OMCs shut biodiesel joint ventures due to lack of commercial viability

Claims by scientists that jatropha plant could grow without water on barren land could have misled entities; jatropha seed extracts are used to produce biodiesel


Biodiesel was considered the answer to diesel’s polluting nature and thus was considered an attractive alternative fuel option. Photo: Bloomberg
Biodiesel was considered the answer to diesel’s polluting nature and thus was considered an attractive alternative fuel option. Photo: Bloomberg

Mumbai: Once touted as the fuel of the future, biodiesel, extracted from jatropha seeds, has lost its sheen for oil marketing companies.

Due to lack of availability and commercial viability, the three oil marketing companies (OMCs)—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—have shut down the joint ventures companies they had started for jatropha cultivation to manufacture biodiesel.

Oil extracted from seeds of the jatropha plant, which can grow on wasteland across the country, is blended with diesel to manufacture biodiesel. Biodiesel is also produced with vegetable oils, the primary feedstock for the fuel, which is scarce.

Biodiesel was considered the answer to diesel’s polluting nature and thus was considered an attractive alternative fuel option.

IOC, HPCL and BPCL had in 2008-09 planned to take up cultivation of jatropha across more than 180,000 acres in the states of Chhattisgarh, Madhya Pradesh and Uttar Pradesh.

IOC and HPCL had formed a joint venture with the Chhattisgarh State Renewable Development Agency (CREDA) to take up large-scale jatropha farming across 74,100 acres and 37,000 acres, respectively.

“IndianOil CREDA Bio-Fuels Ltd has not been incorporated in the preparation of consolidated financial statements as the management has decided to exit from these entities and provided for full diminution in the value of investment,” said IOCL in its 2015-16 annual report.

The joint venture was incorporated in February 2009 with Indian Oil and CREDA holding 74% and 26% equity, respectively. So far, IOCL has planted jatropha in 8,000 hectares—for biofuel production in the states of Chhattisgarh, Madhya Pradesh and Uttar Pradesh.

HPCL in its annual report said, “During 2015-16, in view of non-viability of operations, all business activities of CREDA HPCL Biofuel Ltd (CHBL) including cultivation and maintenance of Jatropha plantations have been suspended.” HPCL holds 74% in CHBL while CREDA holds 26%.

BPCL which had formed a company called Bharat Renewable Energy in 2008 for its biofuels needs and has shut down the same.

“Due to non-viability, the operations of this company have been closed down from September, 2014,” BPCL said in its 2015-16 annual report.

Bharat Renewable Energy was set up in association with Hyderabad-based Nandan Biomatrix—a research and development company—and Shapoorji Pallonji Co., for producing biodiesel from jatropha in Uttar Pradesh across 70,000 acres. The company had plans to invest Rs.2,200 crore in the next seven years to produce 1 million tonnes of biodiesel from jatropha plantations.

India, which imports 80% of its oil consumption, envisaged blending of biodiesel with diesel as a measure to cut the import dependence on fossil fuel, enabling it to reduce the oil import bill.

The country is targeting a more than seven fold expansion in its biofuels market over the next six years, oil minister Dharmendra Pradhan had said on 10 August.

Blending 5% of biodiesel with regular diesel and 10% ethanol with petrol could boost the market to Rs.50,000 crore by 2022, from about Rs.6,500 crore currently.

To expand its biofuels market in six years, India would need 6.75 billion liters of biodiesel and 4.5 billion liters of ethanol, Pradhan had said.

An industry analyst who offers solutions to bioethanol and biodiesel manufacturing plants, said claims by scientists that jatropha could be planted without water on barren land misled many entities.

“A jatropha tree takes seven-eight years to grow. Thus the gestation period is long. Besides, there were assumptions that jatropha should be grown on barren land. Though jatropha survived without water, it did not yield oil. The assumption that it would give oil even without irrigation was misleading. No wonder the ventures of these companies has gone kaput,” he said.

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