Synthesis Paper Title

Plantation and Agri-Commodity Manufacturing (PACM )

Submitted to Mr K. NARENDRAN
LECTURER (EXTENSION AND PLANTATION TECHNOLOGY)

IIPM, BANGALORE

Submitted by Mr. SANDEEP KUMAR 09PGDM035 PGDM (PGP-ABPM) 2009-11

INDIAN INSTITUTE OF PLANTATION MANAGEMENT, BANGALORE (An Autonomous organization promoted by Min of Commerce and Industries; GOI) Jnana Bharati Campus, Malathalli ,Bangalore 560 056 DECEMBER 09

RENEWABLE ENERGY SOURCE FOR NEW GENERATION

TABLE OF CONTENTS
CHAPTERS PARTICULARS PAGE NO. 4 5 6

Acknowledgement Certificate Abstract 1. 2.

2.1 2.2 2.3 2.4

Introduction to biofuel Classification of biofuel

Bioethenol Benefit of bioethenol Biodiesel Benefit of biodiesel

7 7
8 9 9 11

3. 4. 5.
5.1 5.2

Business potential in the global market Major players in the world India market scenario
Business prospects Key achievements

12 14 15 17 16 17 18 19 19 23 24

6
6.1

India biofuel drivers

Ministers involved in biofuel sector

7.
7.1

Biofuel market conditions

Current production scenario

8. 9.

Conclusion References
3

ACKNOWLEDGEMENT

I extend my sincere thanks to Mr K. Narendran, Lecturer (Extension and Plantation Technology), IIPM, Bangalore for providing me an opportunity to think beyond the classroom and explore the recent happenings in Agribusiness Industry. I also thank Dr V.G. Dhanakumar, Director, IIPM, Bangalore who has always been a source of inspiration for us. My deepest gratitude to my parents and my friends for their moral support.

SANDEEP KUMAR 09PGDM035 PGDM (ABPM) 2009-11

CERTIFICATE
It is my proud privilege to express my devout gratitude & indebtedness to my erudite Mr. K. Narendran, professor of PLANTATION AND AGRI -COMMODITY PRODUCTION, IIPM, Bangalore. For his invaluable guidance, c onstant inspiration, keen interest, kind help & untiring efforts during the course of this paper work. I also convey thanks to my colleagues for there camaraderie & all persons who are directly or indirectly instrumental in completion of the paper work .I find no word to quantify my love & gratitude towards my parents, my family, well wishers.

Place: IIPM, Bangalore

(Mr. Sandeep kumar) 09PDGM035

Date: 21/12/09

PGDM(PGP -ABPM)

ABSTRACT
Biofuels are renewable fuels made from biomass that can be used to supplem ent or replace the fossil fuels, including petroleum and diesel, used in transport. Biofuels have become one of the fastest growing markets in the world at 15% growth a year. They are being promoted by European governments hoping to meeting Kyoto targets and by George Bush wanting to replace some Middle Eastern oil imports. With oil prices steady above $60 a gallon, biofuel has become competitive. Whilst it attracts subsidies in Europe and the US, Brazil have shown that a mature biofuel industry can now compete with petrol on the free market. This paper looks at fuels gained from energy crops w hich have been grown either for biomass burning - to produce heat and energy - or for transport fuel. It also discuss the production of biogas from organic waste, the burning of waste products from existing agriculture for heating or electricity, or the use of waste vegetable oil as biodiesel. Gaining energy from waste can make a positive contribution to reducing greenhouse gas emissions, and should definitely be supported. In this paper the comparison between biofuels and diesel or petrol is made .This paper focuses on the importance of biofuel to meet the demand of energy in the future where the non-renewable source of energy about to over and finally this paper enlighten the huge market potential of biodiesel in coming future.

1. Introduction to biofuel

Fig- 1(Biodiesel plant)

Fig-2 (Bio-ethanol car in Europe )

Biofuel is defined as solid, liquid or gaseous fuel obtained from relatively recently lifeless
or living biological material and is different from fossil fuels, which are derived from long dead biological material. Also, various plants and plant -derived materials are used for biofuel manufacturing . Biofuels are renewable fuels made from biomass that can be used to supplement or replace the fossil fuels, including petroleum and diesel, used in transport. Biofuels have become one of the fastest growing markets in the world at 15% growth a year. They are being promoted by European governments hoping to meeting Kyoto targets and by George Bush wanting to replace some Middle Eastern oil imports. With oil prices steady above $ 60 a gallon, biofuel has become competitive. Whilst it attracts subsidies in Europe and the US, Brazil have shown that a mature biofuel industry can now compete with petrol on the free market. Many environmental NGOs strongly su pport biofuels as one of many renewable technologies needed to reduce our dependence on hydrocarbons and to avert the worst of climate change. They want targets to greatly increase the use of biofuels whilst ensuring that all supplies have to be certified as coming from sustainable sources. Meantime, governments around the world are introducing the targets without the environmental safeguards. A European Union Directive, for example, mandates the use of biofuels in 5.75 and possibly even 8% of all road tr ansport fuel. A 20% target is stated for 2020.

2. Classification of biofuels
There are two main types of biofuels for transport: 1) Bioethanol, which is alcohol derived from sugar or starch, for example from sugar beet, cane or from corn, and 2)biodiesel, derived from vegetable oils, for example from rapeseed oil, jatropha, soy or palm oil.

The US are the worlds largest bioethanol producer, and this accounts for 99% of their biofuel for road transport. The European Union is so far t he worlds largest biodiesel producer, and use considerably more biodiesel than bioethanol.

2.1 BIOETHENOL
The principle fuel used as a petrol substitute for road transport vehicles is bioethanol. Bioethanol fuel is mainly produced by the sugar fermentation p rocess, although it can also be manufactured by the chemical process of reacting ethylene with steam. The main sources of sugar required to produce ethanol come from fuel or energy crops. These crops are grown specifically for energy use and include corn, maize and wheat crops, waste straw, willow and popular trees, sawdust, reed canary grass, cord grasses, jerusalem artichoke, myscanthus and sorghum plants. There is also ongoing research and development into the use of municipal solid wastes to produce et hanol fuel. Ethanol or ethyl alcohol (C2H5OH) is a clear colourless liquid, it is biodegradable, low in toxicity and causes little environmental pollution if spilt. Ethanol burns to produce carbon dioxide and water. Ethanol is a high octane fuel and has r eplaced lead as an octane enhancer in petrol. By blending ethanol with gasoline we can also oxygenate the fuel mixture so it burns more completely and reduces polluting emissions. Ethanol fuel blends are widely sold in the United States. The most common bl end is 10% ethanol and 90% petrol (E10). Vehicle engines require no modifications to run on E10 and vehicle warranties are unaffected also. Only flexible fuel vehicles can run on up to 85% ethanol and 15% petrol blends (E85).

Sugar Fermentation Process

The hydrolysis process breaks down the cellulostic part of the biomass or corn into sugar solutions that can then be fermented into ethanol. Yeast is added to the solution, which is then heated. The yeast contains an enzyme called invertase, which acts as a catalyst and helps to convert the sucrose sugars into glucose and fructose (both C6H12O6). The chemical reaction is shown below:

The fructose and glucose sugars then react with another enzyme called zymase, which is also contained in the yeast to produce ethanol and carbon dioxide. The chemical reaction is shown below:

The fermentation process takes around 8 three days to complete and is carried out at a temperature of between 250C and 300C.

2.2 Benefits of Bioethenol

Bioethanol has a number of advantages over conventional fuels. It comes from a renewable resource i.e. crops and not from a finite resource and the crops it derives from can grow well in the UK (like cereals, sugar beet a nd maize). Another benefit over fossil fuels is the greenhouse gas emissions. The road transport network accounts for 22% (www.foodfen.org.uk) of all greenhouse gas emissions and through the use of bioethanol, some of these emissions will be reduced as the fuel crops absorb the CO2 they emit through growing. Also, blending bioethanol with petrol will help extend the life of the UKs diminishing oil supplies and ensure greater fuel security, avoiding heavy reliance on oil producing nations. By encouraging bi oethanols use, the rural economy would also receive a boost from growing the necessary crops. Bioethanol is also biodegradable and far less toxic that fossil fuels. In addition, by using bioethanol in older engines can help reduce the amount of carbon monoxide produced by the vehicle thus improving air quality. Another advantage of bioethanol is the ease with which it can be easily integrated into the existing road transport fuel system. In quantities up to 5%, bioethanol can be blended with conventional fuel without the need of engine modifications. Bioethanol is produced using familiar methods, such as fermentation, and it can be distributed using the same petrol forecourts and transportation systems as before.

2.3 BIODIESEL
Biodiesel is a natural and renewable domestic fuel alternative for diesel engines made from vegetable oils, mostly soy and corn. It contains no petroleum, is nontoxic and biodegradable. Biodiesel burns clean, which results in a significant reduction of the types of pollutants that contribute to smog and global warming and emits up to 85% fewer cancer-causing agents. It is the only alternate fuel approved by the Environmental Protection Agency ( EPA), has passed every Heath-Effects Test of the Clean Air Act and meets the requirements of the California Air Resources Board (CARB). Biodiesel is made using an alcohol like methanol and a chemical process that separates glycerine and methyl esters ( biodiesel) from fats or vegetable oils. Glycerine is used in many common products including soap and is highly marketable; therefore there is little waste in the process. That said, growing crops requires time and significant investment, and the fuel must be made and shipped to a local station. For these reasons biodiesel is more expensive than petroleum, gallon for gallon. This must be considered against the many economic advantages, however, that arise from a domestic form of fuel, a cleaner environment, an improvement in air qua lity, and a reduction of cancer -causing agents. A "bootleg" form of biodiesel can be made from discarded cooking oils as collected from restaurants. The cooking oil must be put through a p rocess before it can be used as fuel, but home-brewed biodiesel is not a legal form of the fuel as it isn't subject to standards . 9

Biodiesel has been rigorously and independently tested in virtually every type of diesel engine by a number of agencies in the laboratory and on the road. The National Biodiesel Board (NBB) reports the tests combine to account for over 50 -million street miles plus intense off-road and marine use. Performance is said to rate comparably to petroleum in all areas from power to efficiency, hauling and climbing. It can be used in its pure form or blended with petroleum fuel. The most common mix is 20/80, referred to as "B20" containing 20% biodiesel by volume, and 80% petroleum. Biodiesel can be used in any diesel engine with few to no modifications. The main effect is super-lubrication which has the benefit of acting like a solvent to clean the engine. If the engine has been previously running on conventional diesel th is can result in an initial need to change fuel filters until sludge left by petroleum fuel is purged. This effect is more pronounced when using B100 (100% biodiesel), and may be less so with B20. Precautionary measures should be taken however, by checking the fuel filter after initial hours of running blended or neat fuel (100% biodiesel). When using B100 exclusively, the lubrication could degrade certain types of rubber over time, which may require replacement of fuel hoses or fuel pump seals. This isn't as much of a concern with newer engines that contain parts designed for low -sulphur diesel (known as #2 diesel), as these parts are also compatible with biodiesel. The use of B20 did not result in the need to replace hoses or seals in the many miles of tests previously mentioned. Like conventional diesel, biodiesel will cloud and gel at very cold temperatures, but blends like B20 are only slightly more sensitive than #2 diesel in this respect. The recommendations are the same regardless of blend: park the vehicle in or near shelter if possible; use optional fuel heaters; or mix with #1 diesel. Biodiesel should not impact or void the manufacturer's warranty of any compressionignition motor (diesel), however, it's always safest to check your warranty first. Call the manufacturer if unsure.

The technical definition of biodiesel is: The mono alkyl esters of long fatty acids derived from renewable lipid feedstock such as vegetable oils or animal fats, for use in compression ignition (diesel) engines (National Biodiesel Board, 1996). In simple terms, biodiesel is a renewable fuel manufactured from methanol and vegetable oil, animal fats, and recycled cooking fats (U.S. Department of Energy, 2006). The term biodiesel itself is often misrepresented and misused. Biodiesel only refers to 100% pure fuel (B100) that meets the definition above and specific standards given by the American Society of Testing and Materials (ASTM) International (D 6751) . However it is often used to describeblends of biodiesel with petroleum diesel. Such blends are generally referred to as B2, B5, B20, etc., where the number indicates the percent of biodiesel used. The most common method to produce biodiesel is through a process called transesterification, which involves altering the chemical properties of the oil by using

10

methanol (Fangrui and Hanna, 1998). Transesterification of plant oils with methanol is a relatively simple process that yields high conversions with only glycerin as a byproduct. The properties of biodiesel differ depending on the source of plant oil/fat source. This is mainly related to their chemical structure, such as the number of carbons and the number of double bonds in the hydrocarbon chain.

2.4 Benefits of Biodiesel

There are several significant advantages and limitations of using biodiesel to replace petroleum-based diesel (U.S. Department of Energy, 2006).

Advantages
1.) B100 can be produced from renewable, domestic resources. 2.) B100 is energy efficient. (The total fossil fuel energ y efficiency of biodiesel is 320% vs. 83% for petroleum diesel.) (National Biodiesel Board, 1998) 3.) B100 can be used directly in most diesel engine applications. 4.) B100 can reduce global warming and tailpipe emissions ( -41%) (Hill, Nelson, Tilman, Polasky, & Tiffany, 2006). 5.) B100 is nontoxic and biodegradable.

Limitations
1.) B100 contains approximately 8% less energy per gallon. 2.) B100 generally has a higher cloud and pour point (will freeze at a higher temp) than conventional diesel. 3.) B100 is not compatible with some hose and gasket materials, which may cause them to soften, degrade, and rupture. 4.) B100 is not compatible with some metals and plastics. 5.) B100 may increase nitrogen oxide emissions.

11

3. Business potential of b iofuels in the global market

Global demand for oil is rising at two percent every year. Since 1985, the energy use has increased by about 30 percent in Latin America, 40 percent in Africa and 50 percent in Asia. Over the next 20 years, the demand for ener gy is expected to rise by about 50 -60 percent worldwide. Though Europe has started research on biodiesel in 1970s, industrial production began in the year 1992. Today the EU produces about 48.45 lakh tonnes of biodiesel of which Germany is the largest prod ucer with 21.80 lakh tonnes per year. The US shifted its focus towards biodiesel in early 1980s, and it began its production in early 1990. The biofuels demand is expected to increase to 33 million tonnes by 2010.

Global biodiesel demand to double in 5 ye ars

The driver for biofuels usage is not limited to the United States and Europe, but is also growing in the Asia-Pacific and Latin American regions, according to Tammy Klein, executive director of global biofuels services for Hart Energy Consulting. She spoke about the global biofuels outlook on the opening day of the Canadian Renewable Fuels Summit held Dec. 1 and 2 at Vancouver, British Columbia. Thirty countries are implementing biofuels targets in 2010 alone, she said, with many of these countries in the developing world encouraging biofuels as a means of building energy security and improving their rural economies. Biodiesel demand is expected to double between 2009 and 2015, while supply is expected to grow threefold. Currently there is massive overcapacity on a global basis in the biodiesel industry and utilization rates are generally below 50 percent, she added. Current global biodiesel capacity is already large enough to supply the demand projected for 2015 of 10 billion gallons per year. Currently, 30 countries worldwide are blending biodiesel, with the typical B5 beginning to inch upward. Several countries in Europe are moving towards B7, with Brazil moving towards higher blends and Indonesia considering B10. In 2009, developing countries represented 17 percent of biodiesel demand and almost 50 percent of global supply. That is expected to grow to 42.6 percent of biodiesel demand and 59.2 percent of global supply by 2015. Much of that demand among developing countries will be for domestic use , she added. African nations are looking towards biofuels for job creation, economic development and domestic energy supply and are not likely to become international players. In the Asia-Pacific region, the big fourIndonesia, Malaysia, China and the Philippinesrepresent 74 percent of biodiesel demand in the region. Brazil is likely to produce biodiesel to satisfy its internal markets and continue to raise blending limits to absorb capacity. Europe is expected to see the greatest penetration of biodiesel into the diesel market by 2015, although the pending implementation of sustainability standards for its Renewable Energy Directives is raising questions. We dont know how Europe will meet its RED requirements, Klein said. With U.S. imports restricted b y countervailing duties and the Brazilians using their biodiesel internally, it may leave Argentina and the Asia -Pacific producers to supply Europe, driving an expansion of the Asia -Pacific industry in particular.

12

Europe will remain the largest consumer of biodiesel at about 44 percent of world consumption, but Asia-Pacific will come close with a 39 percent share by 2015, she projected. Klein urged the group of Canadian Renewable Fuels Association members to be proactive about involvement in policy develo pment and the work being done on sustainability standards, not only in dialoguing with nongovernmental organizations but also engaging with governments and organizations like the Roundtable for Sustainable Biofuels. The complaint from the RSB is they don t have enough industry participation, and not enough producer involvement, she said. She also predicted that the anticipated EU sustainability standards for biofuels will be challenged in the World Trade Organization as a protectionist trade barrier. At a recent international meeting, she reported, the change in tenor was astonishing from the EC representative who openly admitted they would have to consider WTO implications in the development of the RED. Brazil is watching the EC closely, she said. And Brazil has a history of winning WTO cases. If a WTO suit successfully challenges Europes sustainable biofuels policy, it could also impact U.S. policy as well, she added.

BioFuel Africa begins commercial jatropha production

Fig-3 (Jatropha plant) Biofuel Africa Ltd. announced it is the first in West Africa to commercialize jatropha oil. The Ghanaian corporation that is wholly owned by Norwegian -based Solar Harvest AS has 1,630 acres in cultivation on leased land, in addition to its research far m. The company is testing jatropha for use as a straight vegetable oil fuel in Ghana, saying that in hot climates using straight vegetable oils will facilitate easier processing for local fuel production. Biofuel Africa has adopted a Food First Principl e, according to CEO Steiner Kolnes, giving food production a priority while simultaneously developing jatropha production. The project has grown from 55 acres planted to food crops tended by 25 farmers in 2008, to 540 acres last year. The company plans to expand that to 6,300 acres of corn, rice and soybeans in 2010. The company received approval last year from the Ghana Environmental Protection Agency to develop close to 60,000 acres of jatropha in a program that is to include environmental, social and ec onomic activities that assure positive impacts for local

13

communities. Biofuel companies that combine local fuel production with generation of a renewable local food source are proving that jatropha is an attractive and viable commodity for developing economies plagued with food security issues, exorbitant fuel prices and infrastructure lapses, the company said.

4. Major players in world

Making biofuel has become a big business as biofuel production continues to increase throughout the world. Biofuel is an alternative fuel that is made from veget able oil. Below we break down the major biofuel industry players.

1. Dyniol -

This company is currently building the worlds largest refinery of biodiesel in Houston, Texas with an estimated capacity of 1.5 billion gallons of biodiesel in a single year.

2. Dominion Energy Services -

Dominion is currently building a combined ethanol and biodiesel refinery in Canada. This one of a kind refinery will apparently have a maximum output of 300 million gallons per year.

3. Brasil Eco Energia - This company is currently building a what they hope to
be the biggest biodiesel plant in the world specializing in using soybeans for making biofuel. They hope biofuel pr oduction will be upwards of 225 million gallons of biofuel per year.

4. Agri-Source Fuels -

This Florida based company is a major player in the biofuel industry specializing in B100 type biofuel. They currently opened up another plant in Pensacola, Florida

5. Imperium Renewables -

This Grays Harbor, Washington plant has a production capacity of over 100 million gallons a year. It has been in operation for over two years and specialize in making biodiesel from canola oil. Even though the biodfuel industry has fallen on difficult times due to economic shifts and high prices the large companies continue making biofuel in hopes of surviving the rough times. As technology becomes more advanced and biofuel infrastructure is put in place look for it to play a more prevalent role in fueling the world.

14

5. INDIAN MARKET SCENARIO

In India, the biodiesel industry is in the nascent stage. However, there has been greater awareness on biodiesel in India in the recent times due to shortage and escalating prices of petrol and diesel. With the government introducing the biofuel blending mandate, the demand for biodiesel will see a steady rise in the years to come. Indian government is very keen and if the National Biofuel Policy is approved we can be one of the most potential countries in the world. There is lot of awareness about biofuels in the country. Availability of land for biofuel crops cultivation and low cost of production have made India as one of the most potential countries for biofuel production. The scope for producing biodiesel from non -edible seeds like jatropha and pongamia is an advantage to India when compared to rest of the world. India's biodiesel processing capacity is estimated at 600,000 tonnes per year. The government is now likely to fix a price of Rs 34 a litre for purchase of biodiesel by oil marketing companies.

5.1 the business prospects of biofuels from Indias perspective

India has a huge potential for biofuels production. The favorable subtropical climate, huge stretches of culturable marginal lands and the natural resource wealth of the country stand testimonials to the fact that the country has good scope for biofuel production. India has witnessed a steep rise in energy consumption in the recent years and is today the worlds sixth largest energy consumer with the demand growing at an annual rate of 4.8 percent. The demand for diesel is estimated to grow at an annual rate of 5.8 percent till 2030. Current oil and gas reserves in India are not adequate to fulfill this growing demand. Ind ia produces about 30 percent of its annual crude oil requirement of approximately 105 million tonnes. For the balance 70 percent, the country relies on imports. The transportation sector accounts for almost 50 percent of the total crude oil consumed. This has increased the risk exposure of the country to the high price of the crude oil in the international market. Considering this demand -supply mismatch, the Government of India has undertaken two strategic measures of accelerating the exploration and prod uction activities in the oil and gas sector; and promoting the consumption of alternate fuels. Blending mandate of 20 percent by the end of the year 2017 and the support package extended by the government in terms of tax sops and incentives are some of the eminent drivers of the industry. Other than the aforesaid factors, the country having 70 percent of its population in the rural areas, ought to focus on the production of green fuels especially for rural electrification programs. The industry is still in its nascent stage in the country and expected to take off when an organized industry status is given to the sector by bringing biofuel policy in place. Estimated Jatropha cultivation requirement [in million hectares (mn ha)] to meet biodiesel blending demand in India.

15

5.2 The key achievements of biofuels research in India

Eminent organizations and institutions involved in the research and development of biofuels are ICRISAT, Hyderabad; CRIDA, Hyderabad; and ICAR, New Delhi. Other than these research-focused organizations such as, TNAU, Coimbatore; TERI, New Delhi and FRI, Dehradun; are also engaged in the extensive research of biofuel crops. The key areas of research so far are for the feedstock development and for the processing of the produce into biofuel. The raw material or the feedstock development includes the crop development through varietal improvement and hybridization, and locational trials for adaptation of the species. The research on processing technology focuses on evolving cost -effective technology for the betterment of all the stake-holders. The Department of Science and Technology (DST) is the committee member in producing high yield varieties for jatropha along with the coordination of the Ministry of New and Renewable Energy (MNRE) as well as the Ministry of Agriculture. Department of Biotechnology (DBT) is working on production of quality planting material of jatropha, and they have called for proposals for initiating the multi -locational trials of jatropha. Nandan Biomatrix has been selected by DBT for the project of mass multiplication of jatropha curcas saplings through vegetative cuttings since they were convinced with the R&D work taken up by us on jatropha for the past several years. DBT selected us and gave 25 percent of the work order in India.

Estimated Jatropha cultivation requirement (in million hectares ) to meet biodiesel blending demend in India YEAR 2004-05 2005-06 2006-07 2007-08 AT 5% BLENDING 1.18 1.24 1.57 2 AT 10% BLENDING 2.35 2.48 3.14 3.99 AT 20% BLENDING 4.7 4.95 6.27 7.98

16

6. INDIAS BIOFUEL DRIVERS

The cornerstone of Indias energy security strategy is to focus effort toward energy self-reliance and developing renewable energy options like bio- fuels vis-a- vis fossils fuel. Adoption of environmentally friendly bio -fuels to meet improved vehicle emission norms. Developing an alternative usages for crops like sugarcane and its byproducts as feedback for bio -fuels to support farm income. Improve utilization of wastelands and other unproduct ive land for cultivation of bio- fuel feed stock. Enhance rural employment and livelihood opportunities by promoting production and marketing of bio -fuel feed stocks. With a rapidly growing economy and rising population, India is the fifth largest and on e of the fastest growing petroleum oil consumers in the world. With limited domestic crude oil reserves, India meet over 72% of its crude oil and petroleum products (petrol, diesel, aviation fuel, etc. ) requirement through imports. Energy demand in the tr ansport sector is growing relatively high due to the growing economy and rising private vehicle ownership, particularly 4-wheelers. India is increasingly dependent on imports to meet its petroleum demand. India is one of the world s leading producers of sugarcane and sugar. Sugar molasses, a byproduct of the sugar industry, is used for production of most of the rectified spirits (alcohol) produced in India, including ethanol for fuel. Due to the cyclical nature of sugarcane and sugar production in India, sugarcane farmers and the processing industry experience periodic market gluts of sugarcane, sugar and molasses production impacting prices and farm incomes. The GOI has been focusing on encouraging sugarcane juice/sugar molasses usage for ethanol production to bring stability in farm incomes. Bio-diesel production efforts are focused on using non -edible oils from plants (Jatropha curcas, Pongamia pinnata and other tree borne oilseeds) and animal fats like fish oil. The focus is to encourage the use of wastelands and other unproductive land for the cultivation of these relativel hardy new bio-fuel crops. The GOI does not want bio-fuel feedstock crop cultivation to compete with food crops for scarce ag ricultural land and water. An estimated 55.3 million hectares are considered wasteland in India, which could be brought into productive use by raising bio -diesel crops. The GOI policy is also driven by the fact that bio-fuel crop cultivation in wastelands would provide additional employment to the vast rural population in India. There is some question as to the definition of wastelands as some grazing or less

intensive dry land farming may be taking place on these wastelands . Nevertheless, biodiesel production from non -edible oilseeds, etc. is still in the research and development stage in India. 17

6.1 Ministries Involved in the Bio -fuels Sector

India has been pursuing a two -fold strategy for promotion of bio-fuels by : a)providing budgetary support for research, development and demonstration of technologies; and b) promoting private investment through fiscal incentives. Several mi nistries are involved in policymaking, regulation, promotion, and development of the bio -fuels sector in India.

Ministry
Ministry of New and Renewable Energy

Role
Overall policymaking role for promoting development of bio-fuels. Also support research a nd technology development for production of bio -fuels.

Ministry of Petroleum and Natural Gas

Responsible for marketing bio -fuels as well as development and implementation of pricing and procurement policy

Ministry of Agriculture

Research and development for production of bio-fuel feedstock crops (sugarcane/sweet sorghum, etc. for ethanol; and Jatropha and other non -edible oilseed species for bio-diesel)

Ministry of Rural Development

Responsible for promotion of Jatropha plantations on wastelands

Ministry of Science and Technology

Supports research in bio-fuels crops, especially in the area of biotechnology

18

7. BIO-FUEL MARKET CONDITIONS

Motor Vehicle Petroleum Based Energy Market
India s petroleum-based energy demand by the transport sector is the fastest growing energy consuming sector and will continue to grow steadily in the coming years due to strong growth in the economy, rise in income levels, and an increase in the availability and choice of vehicles. Petroleum product consumpti on has gone up from 100 million tons in Indian fiscal year (IFY) 2001/02 (April/March) to 134 million tons in IFY 2008/09 [9] . Energy demand by the transport sector is expected to grow by 6 -8 percent per year during the 11th five-year plan (2007-2012). Diesel and gasoline (petrol) contribute 98 percent of the energy consumed in the transport sector. Over 80 percent of passengers and about 60 percent of freight are transported by road in India. With the growth in the economy and the rise in personal incom es there is increasing dependence on personal modes of transport such as cars and two wheelers. Industry sources report that that the total number of vehicles has increased more than five fold, from 21.3 million (including 14.2 million 2 -wheelers) in 1991 to 109 million in 2008 [10] . The motor vehicle population grew by 10 -12 percent in the last few years, and is expected to continue to grow around 8 -10 percent in the next few years.

7.1 Current Production Scenario Ethanol Production

The ethanol supply for the EBP program during MY 2008/09 has been severely impacted by the short supply of sugar molasses and continued strong demand for alcohol from other competing industries. Consequently, ethanol for blending with petrol in Indian sugar marketing year 2008/09 (October/September) is estimated at 100 million liters, against the target of 600 million liters. With market prices of alcohol ranging between Rs. 26 to Rs. 30 per liter since October 2008, most ethanol suppliers preferred diverting their supplies to the potable liquor and chemical industries instead of supplying ethanol at the current price of Rs. 21.50 per liter for the EBP program. Despite the forecast improvement in the sugarcane and sugar production in MY 2009/10, a sharp drawdown in carryover stocks and expected strong demand from the chemical and potable liquor industry will constrain alcohol supplies. Consequently, supply of ethanol for fuel is forecast lower at 50 million liters. However, ethanol supplies to the EBP program may improve if petroleum companies agree to a major hike in the procurement price from the

19

Table 2: India's Production & Distribution of Molasses and Alcohol/Ethanol in Sugar Marketing Year (October/September)

20

Source: FAS/New Delhi Estimates based on information from Trade Sources The progress of the second phase of the EBP has been slow as ethanol usage is subject to commercial viability. Besides irregu lar molasses availability, a plethora of high taxes and levies has adversely impacted ethanol blending in several states, particularly sugar/alcohol deficit states. Most states have a labyrinth of rules and regulations (inter -state movement, high excise duties, storage charges, etc.) to control alcohol for the potable liquor industry, and these regulations are equally applicable to ethanol for blending purposes. The GOI is actively engaged in working with state governments to resolve the underlying issues constraining adoption of the EBP program in other states. The current shortage in supplies of ethanol has been due to high prices of sugar molasses which makes it unviable to supply ethanol to petroleum companies at the negotiated prices [13] . The sugar industry continues to pressure the government to ask the petroleum companies to raise the negotiated sales price, while the petroleum companies have opposed increases in ethanol prices, especially given that crude oil prices have eased since mid-2008. In years of bumper sugarcane production, the sugar industry may prefer to produce ethanol directly from sugarcane juice to avoid the sugar market glut and declining prices. There is considerable scope for increasing sugarcane yields from the existing acreage, wh ich can also offer additional sugarcane for production of ethanol directly from juice. There is limited scope to increase area under sugarcane as the crop is water intensive and India s irrigation water supplies are increasingly limited. Since the production of ethanol directly from sugarcane juice requires additional investments for technological modifications, most mills are closely assessing the market demand for ethanol and the ef ficacy of the government s ethanol policy before making the necessary investments. Industry reports suggest that a petroleum marketing company has acquired two sugar mills for production of ethanol from sugarcane juice on an experimental basis, and with co mmercial production expected in MY 2009/10. There are currently no foreign players in the Indian sugar industry, as it is one of the most controlled agribusiness-sectors in the country (see policy section of Sugar Annual IN9049). However, the increased consumption of ethanol by oil companies, and the production of ethanol from sugarcane juice by local companies may attract foreign investment in the future

21

7.2 Bio-Diesel Production

India s commercial production of bio -diesel is very small and what is produced is mostly sold for experimental projects and to the unorganized rural sector. While the government discourages the use of edible vegetable oil for production of bio -diesel, it is also not economically feasible to produce bio -diesel from vegetable oils due to high edible oil prices in the domestic market. The small quantities of Jatropha and other non-edible oilseeds procured by traders are mostly crushed for oil, which is used for lig hting lamps and other non-edible uses. Several entrepreneurs have established small plants (less than one ton per day) to extract bio-diesel, but the product is mostly sold in the unorganized sector mainly for operating irrigation pumps and other agricult ural uses. There are about 20 large capacity plants (one to fifty tons per day) that produce bio -diesel from edible oil waste (unusable oil fractions), animal fat and non-edible oil. Automobile and transport companies mostly buy bio -diesel for R&D trials on their vehicles. Indian Railways and other state -owned transport companies have set up experimental projects for bio -diesel production. Reliable production information on Indian bio-diesel is not available as commercial production is yet to take off in an organized manner, with estimates ranging anywhere between 100 to 200 million liters per year. Most Jatropha plantations are far from bio -diesel producing units, and lack of efficient marketing channels result in high inefficiencies leading to high produc tion costs. Industry sources estimate current bio -diesel finished production costs at anywhere between Rs. 32 to 40 (67 cents to 83 cents) per liter, much above the government advised purchase price of Rs. 26.5 (55 cents) per liter. Consequently, there has been no commercial sale of bio -diesel at the GOI s bio-diesel purchase centers. Some of the state transport agencies and Railways procure biodiesel for experimental trials of their vehicles. Many Indian corporations, including petroleum marketing compani es, are venturing into bio-diesel production by having a memorandum of understanding with state governments to establish Jatropha plantations on government wasteland or contract farming with small and medium farmers. Several state governments have announce d policies to encourage Jatropha cultivation, setting up bio-diesel plants and supply chains in their respective states. Although the nascent bio-diesel industry has been lobbying the government to allow duty concessions on imports of vegetable oils (palm, soybean, etc.) and their derivatives to captive consumption for bio -fuel production at their units, there are no positive indications for approval of such proposals. Some local and foreign collaborative projects for production of bio-diesel for exports are being set up near the port s as export-oriented-units that could boost the country s bio-diesel production capacity to 1.0 to 2.0 million tons per annum in the next few years. There is no commercial production of bio -fuels from other biomass, except for some experimental trials by research organizations

22

CONCLUSIONS
Biofuels are renewable fuels made from biomass that can be used to supplement or replace the fossil fuels, including petroleum and diesel, used in transport. Biofuels have become one of the fastest growing markets in the world at 15% growth a year. Biofuel is defined as solid, liquid or gaseous fuel obtained from relatively recently lifeless or living biological material and is different from fossil fuels, which are derived from long dead biological material. Also, various plants and plant -derived materials are used for biofuel manufacturing . There are two main types of biofuels for transport:1) Bioethanol, which is alcohol derived from sugar or starch, for example from sugar beet, cane or from corn, and 2)biodiesel, derived from vegetable oils, for exa mple from rapeseed oil, jatropha, soy or palm oil. Global demand for oil is rising at two percent every year. Since 1985, the energy use has increased by about 30 percent in Latin America, 40 percent in Africa and 50 percent in Asia. Over the next 20 years, the demand for energy is expected to rise by about 50-60 percent worldwide. Currently, 30 countries worldwide are blending biodiesel, with the typical B5 beginning to inch upward. Several countries in Europe are moving towards B7, with Brazil moving towards higher blends and Indonesia considering B10. In 2009, developing countries represented 17 percent of biodiesel demand and almost 50 percent of global supply. That is expected to grow to 42.6 percent of biodiesel demand and 59.2 percent of global supply by 2015. Making biofuel has become a big business as biofuel production continues to increase throughout the world. Biofuel is an alternative fuel that is made from vegetable oil. In India, the biodiesel industry is in the nascent stage. However, there has been greater awareness on biodiesel in India in the recent times due to shortage and escalating prices of petrol and diesel. India has a huge potential for biofuels production. The favorable subtropical climate, huge stretches of culturable marginal lands and the natura l resource wealth of the country stand testimonials to the fact that the country has good scope for biofuel production. Eminent organizations and institutions involved in the research and development of biofuels are ICRISAT, Hyderabad; CRIDA, Hyderabad; an d ICAR, New Delhi. Other than these research -focused organizations such as, TNAU, Coimbatore; TERI, New Delhi and FRI, Dehradun; are also engaged in the extensive research of biofuel crops. India s commercial production of bio -diesel is very small and what is produced is mostly sold for experimental projects and to the unorganized rural sector. While the government discourages the use of edible vegetable oil for production of bio -diesel, it is also not economically feasible to produce bio -diesel from vegetable oils due to high edible oil prices in the domestic market. The small quantities of Jatropha and other non-edible oilseeds procured by traders are mostly crushed for oil, which is used for lighting lamps and other non-edible uses. Many Indian corporatio ns, including petroleum marketing companies, are venturing into bio -diesel production by having a memorandum of understanding with state governments to establish Jatropha plantations on government wasteland or contract farming with small and medium farmers . Several state governments have announced policies to encourage Jatropha cultivation, setting up bio-diesel plants and supply chains in their respective states. So,there are huge oppurtinities for the biodiesel marketing in rhe country as well as in th e world.

23

REFERENCES Fangrui, M.; Hanna. M. A. Biodiesel production: A Review. Bioresource Technology, 1 -15(1998) Hill, J.; Nelson, E.; Tilman, D.; polasky, S.;Tiffany. D. Environmental, Economic, and Energetic costs and Benefits of Biodiesel and Ethano l Biofuels. National Biodiesel Board. Biodiesel report (March 1996) U.S. Department of energy. Biodiesel Handling and Use Guidelines. ( March 2006) Alexander Farrel et al, Ethanol can contribute to energy and environment goals science vol -113 Internet

************************************************

24