India in slow lane in drive for greener fuels

A woman is seen clearing wild grass near jatropha plants in a plantation field in Maharashtra in this October 9, 2006 file photo.

NEW DELHI (Reuters) - India's failure to agree a biodiesel policy has forced firms to shelve expansions plans, putting it way behind energy-hungry rivals like China in the drive to greener fuels, a top industry representative said.

The delay has also left edible oil processing companies, which have built capacity to turn 1.2 million tonnes of jatropha into biodiesel, in the lurch -- and 9 billion rupees ($227 million) poorer, said Sandeep Chaturvedi, head of the Biodiesel Association of India.

New Delhi is blending ethanol with petrol, but has been unable to forge a framework for biodiesel as ministers differ over subsidies needed to kickstart the sector.

"It is a clear example of how an indecisive government can jeopardise plans to popularise jatropha to reduce dependence on fossil fuel and pollution," Chaturvedi told Reuters in an interview.

One tonne of jatropha seed can yield 300 kg of biodiesel, he said.

India consumes 40 million tonnes of diesel a year, way above annual petrol demand of 8-9 million tonnes, and in 2003 announced plans to replace around five percent of its diesel consumption with biodiesel made from jatropha, a crop which thrives here.

"By not agreeing to a subsidy or on a policy, the government has dealt a blow to biodiesel which should have been treated at par with ethanol," he said.

Some countries believe biofuels hold out the promise of major cuts in greenhouse gas emissions and are an alternative to scarce and expensive fossil fuels.

India is a major polluter and is likely to rise up the world's league of dirty nations as Asia's third-largest economy purrs along at annual growth rates of over 8 percent.

It imports 70 percent of its crude oil requirements, and heavily discounts fuel sales by state firms, although on Thursday raised the price of petrol and diesel for the first time in 20 months.

SWEET ON ETHANOL

Domestic oil retailers are required to mix ethanol with petrol to 5 percent of volume almost nationwide and India plans to double that to 10 percent from October 2008, when the new sugarcane crushing season begins.

But other countries have gone much further.

Brazil allows as much as 50 percent ethanol to be blended with petrol while China has gone ahead with plans to build one of the world's first large-scale jatropha-based biodiesel plants, Chaturvedi said.

"The basic reason behind the delay in the biodiesel policy is subsidy. Some ministries favour subsidy for the sector as it is in nascent stage, while the Finance Ministry seems to be opposed to the idea," he said.

"We have been telling the government that jatropha can help India save foreign exchange by lowering crude imports and mitigate pollution risks but to no avail."

Some experts say jatropha is several years of intensive research away from being a commercially viable biofuel.

But Chaturvedi said it leads the pack in India as the hardy plant grows well on barren land with few inputs.

"About a million hectares of land is under jatropha cultivation but processing units cannot start functioning due to the lack of guidelines."