The National Policy on Biofuels adopted in 2009 envisaged an accelerated promotion of the cultivation, production and use of biofuels to increasingly substitute petrol and diesel for transport. It aimed at contributing to energy security and climate change-mitigation besides creating new employment opportunities.
The policy also envisaged the exploitation of potential of trees bearing non-edible oilseeds and encouragement of R&D by the industry in the areas of development of improved planting material and conversion technologies of first-and-second-generation of biofuels.
What ensued was that in 2005–2010, attracted by the unlimited scope of the market for fuels, many entrepreneurs started biodiesel production units without properly securing the availability of raw materials. Some of them also embarked on the plantation of Jatropha with farmers with unproven seed stock. This led to failed plantations, agitated farmers who removed the plantations and closed units due to lack of raw material availability.
The Government's efforts through institutions like DBT to supply improved planting material was restricted to collection and characterization of local germplasm while the core varietal improvement work was done by very few institutions like TNAU, CSMCRI, etc. which was not a co-ordinated effort.
This resulted in the following issues (feedstock):
The above situation makes future efforts for mass cultivation of biofuel crops very difficult.
Thought the Government has put in place a progressive tax regime for biodiesel, various states are subjecting the blended portion of the biodiesel to a significantly high taxation in line with the rates applicable for diesel. In most states, the VAT on biodiesel is about 4% whereas HSD is a non-VAT commodity with special tax rates of 10-28% depending upon each state. In some cases, additional octroi and special taxes are also levied.
State Governments where maximum capacity was installed wanted to tax biodiesel at the rate of HSD which would increase the cost by about 20%, making it economically unviable.
There is a need to put biodiesel in the declared goods category and the GoI must make use of its powers to restrict the State Governments to tax biodiesel highly.
Presently, there are about 5-6 large capacity biodiesel plants (10,000 to 250,000-metric tonnes per year) with capacity to produce biodiesel from alternative feedstocks. Around 110-115-million litres of biodiesel is produced from multiple feedstocks. However, the installed capacity exceeds 350-400-million litres. Putting biodiesel in the 'declared goods' list will encourage full utilization of installed capacity and further enhance capacity.
The issue of purchase policy enunciated by MOP&NG during October 2005 wherein a landed purchase price of Rs.26.50/ltr was announced in 2006, has been a cause of concern. This price fell short of even the raw materials cost of the biodiesel.
In 2005-09 about 1.2-million tonnes capacity was created but the installed capacity was highly under-utilized. Besides, the biodiesel being produced was mainly being exported.
The National Biofuels Policy announced in December 2009 encouraged installation of capacity but closed all marketing opportunities by giving absolute monopoly on marketing and pricing to OMCs.
The national Jatropha mission was deferred and the indigenous feedstock program did not take off. The policy completely banned imports of economically available fatty acids and other non-edible oils. The policy further banned exports of biofuels. Hence, only 100% EOUs or those in SEZs could operate and rest all industry was closed.
Several representations were made to the Government but it was only in 2013 that serious discussions took place. Meanwhile, several units were forced to shut down.
Government of India has announced a number of fiscal incentives for research and development by industry from time to time and many of these incentives are implemented through DSIR. In-house R&D units recognised by DSIR are not only eligible for these incentives (wherever applicable) but also for receiving funds for R&D from other government departments and agencies such as DST, DBT, CSIR, ICMR, ICAR and TDB where recognition to the in-house R&D centre by DSIR is a requirement. This is the only scheme in the entire government set-up for benchmarking industrial R&D.