NEW DELHI/ MUMBAI: The Union Cabinet has approved a policy that aims to achieve 20% biofuel blending in all the auto fuel used in the country by 2017. It also plans to make 10% ethanol doping in petrol mandatory from October 1.

The national policy on biofuels seeks to ban import of certain biofuels, proposes no taxes and duties on bio-diesel, encourages free movement of biofuels within states, and ensures a minimum price for biofuel producers.

The minimum purchase price for bio-diesel would be linked to the prevailing subsidised diesel price.

"In the event of diesel price falling below the minimum purchase price, oil marketing companies may be compensated by the government," an official statement said.
"Statutory minimum price mechanism for sugarcane could also be examined for extending such a mechanism for oilseeds to be utilised for production of bio-diesel by the processing industry," the statement said.

Biofuel makers welcomed the clarity. Pramod Chaudhari, chairman of the CII National Biofuel Committee and also of Praj Industries, the Pune-based biofuel equipment maker, said the policy is the need of the hour.

"Many countries have gone ahead with their plans for alternate energy and it is high time we did it too. The policy is good for the industry."

Vishal Rawat, president of the bio-diesel making unit of IKF Technologies, said, "The policy will help ease pressure on the economy by reducing dependence on imports of mineral oil."

India currently imports 70% of its oil requirement. Amol Tilak, analyst with Kotak Commodities Services Ltd, said the policy will be beneficial to farmers and sugar mills in the long run.

"We have still another 8 years to go to for the 20% blending to kick in. So we could see a situation where demand for ethanol would be on the higher side," he said.
Rajiv Kumar, director, Icrier, said the provision for bringing biofuels under the ambit of declared goods will integrate the domestic markets.

"The liberalisation of movement in agro products is a good start. With this, prices tend to equalise and also get lower with the growing economies of scale," he said.

Kumar, however, pointed out that the policy lacks clarity on what specific incentives will be provided to encourage oilseeds plantation on wasteland. "I hope the policy has adjudged the real trade-off between bio-fuels and food supply, which has become a real issue across the world," he said.

The ministry of panchayati raj is also working with a couple of state governments, wherein community-owned wastelands are given to farmers to grow bio-fuel crops, Rawat said.

Rawat hoped that in case the price of diesel falls below that of bio-diesel, the government provides subsidies to bio-fuel producers.

Rajiv Kumar, however, feels the policy is incomplete without removing subsidies on hydrocarbons.

"A realistic policy doesnt work without the right market price for fossil fuels," he said.
In October 2007,the government made it optional for oil marketers to blend 5% ethanol.

But oil companies couldnt reach the target, aggregating around 3% blending levels.
The Centre now plants to double the current blending target to 10% from October, which is the start of the new crushing season for sugar.

But implementation is stuck over the floor price for ethanol -- oil marketing companies are unwilling to pay Rs 21.50 a litre demanded by producers.
Source : DNA