Indian biodiesel producers rethink export-only status

Indian biodiesel producers are caught between government regulations at home and abroad, and are slashing production as they struggle to find buyers.

India's government has mandated a 20 percent blend in gasoline and diesel by 2017. The policy requires bioethanol and biodiesel derived from non-edible sources and be grown on non-farming land (see India, EU affirm new biofuels).

Ethanol is making headway, but the government lacks the regulatory framework for blending biodiesel into existing diesel. The permitting process is so complex that many biodiesel producers are exporting biodiesel (see India can't use own biodiesel).

But new regulations in the U.S. and Germany against palm-oil biodiesel have essentially crushed those markets. Additionally, the dropping price of crude oil has lessened the need for EU countries to import from India (see Ethanol blend increases while oil reaches new low).

These circumstances have local biodiesel makers once again exploring India's domestic market. A number of biodiesel producers have been cutting deals to supply fleets with biodiesel, including Hyderabad-based Gaiatech Fuels, which signed a one-year deal to supply 1.6 million liters (423,000 gallons) of biodiesel to Navi Mumbai’s bus system (see Gaiatech supplies biodiesel for public transit in India).

And in January, Mumbai-based Mission Biofuel India asked for government approval to build the country's first biodiesel refinery (see Mission Biofuel plans India's first biodiesel refinery).

Meanwhile, two of the country's leading Hyderabad-based biodiesel producers, Naturol Bioenergy and Universal Biofuels, are giving up their government status as export-oriented-units.

Hyderabad-based began commercially producing in April out of its Rs. 140 crore ($1.4 billion USD) facility, the first biodiesel plant in India. Naturol shipped biodiesel to the EU and the United States starting in June because India couldn't blend it into gasoline and diesel. But the company is running the 100,000-ton-a-year biodiesel plant at 50-percent capacity since December because it could no longer export at a profit, according to the Wall Street Journal.

The Malaysian Insider reported that Naturol is now capitalizing on the advantages that selling domestically present, including no tariffs, no working capital tied up in shipping, and a wider range of feedstocks. Some fatty acid biodiesel sources, such as stearin, are best used domestically because they freeze more easily than standard diesel.

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