants, for new and second

- generation feedstock‟s, advanced technologies and conversion processes, and production units based on new and second

generation feedsto ck.

Bring biofuels under the ambit of “Declared Goods” by the Government so as to ensure their

unrestricted movement between states. [6]

Except for a concessional excise tax of 16 percent on bioethanol, no other central taxes and duties are propose d to be levied on biodiesel and bioethanol.

Biofuel technologies and projects would be allowed 100

- percent foreign equity through an automatic approval route to attract foreign direct investment (FDI), provided the biofuel is for domestic use only, and not for export. Planting of inedible oil bearing plants would not be open to FDI participation.

For more information, please follow the link to biofuel policy

.

Institut ional mechanism

The National Biofuel Policy proposes to set up a National Biofuel Coordination Committee (NBCC) headed by the Prime Minister. Given the roles of different agencies and ministries in the biofuel program, NBCC‟s role of providing high

- leve l coordination, policy guidance and review of biofuel development, promotion and utilization becomes more imperative. The committee would meet periodically to review progress of and to monitor the biofuel program. The policy also mandates a

Biofuel Steer ing Committee headed by a Cabinet Secretary to oversee implementation of its policies on a regular basis.

Various state governments will work closely with their respective research institutions, forestry department, and universities for development and promotion of biofuel programs. Few states ( http://www.pcra

- biofuels.org/whois.htm ) have drafted policies and set up institutions for promoting

biofuel in their states. In order to deal with differen t aspects of biofuel development and promotion in the country, several ministries have been allocated specific roles and responsibilities:6

Ministry of... Role

New and Renewable Energy Sources Policymaking and overall coordination concerning biofuels. Und ertake

Research and Development (R&D) of various applications of biofuels

Petroleum and

Natural Gas Marketing biofuels as well as development and implementation of pricing

and procurement policy Agriculture R&D of biofuel feedstock through ICAR and IARI (sweet sorghum,

jatropha, pongamia oil tree ( Millettia pinnata ), and inedible oilseeds). Undertake jatropha plantation on non

- forest land. Rural Development Plantation of jatropha on wastelands. Integrate biodiesel program with rural

development schemes (such as Mahatma Gandhi National Rural Employment Guarantee Scheme). Coordinate R&D with other agencies.

Science and Technology Support research on biofuel crops through biotechnology

Road Transport and Highway Plantation along highways and use of bio fuel blended fuel. Work with

automobile manufacturers‟ association in India for engine modification,
emission norms, etc. Railways Undertake plantation of jatropha on wastelands, along rail rights of way, and

conduct trials of biodiesel blended fuel in locomotives.

Environment and

Forests Ensure implementation of jatropha and tree borne oilseed plantations in

forest wastelands; Central Pollution Control Board to monitor health and

environmental effects.

ETHANOL POLICY

Ethanol is produced in India from sugarcane molasses for blending with gasoline. Beginning January 2003, the GOI mandated a 5

- percent ethanol blend in gasoline through its ambitious Ethanol Blending Program (EBP). Ethanol and alcohol production in India depends largely on availabil ity of sugar molasses (a byproduct of sugar production). Since sugarcane production in India is cyclical, ethanol production also varies with sugar and sugarcane production and therefore does not assure optimum supply levels needed to meet the demand at a ny given time. Lower sugar molasses availability and consequent higher molasses prices affect the cost of production of ethanol, thereby disrupting the supply of ethanol for the blending program at pre

- negotiated fixed ethanol prices.

Develop ments in EBP

Period Action Comments7

January, 2003 Ministry of Petroleum and Natural

Gas (MoPNG) made 5

- percent ethanol blending ( Gazette on EBP ) in gasoline (gasoline) mandatory across

9 States an d 5 Union Territories Partially implemented due to unavailability of ethanol (due to low sugarcane production in 2003/04 and 2004/05)

September,

2006 Resurgence in sugarcane production

in 2005/06 and 2006/07 led GOI to

mandate 5

- percent blending of

ethano l in gasoline across 20 states and 4 Union Territories (excludes Northeast, Jammu & Kashmir and Andaman & Nicobar) subject to commercial viability OMC contracted for 1.4 billion liters of

ethanol for EBP at Rs 21.50/liter from Nov 2006 to Nov 2009. Only 54 0 million liters of ethanol supplied till April 2009 due to short supply of sugar molasses. GOI deferred implementation due to short supply of sugarcane in 2007/08

September,

2008 Union Cabinet approved the National

Biofuel Policy. Five

- percent blending mandatory nationwide. GOI deferred the plan again due to short supplies of sugarcane and sugar molasses

in 2008/09.

October,

2008 Third phase of implementing EBP;

blend to be increased to 10 percent. Since there was no official notification released, o il marketing companies have not started 10 percent ethanol blending.

November

2009 Government meets to decide blending

target for EBP Status quo ante remains, targets 5 percent

EBP August 2010 Government fixed an ad

- hoc

provisional procurement price of Rs 27 per liter of ethanol by OMC for EBP program. Decision was taken to constitute expert committee under Chairmanship of Dr. Choudhary, Member of Planning Commission, to

recommen d a formula for pricing

ethanol. Expert Committee in March 2011 had recommended that ethanol be priced 20 percent lower than gasoline. No consensus yet on pricing policy of

ethanol. When ethanol supply runs short, government proposes to reduce import

du ty on alcohol and molasses. OMC caveats the proposal that alcohol or molasses could not be imported for EBP; it has to be exclusively sourced from domestic produced molasses.

Indian Fiscal

Year [7]

(April

- March)

2010/11 OMC unable to procure contracted

ethanol supplies from sugar mills and ethanol manufacturers. The Ministry of Petroleum and Natural Gas, GOI has not been able to implement compulsory blending of 5 percent ethanol in gasoline. Most domestic ethanol producers or suppliers were disqualified from supplying ethanol.

Failure to set ethanol pricing formula and procedural delays by various state governments delayed procurement for

EBP.

Industry sources estimate that 365 million liters of ethanol was supplied against the

contracted 570 mil lion liters.8 During same period, a major share of molasses production was diverted as cattle feed to Europe.

Fiscal Year

2011/12 OMC targets procurement of 1 billion

liters of ethanol for fiscal 2011/12. After deducting the ethanol requirement

for EB P in non

- implementing states (such

as Tamil

- Nadu, West Bengal, Odisha, Jharkhand, Chhattisgarh and Madhya Pradesh), the present requirement worked out to 720 million liters, of which suppliers had offered to supply 610

million liters. With lower supplies in a few states, the contracted supply was

further drawn down to 430 million liters.

Molasses continues to be exported as cattle feed to Europe.

Current

Status By 2017, the GOI mandates replacing

20 percent of petroleum

- based motor

fuel with biofuel s. Given the surplus sugar situation in the current and forecast years (2012/13), net ethanol availability after accounting for domestic consumption seems sufficient to meet blending targets (5 & 10 percent) for

EBP. The contracted supply for current

fis cal year is just sufficient to meet 2 percent blending target. However, given the constraints, achieving a higher target (20 percent) looks unattainable.

Expanding the ethanol supply:

Currently, the government does not allow use of imported ethanol for the EBP program, as the focus is on developing domestic capacity.

Presently, ethanol is manufactured directly from sugar molasses, but given the projection for higher sugarcane production in India for 2011/12 and 2012/13 [8] (upswing in production cycle), use of sugarcane juice (on an experimental basis) for ethanol production seems to be a viable option especially under conditions of a sugarcane glut.

The GOI is offering subsidized loans (through sugarcane development funds) to sugar mills for setting up of an ethanol production unit. The loans would cover up to a maximum of 40 percent of the project cost.

Given the limited scope for bringing additional area under water

- intensive sugarcane cultivation, fluctuations in supply and pricing o f ethanol could be stabilized through use of alternate crops. Public and private institutions could promote use of alternate crops such as sweet sorghum, sugar beets, and sweet potatoes to supplement domestic ethanol production, though the efforts to9

prod uce ethanol from these feed stocks are at an experimental stage.

Development of low

- cost technology to utilize lignocellulosic material such as agricultural and forest residues to produce bioethanol.

Impediments

Procedural hurdles such as non

- issua nce of export permits for interstate transport of ethanol, delays in issuing no

- objection

- certificates (NOC), higher taxes and levies across different states have impacted

the EBP. Rules and regulations, including a high excise tax of Rs 750 per ton on mo lasses, which

works out to 25

- to 30 percent ad valorem, whereas on industrial alcohol the central excise duty is 12.36 percent ad valorem, and interstate (octroi) taxes applicable to potable alcohol for industrial use are equally applicable to ethanol for blending with gasoline, thereby severely constraining its availability

and utilization for EBP.

BIO

- DIESEL POLICY

The GOI had launched the National Bio

- diesel Mission (NBM) after identifying jatropha ( Jatropha

curcas ) as the most suitable tree

- borne o ilseed for biodiesel production. The Planning Commission of India set an ambitious target of planting 11.2 to 13.4 million hectares of land to jatropha by the end of

the 11 th Five Year Plan (2011/12). The central government and several state governments provide fiscal incentives in support of planting jatropha and other inedible oilseeds. Several public institutions, government departments , state biofuel boards, state agricultural universities and coo perative sectors are also supporting the biofuel mission in various capacities.

Developments in NBM

Period Action Comments April,

2003 Demonstration phase 2003 to 2007: Ministry

of Rural Development appointed as nodal ministry to plant 400, 000 hectares to jatropha. This phase also proposed nursery development, establishment of seed procurement and establishment centers,

installation of trans

- esterification plant, blending and marketing of biodiesel Public and private sectors, state

governm ents, research institutions (Indian and foreign) involved in the program achieved varying degrees of

success.10

October,

2005 Ministry of Petroleum and Natural Gas

(MoPNG) announced biodiesel purchase policy under which oil marketing companies (OMC) would purchase biodiesel from 20 procurement centers across the country to blend with high speed diesel as of January

2006. Purchase price set at Rs 26.5 per liter Cost of biodiesel production higher (20 to 50 percent) than purchase price. No sale of biodiese l.

2008 Self Sustaining Execution phase 2008 to

2012: Targeted to produce sufficient biodiesel for 20 percent blending by end of 11 th (2008

- 12) five

- year plan Lack of large

- scale plantation, use of

conventional low

- yielding jatropha cultivars, seed col lection and extraction infrastructure, buy

- back arrangement, inadequate capacity

- and

confidence

- building measures among farmers impeded the progress of this phase.

2010 An estimated half

- million hectares has been planted to jatropha, of which two third s is believed to be new plantations needing two to three years to mature Assuming 80 percent of the biodiesel requirement is met though jatropha oilseeds, the biodiesel thus obtained will meet just 0.01 percent of total biodiesel required for 5

- percent
bl ending by 2010/11.

Fiscal

Year

2011/12 No additional „wastelands‟ have been brought

under jatropha cultivation The government may have to offer

fiscal incentives [9] to growers to adopt better agronomic practices during first 2

- 3 years of plantat ion development in addition to marketing and price support mechanisms to encourage biodiesel program.

Status quo remains as the production of biodiesel from jatropha seeds is commercially insignificant at present.

The GOI‟s ambitious plan of produ cing sufficient biodiesel by fiscal 2011/12 to meet its mandate of 20

- percent blending with diesel is looking unattainable given the unavailability of sufficient feedstock (jatropha seeds) and lack of sufficient research and development to evolve high

- yiel ding, drought

tolerant jatropha seeds.

According to one estimate, 3.21 million tons of biodiesel would be required from 3.42 million hectares

to meet 5

- percent blending by Fiscal 2011/12 [10]

. Considering jatropha to be a major feedstock for

biodiese l with an average seed yield of 2.5 tons/hectare and 30 percent biodiesel recovery rate, 18.6 million hectares would need be brought under jatropha cultivation to meet the 20

- percent blending target by 2017. The above assessment assumes a steady rise in d emand (circa 6.4 percent/annum) for

diesel in India. Diesel demand during the 12 th Five

- year plan (fiscal year 2012/13 through 2016/17) is likely to grow by 35 percent to 87.4 million tons [11]

. Meeting a 5

- percent blending target will require

an additi onal 4.1 million hectares under jatropha

.11

Impediments

Smaller land holdings, ownership issues with government

- or community

- owned wastelands, very little progress made by state governments to stimulate large scale jatropha plantations, and negligible

c ommercial production of biodiesel have impeded efforts and investments by both private

- and public

sector companies.

In the face of reports that most biodiesel companies in India are working at very low capacity and some are idle, the GOI has reportedl y contemplated fixing a higher price of Rs 34 per liter (compared to Rs 26.5 /liter) for purchase of biodiesel (please refer our previous GAIN report IN1058 for more information) through oil marketing companies (OMC), though industry and stakeholders had

r ecommended an even higher price (Rs 36 per liter) to bring idle companies back to operation. The proposed price is believed to have been mutually agreed by the GOI and industry representatives. However, this proposal has yet to materialize.

ETHANOL AN D BIODIESEL

Ethanol

India has 330 distilleries which can produce over 4 billion liters of rectified spirit (alcohol) per year in

addition to 1.5 billion liters of fuel ethanol. Of this total, about 140 have the capacity to distill around 2

billion lit ers [12] of conventional ethanol per year and could meet the demand for 5

- percent blending with gasoline. Currently, India produces conventional bioethanol from sugar molasses; production of advanced bioethanol is in a nascent phase (research and developm ent).

Table 1. India: Conventional Bioethanol Production and Distribution (million liters)

Calendar Year 2006 2007 2008 2009 2010 2011 2012 2013 Beginning Stocks 483 747 1,396 1,672 1,241 1,065 756 911

Production 1,898 2, 398 2,150 1,073 1,522 1,681 2,170 2,239
Imports 29 15 70 280 92 20 80 50 Total Supply 2,410 3,160 3,616 3,025 2,855 2,766 2,901 2,995
Exports 24 14 3 4 10 15 10 15 Consumption

Industrial Use

619 650 700 700 720 700 720 740

Potable Liquor

745 800 850 880 900 850 880 91012

Blended Gasoline

200 200 280 100 50 365 400 450

Other Use 75 100 110 100 110 80 85 85 Total Consumption 1639 1750 1940 1780 1780 1995 2085 2135 Ending Stocks 747 1,396 1,673 1,241 1,065 756

911 1,000

Total Distribution 2,410 3,160 3,616 3,025 2,855 2,766 3,006 3,200 Production Capacity (Conventional Fuel)

No. of Biorefineries

[13] 115 115 115 115 115 115 140 140

Capacity (billion liters‟) 1.5 1.5 1.5 1.5 1.5 1.5 2 2

Feedstock Use (1,000 MT) Feedstock A (000‟ tons) 7,910 9,992 8,958 4,469 6,342 7,004 9,041 9,330

Source: FAS/New Delhi Estimates based on information from trade sources

Note: Feedstock A is molasses

Production:

With an outlook for strong sugar production for a third consecutive year (viz., 2012/13, Marketing Year (MY) October

- September), domestic ethanol production is likely to grow in tandem, almost reaching the high it last achieved in calendar year 2007. The Indian government may renew its focus and strongly implement the mandatory 5

- percent ethanol blending in petr ol, provided there is consensus among stakeholders on the purchase price of ethanol for EBP. Presently, only three

- fifths of total facilities are actually supplying ethanol, severely constraining the supply of ethanol for EBP. Consequently, molasses stoc ks are being diverted to Europe for cattle feed. Short supplies of sugar molasses in preceding years (before MY 2010/11) had constrained ethanol production and consequent higher prices made it unviable to supply ethanol to petroleum companies at the negot iated prices. Presently, strong demand for bagasse (from paper mills, independent sugar units) and molasses (for cattle feed and potable alcohol production) continues to support profitability of sugar mills at times when profit margins run thin.

Consu mption:

Improved supplies of molasses and a steady rise in demand from the chemical and potable liquor industries in the face of an expected rise in blending for EBP could raise total ethanol consumption in

2013 to 2.1 billion liters.

Trade:

Export s of ethanol [14] have grown significantly in the last three years. Taking advantage of the upswing in the sugarcane production cycle, India has exported 25.2 million liters [15] of denatured ethanol and spirits worth $21 million [16] to Ghana, South Kore a, Saudi Arabia, Sierra Leone, Cameroon, Tanzania, Liberia and host of other African and neighboring countries [17]

. Besides being a net exporter of ethanol, India had also imported approximately 16 million liters of ethanol and spirits mostly from13

Unite d States, UAE, Pakistan, UK, South Africa, Germany and China. Traditionally, India imports ethanol only to meet shortfalls during years of low sugar production. Demand is mostly for consumption across the potable liquor and chemical industries, not for fuel. There are no quantitative restrictions on import of biofuels; however, high duties (Table 2) sometimes make imports economically unviable. The GOI does not provide any financial assistance for exports of biofuels (biodiesel or ethanol). However, c urrent trade regulations allow duty

- free imports of feedstocks for re

export by certified export oriented units.

Table 2. India: Import duty on biofuels (percent ad valorem on CIF value)

ITC HS Tariff Number Import duty (percent)

2207.20 Denatured E thyl Alcohol and Spirits (including ethanol) 28.64 3824.90 Chemical Products NES (including biodiesel) 28.64

Ending Stocks:

The ending stocks for the forecast year (2013) are likely to recover to 1 billion liters, up 90 million liters

over the curren t year‟s estimate.

Biodiesel

Jatropha plantation is a subject for state governments. Public

- sector petroleum companies and private

sector firms have entered into memoranda of understanding with state governments to establish and promote jatropha plan tation on government wastelands or to contract with small and medium farmers. However, only a few states have been able to promote actively jatropha plantation despite the government‟s incentives and encouraging policies.

Slow progress in jatropha pla nting has resulted in lower availability of jatropha seeds to be used as feedstock for biodiesel production and hence most of the biodiesel units are not operational most of the

year. There are about 20 large

- capacity biodiesel plants (10,000 to 200,000 m etric tons per year) in India that produce biodiesel from alternative feed stocks such as edible oil waste (unusable oil fractions), animal fat and inedible oils.

Presently, commercial production and marketing of jatropha

- based biodiesel in India is sm all, with estimates varying from 140 to 300 million liters per year. The biodiesel produced is sold to the unorganized sector (irrigation pumps, mobile towers, kilns, agricultural usage, owners of diesel generators, etc.) and to experimental projects carr ied out by automobile manufacturers and transport companies. However, as per industry sources, there has been no commercial sale of biodiesel to state

owned transport companies except for trials [18]

.

Additionally, there has been no commercial sale of biodiesel across the biodiesel purchase centers (set up by the GOI) as the government biodiesel purchase price of Rs 26.5 (48 cents) per liter is still below the estimated biodiesel finished production cost (Rs 35 to Rs 40 per liter / 63

- 72 cents per liter [19] ). Unavailability of feedstock supply (jatropha seeds), rising wage rates and inefficient marketing channels are a few of the major factors that have contributed to higher production costs [20]

.14

In order to revive and accelerate the biodiesel i ndustry, a recent study taken up by the industry recommends that the present procurement prices of biodiesel be raised as well as to ensure an average procurement price of jatropha seeds at level such that farmers will not shift land from food crops to fue l

crops.

Advanced Biofuels

Research and development activities (experimental or pilot trials by select industry groups and government research institutes) are being carried out to develop suitable technologies for production of

advanced biofuels from w ood biomass, agricultural and forest waste, municipal solid waste conversion, microalgae and photosynthetic organisms. Given the technological challenges, commercial production

of advanced biofuel is still far in the future.

BIOMASS FOR HEAT AND POWER

Scope

The Ministry of New and Renewable Energy is implementing a biomass power program with the objective of generating grid

- quality power from biomass resources through various conversion technologies along with optimizing power generation from bagasse produced in sugar mills. The benefits include its renewable nature, wide adaptability, carbon neutrality and the potential to provide largescale productive employment in rural areas. Biomass has been playing important role as fuel for sugar mills, pulp and paper mills, small and medium enterprises (SME). In particular; there is significant potential in breweries, textile mills, fertilizer plants, solvent extraction units, rice mills, and petrochemical plants.

Biomass

Biomass materials used for powe r generation include bagasse, rice husk, straw, cotton stalks, coconut shells, soy husk, oilseed cakes, coffee waste, jute wastes, peanut shells, and sawdust [21] . However, competition for biomass from the growing cattle and water buffalo sector may limit supplies unless biomass is grown specifically for power generation. The availability of crop residue from non

- fodder crops may prove to be good alternatives for biomass power production [22]

.

Availability

The availability of biomass in India is e stimated at about 500 million tons per year including residues from agriculture, agricultural industries, and forest products. A survey by the Ministry of New and Renewable Energy indicated that 15

- 20 percent of total crop residues could be used for power generation, without altering their present uses. This implies availability of 120 to 150 million tons of surplus agro

- industrial and agricultural residues per year that could be made available for power generation. Around 1525 MW of power is proposed to be harnessed from agricultural residues and plantations by end of 12 th Five

- Year Plan (Table 3).15

Bagasse power cogeneration

With modernization of new and existing sugar mills the surplus power generation through bagasse cogeneration in India‟s 550 su gar mills is estimated at 10,000 MW (the target for 12 th Five

- year plan is to achieve 32 percent of total potential) if these mills were to adopt technically and economically optimal levels of cogeneration for extracting power from bagasse. Total estimate d biomass power potential from bagasse ( biomass power ) is about 31,000 MW. The GOI has initiated several programs and schemes for promoting renewable energy source s, the details of which may be accessed from www.mnre.gov.in

.

Table 3. India: Biomass based Commercial Energy Achievement in Mega Watts (MW)

S.No. Sources/ Systems Estimated

Potential Achieved in

fiscal 2010

- 11 Achieved

through

March

2011 Achieved

through

December

2011 Total Target by

end of 12 th Five

year plan (2016/17)

1 Biomass Power (Agri

- residues and plantations) 18,000 143.50 1,025 1,118 1,525

2 Biomass Power Cogeneration (Non

- bagasse) NA 61.19 282.07 NA NA

3 Biomass Power Cogeneration (Bagasse) 10,000 # 257 1616 2,012 * 3,216

4 Waste to Energy 2,700 7.50 72.46 NA 324

5 Biomass Gasifier

- 6.72 eq 150 eq NA NA

6 Family Type Biogas Plants 12 Million 73,281 units 4.5 million

units NA 5.6 million units

Source: Ministry of New and Renewable Energy, GOI

Notes:

NA: Not Available MW: Megawatts MW eq: Megawatt equivalent *: Includes 1932 MW from private

- sector sugar mills while additional capacity from cooperative sector likely to be c ommissioned by August 2012 #: updated from Indian Sugar Mills Association (ISMA)

[1] Economic Survey of India pegs growth at 7.6 percent for fiscal 2012/13 and 8.6 percent for fiscal 2013/14, while other privat e institutions and rating agencies expect Indian economic growth to moderate down to 6.5/7 percent and 7.5 percent in Indian fiscal 2012/13

and 2013/14 respectively.

[2] According to the International Energy Agency (IEA), hydrocarbons account for the majority of India's energy use. Together, c oal and oil represent about two

- thirds of total energy use. Natural gas now accounts for a seven

- percent share, which is expected to grow with the discovery of new gas deposits. Combustible renewable resources and waste constitute about one fourth of Ind ian energy use. This share

includes traditional biomass sources such as firewood and cow

- dung, which are used by more than 800 million Indian households for cooking. Other renewable such as wind, geothermal, solar, and hydroelectricity represent a 2

- perc ent share of the Indian fuel mix. Nuclear holds a one percent share.

[3] Ministry of Road Transport and Highways, GOI

[4] http://morth.nic.in/index2.asp?slid=58&sublinkid=29&lang=1

[5] Preliminary estimate for 2010 indicates that India outpaced EU

- 27 and stands third after China and U.S. on CO 2 emission estimates16

(India‟s carbon emissions are growing 3.2 percent annually)

[6] In contrast to the United States, India does not enjoy free interstate movement of goods and services.

[7] Hereinafter referred to as „f'iscal year‟ unless otherwise stated

[8] Marketing Year (MY) (October

- September)

[9] Coupled with carbon credits

[10] A policy brief paper from the National Centre for Agricu ltural Economics and Policy Research (NCAP)

[11] Diesel demand in 2011

- 12 was estimated at 65.2 million tons (77.7 billion liters).

[12] Includes an additional annual ethanol production capacity of 400 million liters that was built up in the last four ye ars after the Indian government provided funds to sugar mills

[13] An estimated three

- fifths of total refineries are actually supplying ethanol for EBP.

[14] Export of biofuel is only permitted after supply meets the domestic requirement and the final deci sion is taken by the National Biofuel

Coordination Committee.

[15] Global Trade Atlas

[16] First 10 months of calendar year 2011

[17] During the same period, India also exported 132,068 metric tons of chemical products including biodiesel worth $108 mill ion to Sri Lanka, United States, Italy, Bangladesh and other Asian and European countries.

[18] A few state road transport corporations claim to run their buses on blended fuels

[19] Cost of production may be still higher, as above estimates are base d on inputs from industry sources

[20] Feedstock constitutes more than 75 percent of cost of production of biodiesel

[21] Annual report 2011/12, MNRE, GOI

[22] Department of Science and Technology, GOI