Mumbai: India’s largest private sector company Reliance Industries Ltd plans to set up the country’s first biodiesel refinery in Andhra Pradesh at a cost of around Rs700 crore. US oil major Chevron Corporation will likely help out with the technology.

Sources close to the development who did not wish to be identified said this could be part of the discussions between David J. O’Reilly, the company’s chairman and CEO who is visiting India, and Mukesh Ambani, chairman, RIL, when the two meet on 23 February at Jamnagar in Gujarat. An RIL spokesperson declined to comment on this.

Last year, in April, Chevron acquired a 5% stake in Reliance Petroleum Ltd, a subsidiary of RIL which is building a new 5,80,000 barrels-a-day oil refinery at Jamnagar. There have been reports that Chevron wants to increase its stake in the company, and that it could strike an alliance with RIL to exploit the latter’s finds in the Krishna-Godavari basin in Andhra Pradesh.

RIL has ambitious plans for the biofuels business and is cultivating Jatropha, a plant that can yield high quality biodiesel, in a 200 acre plot at Kakinada in Andhra Pradesh. “The company will set up a pilot project at Kakinada this year and once economies of scale are ensured, it will start working on a full-fledged transesterification unit,” said a senior RIL executive who did not wish to be identified.

RIL has also earmarked a large plot of land in Gujarat for the cultivation of Jatropha.

Biodiesel is an alternative fuel similar to conventional or “fossil” diesel. It can be produced from vegetable oil, animal oil or fat, tallow and waste cooking oil.

The process used to convert these oils to biodiesel is called transesterification.

A recent report of the Energy Information Administration (EIA), an international agency that tracks the energy sector, estimates the demand for biodiesel at 25 million litres in 2010 and 28 million litres in 2020. These estimates are based on potential fleet demand for bio-diesel to comply with the Energy Policy Act of the US which insists on controlled environment pollution. EIA also says that depending on biodiesel’s potential as a lubricity additive, something that is added to fuels to optimise the functioning of the engine, could reach as much as 1.8 billion litres in 2010 and 2.4 billion litres in 2020.

Public sector oil firms recently announced a price of Rs25 a litre (inclusive of taxes and duties) for biodiesel extracted from non-edible oilseeds such as Jatropha. The programme to sell diesel mixed with non-edible oil extracted from Jatropha, and other plants could reduce India’s dependence on conventional oil.

Last year, Andhra Pradesh set up a separate department to oversee the cultivation of Jatropha and other plants that are sources of biofuel on 7,28,000 hectares of wasteland. According to documents detailing Andhra Pradesh’s biodiesel plans, a Jatropha seed contains 27-31% extractable oil and a plantation of around 1,00,000 hectares can yield 2,50,000-3,00,000 tonnes of crude Jatropha oil a year, or roughly, $100 million in revenue.

Apart from Reliance, others, including Di Oil Plc, a UK-based producer of biofuel, Godrej Agrovet, and the Emami Group have plans in the biodiesel business.