MARKETING POTENTIAL FOR BIODIESEL UNIVERSAL BIOFUELS PVT. LTD., HYDERABAD, INDIA (A wholly owned subsidiary of AE Biofuels, Inc., USA) Nov 19, 2010 Is there a Marketing Potential for Biodiesel in India OR from India ? INDIAN MARKET Background & Facts • The GOAL of the Biodiesel Policies was to promote the use of Biodiesel in India for reasons of Energy Security, Climate Change Mitigation, Renewability of Biodiesel vs NonRenewability of Fossil Fuels, Environmentally Friendly, etc. • To promote the Biodiesel industry, Government of India offered incentives. -EXCISE WAS EXUMPTED -VAT, as per the Biodiesel classification was 4% in most States • Upon the announcement of incentives, 1500 Cr was invested across different States in India. Cont……… INDIAN MARKET Background & Facts Cont……… • Presently, industry is operating at 10% capacity or less. It is today an industry in distress. • Not a liter of Biodiesel has been blended with Diesel for distribution as transportation fuel by the OMCs. • In contrast, EU blended12 Million KL of B100 with Diesel in 2009. This represents approx. 5-7% blending with diesel. If India were to blend 5% biodiesel, it will need 2.5 Million KL. Installed capacity of Biodiesel in India is only 1.1 Million KL. • Biodiesel producers understand that Biodiesel has to be priced equal to or less than Diesel price, so no under-recovery. •World-over, Biodiesel is made from edible oils like soya, rapeseed and palm oil. INDIAN MARKET Why did we fail in the Indian market? • States revenue-centric focus with ‘zero’ consideration for Biofuels Policy is the No. 1 reason for the failure of Biodiesel program in India . States bent on taxing Biodiesel at the rate of Diesel if blended with Diesel. • Back-seat approach of MOPNG / MNRE to resolve industry issues with States. • MOPNG’s directive to ban Direct Sale of Biodiesel. • Biodiesel Policy has been structured around Jatropa. Government must realize that Jatropa has failed as a commercially viable crop. Cont……… INDIAN MARKET Why did we fail in the Indian market? Cont……… • India’s Hypersensitivity to Food vs Fuel issue. World has successfully launched biodiesel programs using edible oils. China & EU are classical examples. They are net importers of oils/oil seeds, yet have launched a successful biodiesel programs. • Non-edible palm derivatives like stearin & PFAD are a NO! NO! for biodiesel production, yet their use for production of soaps and other oleo-chemicals is perfectly OK. EXPORT MARKET Why did we fail in the Export Market? • Argentinean Biodiesel producers have a 14% advantage on the cost of feedstock due to differential export tax between Soya Oil and Biodiesel. Soya based biodiesel has better cold flow properties for the EU market and therefore, priced higher. • Indonesian producers also benefit from the 10% export tax on palm oil vs no export tax on Biodiesel. Additionally, India has a inbound freight disadvantage. • India has come under scrutiny by EU for aiding evasion of anti-dumping duty imposed on American Biodiesel by rerouting it through India and misdeclaring as Indian origin product. Guess who? INDIAN MARKET What must be done to save the industry? • Domestic market is our best bet. • PMO must be approached to intervene, so that States rationalize VAT on blended Biodiesel, like the Central Government rationalized Excise. PM is the head of the steering committee on Biofuels. • MOPNG must be approached to allow direct sale of Biodiesel, immediately. • Biodiesel price in India cannot be fixed like the price of Ethanol. Feedstock for Biodiesel is not supplied by the Government at fixed prices. Biodiesel price has to be commodity linked, either to feedstock or diesel or both.