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| Biodiesel sector waits for clarity on benefits from duty cut |
| Kalpana Pathak / Mumbai Jul 09, 2009, 00:00 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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