Bio-fuel is next big bet if crude continues to rise

By Vishwanath Pilla, CNBC-TV18

The spike in crude prices has hurt every sector but one industry has taken off. That is the alternative fuel industry, also known as the biofuel industry. 

Andhra Pradesh is slowly becoming the hub for this sunrise sector.

The Vakalapudi Industrial park in the port city of Kakinada is humming with activity. The industrial park has attracted investments worth over Rs 450 crore  from bio-diesel firms such as Reliance Industries, Naturol Bioenergy and Universal Bio Fuel. The reason for the rush is that bio-fuel will be the next big bet if crude continues to rise at paralyzing levels.

Biodiesel is pegged at Rs 50 a litre which is Rs 10 less than normal diesel and the government has thrown in a subsidy of nearly Rs 20. Hyderabad-based Naturol Bioenergy has already started production and became the first company to export alternate fuel from india.

Bhaskar Chalsani, CEO, Naturol Bioenergy said, "Unfortunately we do not have a policy in India in the domestic market. There is a policy in Europe and US. That is one of the reasons why Naturol is exporting today. However, we cannot ignore the domestic market. India is a huge market."

The other major challenge is the availability of feedstock. The industry relies on imported stock to produce bio-diesel. To avoid this, companies like Naturol is in the process of building jatropha and palm oil resources to source feedstock. It is distributing jatropha seeds free-of-cost to farmers. Till now, the response from farmers has been lukewarm since the crop yield begins from the fourth year onwards.

Bhaskar Chalsani said "The primary energy crop that the government and industry is looking at is jatropha. However, one critical aspect missing is policy again. Government of India has to come out with a clear cut policy on jatropha so that the industry, farmers and the scientific community have clarity in going forward."

Bio-diesel is coming up in a big way in Andhra Pradesh. But the major bottleneck remains the availability of feedstock. The industry here wants the government to come out with a comprehensive bio-diesel policy and subsidy for farmers cultivating jatropha.