Role of Bio-Diesel in the growing energy demand scenario in India FEBRUARY 1 & 2, 2008, FICCI, NEW DELHI CLIMATE CHANGE & BIO-DIESEL 2008
Role of Bio-Diesel in the growing energy demand
scenario in India
FEBRUARY 1 & 2, 2008, FICCI, NEW DELHICLIMATE CHANGE & BIO-DIESEL 2008
2
INDIA WILL BECOME THE THIRD LARGEST ECONOMY IN THE WORLD BY 2030 AND HAVE THE FASTEST GROWTH RATE
Source:World Development Indicators; Goldman Sachs, Dreaming with the BRICs: The path to 2050; IEA; UBS estimates
GDP in trillion US$
0.6
1.7
2.0
4.4
11.7US
Japan
Germany
China
India
FY 2005 (E)
2.7
6.0
6.1
14.3
20.8US
China
India
Japan
Germany
FY 2030 (E)
CAGRPercent
2.2
8.2
9.0
1.2
1.1
India has a robust future growth position
3Source: IEA; BP Statistical Review of World Energy 2004; Project BRICS-Relative attractiveness of downstream markets
INDIA IS EXPECTED TO BE THE WORLD’S FOURTH LARGEST CONSUMER OF ENERGY BY 2020
Oil consumption likely to substantially increase by 2020
2020 forecast oil consumption in mtpa
US China India RussiaJapan Brazil Germany
160165185225
285
655
1210
Potential to be fourth largest energy consumer by 2020
Million tonnes of oil equivalent, 2020
2891
1896
831
590 583
368 339
US China India JapanRussia Canada Germany
4
Million tonnes per year (mtpa)
INDIA WILL HOWEVER NEED TO RELY HEAVILY ON CRUDE IMPORTS TO SATISFY THE DEMAND FOR OIL
• Strong demand growth expected in next 10-15 years• Flat domestic production far from sufficient to cover demand• Import to make up over 80% of demand by 2020
Source:FACTS 06 Fall; BP; EnergyFiles; Wood Mackenzie
32 33 44 38 35
80 91109
144190113
2000
225
2020E
124
2005
182
2015E
152
2010E
Net import
Production
% imported 71% 73% 71% 79% 82%
5
BIO-DIESEL CAN PLAY AN IMPORTANT ROLE IN THIS SCENARIO
Description
• Bio-diesel can reduce crude imports by 5% in 2015 and 10% in 2020 (assuming a 10 % blending mandate and 20% blending mandate in 2015 and 2020 respectively)
Rural empowerment
Drivers for bio-diesel adoption
Supply security through reduction in crude imports
•Bio-diesel value chain can create up to 9 million jobs in rural areas as early as 2015
Low environmental impact
•Bio-diesel production process is eligible for carbon credits (CERs) under Kyoto Protocol’s Clean Development Mechanism (CDM) scheme.
•Bio-diesel is less polluting and eco-friendly than conventional fossil fuels
6
Million tonnes per year (mtpa)
BIO-DIESEL CAN PLAY AN IMPORTANT ROLE IN REDUCING CRUDE IMPORTS
Reduction in crude imports by 5% by 2015 and 10% in 2020 (assuming a 10 % blending mandate and 20% blending mandate in 2015 and 2020 respectively) can be achieved through Bio-Diesel
Source:FACTS 06 Fall; BP; EnergyFiles; Wood Mackenzie
Net import
Production
% imported
Bio-Diesel substitution
32 33 44 38 35
80 91109
137
172113
2000
18
124
182
2015E2005
7
152
2010E
225
2020E
71% 73% 71% 75% 76%
7
BIO-DIESEL HAS SIGNIFICANT ENVIRONMENTAL BENEFITS
Emissions are lower compared to conventional diesel
Units in per cent
• Plant prevents soil erosion helps in nutrient replenishment of soil
• Leaves, flowers and barks can be used for medicinal purposes
20% blending of Bio-Diesel
• Total unburned Hydrocarbons -30%
• Carbon monoxide -20%
• Particulate matter -22%
• NO2 -+2%
• Sulphates -20%
• PAH (Polycyclic aromatic hydrocarbons) -20%
• Ozone Potential of Speciated HC
-10%
• Nitrated PAH -50%
8
BPCL’S EFFORTS IN THE BIO-DIESEL CHAIN
Key initiatives
• Pilot efforts in Jatropha cultivation in BPCL owned tracts of land across the country
Phase 1(till 2007)
Phase 2 (2008-09)
Phase 3(2009-2015)
• Over 600 acres brought under Jatropha cultivation.
• Initial commercial efforts for entering in the Bio-Diesel Value Chain in collaboration with State Governments and other partners
• Partnerships with State Governments with high activity in Jatropha and Pongamia cultivation for large scale commercial play in the Bio-Diesel Value Chain
• Over 1 million acres to be brought under Jatropha cultivation to produce 1 million tonnes of Bio-Diesel by 2014-15
• 100,000-200,000 acres to be brought under Jatropha cultivation
9
A FULLY INTEGRATED PLAY IS REQUIRED FOR SUCCESS IN BIO-DIESEL
RationaleBio-Diesel Value Chain : Business Model
Jatropha farming
Seed collection, oil extraction and esterification
Blending and Marketing
Marketing
Production
Farming
Marketing
+
+
Production
Marketing+
1
2
3
Integrated play
•The rural community in India are lacking in perception to raise suitable crops upon waste and barren lands.
• Union Govt. through NREGS is keen to uplift the standards of such farmers by encouraging them to take up the Jatropha Cultivation Activity.
• Such Programmes can be effectively implemented under the P3 model (Private, Public, Panchayat ) with the active involvement of established Companies in diversified areas.
10
BIO-DIESEL VALUE CHAIN : KEY ACTIVITIES
Identification / Allocation of waste / fallow Land in large chunks for Jatropha Cultivation by Local Panchayat / Collector / State Government.
Cultivation of Hybrid High Yield Jatropha in a phased manner @ few lakh acres per year.
Fruit / Seed produce Collection network.
Setting up of Oil extraction plants / Solvent extraction plants.
Setting up of Trans-esterification Plants.
Distribution & Logistics, Blending & Marketing of Bio-Diesel.
11
OPERATION MODEL : BIO-DIESEL BUSINESS
Samplings developed in nursery
Farmers
Jatropha cultivation
3-4 year growing period (20-25 year life)
Oil extraction
Trans-esterification
Storage
Bio-Diesel30%
Marketing through ROs
Seed cake70%
Glycerol10%
Installations /DepotsSeeds (100%)
Cost of operations +10% of chemicals Revenue from carbon
credits
12
BENEFITS
Generation of Employment / Self Employment to Lacs of families of farmers
Huge area of waste land to be converted into productive use
Industrialization through investment of huge capital outlay in the State running into few thousand crores
Alleviation of poverty in rural areas
Soil and Water conservation
Breaking the cycle of drought
13
Afforestation
Reduction of air pollution
Reduction of green house gases & Global warming mitigation
Curbing rural migration
Energy Security and Revenue generation to concerned State
Self Reliance of energy needs
Foreign Exchange Savings for the Country
Rural economy improvement
BENEFITS-CONTD..
14
SUPPORT FROM GOVERNMENT
Classification of Jatropha crop under Agriculture / Horticulture / Forest Depts.
Single Window facilitation through Bio-Energy Mission Cell or Renewable Energy Dept. created by various State Govts. in co-ordinating with all its concerned Departments at State / District level & upto Village Panchayat level for smooth implementation of the entire Bio-Diesel Value Chain and to ensure strong bond between Village Panchayat and Entrepreneurs, starting from land identification to collection of fruits from the allocated fields.
Assistance for identification and leasing on Long Term and or allocation of Suitable land for establishment of
NurseriesDemonstration UnitsTraining CentresR&D CentresSeed collection CentresExpelling UnitsTrans-esterification Plants
15
SUPPORT FROM GOVERNMENT - CONTD..
To extend the Transport Subsidy Scheme to facilitate the execution of this Project to the farmers as well as the Entrepreneurs.
To render support in terms of waiving state level taxation in the best possible manner.
To provide applicable subsides to the small industries in establishment of Oil Expellers and Solvent Extraction Units
To render power tariff waivers for the expelling Units, S.E. Units and Trans- esterification Units.
The non-edible oilseeds cannot be marketed / used / consumed directly without a complex transesterification refining process. Therefore, the respective State Govts. may issue an Executive Order to exempt this transaction from the purview of the State Mandi Act, thus facilitate procurement of the non-edible oilseeds from the farmers directly by the Entrepreneurs.
16
SUPPORT FROM GOVERNMENT-CONTD..
Assist the Entrepreneurs in bringing awareness and Farmers mobilization for Jatropha cultivation, including development of village youths by bringing orientation and perception regarding the plantation activity.
Ensuring implementation of Government’s Employment Guarantee Scheme and all other relevant schemes to support farmers for Jatropha cultivation.
Convergence of various development schemes of State and Union Government for the benefit of this activity.
Entrepreneurs to be involved in the restructuring of the existing Advisory Body formed by various State Govts. for implementation of Bio-Diesel Value Chain in the respective States.
Facilitates formulation of Policies for Jatropha crop Insurance and also involve Banking Institutions to arrange soft loan to farmers.
19
POTENTIAL RURAL IMPACT ON INCOME AND JOBS CAN BE HIGH
Land under cultivation
Million Acre
2015 substitution level*
Per cent
Rural economic impact (Rs crore)
Multiplier effect
TotalRural impact
Income Jobs
Rs crore Million
7.5-1010 (9-11%)** 2 9
15-2020 (18-21%)** 2 18
Maximum blending without any engine modification
*Fossil diesel demand 75 million metric tonnes ** Percentage of 35-40 million hectares of wasteland that can be used for plantations
***Based on ~Rs.5-6 per kg of seeds contracts signed by blenders with farmers
3.8-55 (3-4.5%)** 2
6,750***
13,500***
13500
27,000
67503,375*** 4.5
20
3 ENABLING INTERVENTIONS ARE REQUIRED TO MAKE BIO-DIESEL A THRIVING INDUSTRY IN INDIA
National Board for development and execution of fuel policy
– Policy on blending proportion of Bio-Diesel
– Approach to creating “Bio-Diesel fund” to manage against crude fluctuations
– Models of possible tri-partite contracts between farmers/villagers, the government, and the private producers (processors/blenders) that could be adopted to make significant acreage of Government owned wastelands for cultivation
Public private partnership involving State Governments
– On R&D on seed productivity-Create a dedicated Bio-fuel seed resource at Department of Bio-technology
– Certification of seed quality and other farming standards
– Ensure close involvement of Panchayats to gain farmer confidence
Farmer insurance and financing and purchase guarantees
– Coordinate policies to finance marginal farmers for wasteland cultivation
*Source: Interviews, press searches
2
1
3
21
FURTHER, INDIA CAN CATER TO THE GLOBAL BIO-DIESEL DEMAND TO EARN SIGNIFICANT FOREIGN EXCHANGE
1.Based on 5% blending at a diesel demand of 65-70 MMT 2.Based on Rs 18 sale price per litre
3.Net of EU internal production 4. Early indications are that Japan is likely to tie-up with Brazil for bio fuels
India’s share
Required supply
Bio-diesel demand
Tonnes million
Implied forex inflows/savings
Rs crore
EU (2010-11)20-30 1.5-38-93
Per cent
Domestic 1100 3-43-4
3,500-7,0002
7,000-9,500*
Japan0 4 02-3 0
Rs.13,000-17,000 crore
foreign exchange
opportunity
Million tonnes
22
OIL WILL CONTINUE TO BE A KEY SOURCE OF ENERGY EVEN IN 2020
Primary energy consumption by fuelQuadrillion BTU1
11 quadmillion BTU = 2.61 BSCFD of gas equivalent
2Hydro includes geothermal renewables include solar, wind and tide, wave and ocean energy
3Oil consumption includes international marine bunkers
4Solid fuel consumption and imports include net imports of coke
Source: DRI-WEFA World Energy Service forecasts
Natural Gas
Nuclear, hydro2 & renewables
Solid waste & biomass
Solid Fuel4
Oil3
Total
7.1 7.89.9 11.8
14.51.2 1.3
2.0
2.8
3.9
10.5
9.09.2
10.0
10.2
10.5
8.3
6.5
5.04.5
1.0
0.9
0.8
0.60.5
22.224.0
29.1
34.1
40.4
2002 2005 2010 2015 2020
Oil will contribute to at least 25% of total energy supplies even in 2020
23
JATROPHA PLANTATION : COST BREAK-UP : WORKING SHEET- I
Employment generation and costs for Jatropha plantation (in Rs. per hectare)
S. No. ItemCOST (Rs.) Employment in person days Year
1st 2nd 3rd 1st 2nd 3rd
1 Site preparation i.e. cleaning and levelling of field - 10 MD 1000 - - 10 - -
2 Alignment and staking - 5 MD 500 - - 5 -
3 Digging of pits (2500 Nos.) of 30 Cm3 size @ 50 pits per MD - 50 MD 5000 - - 50 - -
4
Cost of FYM (including carriage) 2 Kg. per pits during 1st year (2 MT) 1 Kg. per pit during second year onwards @Rs.500/MT 2500 1250 1250 - -
5Cost of fertilizer @ Rs.6 per kg (50 gm. Per plant during 1st year and 25 gm from 2nd year onward) and 2 MD for each application. 950 575 575 2 2 2
6Mixing of FYM, insecticides fertilizers and refilling of pits @ 100 pits per MD 25 MD 2500 2500 2500 25 25 25
7Cost of plants (including carriage) 2500 Nos. during first year and 500 Nos. of plants during second year for replanting @ Rs.2.5 per plant 6250 1250 - - - -
8Planting and replanting cost 100 plants per MD for 1st Year @ 25 MD and 5 MD in 2nd Year, respectively 2500 500 - 25 5 -
9Irrigation - 3 irrigation during 1st and one irrigation during 2nd year @ Rs.600/- per irrigation 1800 600 - 5 2 -
10Weeding and soil working 10 MD x 1 time for 1st year & 10 MD X 3 times for 2nd years 1000 3000 - 10 30 -
11 Plant protection measure 300 - - 1 - -
Sub total: 24300 9675 4325 133 64 27
Contingency (approx. 5% of the above) 1215 483.75 216.25 7 4 2
Grand Total: 25515 10158.75 4541.25 140 68 29
Per acre cost (GRAND TOTAL / 2.5) 10206 4063.5 1816.5
Say 10200 4060 1850
Total for 1st Year & 2nd Year 14260
Total for 1st Year to 3rd Year 16110
24
BIO-FUEL PLANTATION & PROJECT COST PROJECTIONS
Sr. No. Particulars
Unit price (Rs.)
Ist yr.2007-08
2nd yr.2008-09
3rd yr.2009-10
4th yr.2010-11
5th yr.2011-12
6th yr.2012-13 Remarks
AMOUNT TO BE PAID TO FARMERS ON PER ACRE BASIS FOR PLANTATION / UPBRINGING FROM GOVT. SCHEMES 16110
1
Land Area to be planted during the year (in acres) - 1 lakh 2 lakhs 2 lakhs 2 lakhs 2 lakhs 1 lakh
10 lakh acres
2
Total Plantation Cost year-wise to be funded by State Govt. from various ongoing schemes such as NREGS etc. (Rs. in crores) 161.1 322.2 322.2 322.2 322.2 161.1 1611
25
JATROPHA COST OF CULTIVATION PER ACRE IN NORMAL SOILS : SHEET - II
Sr.No.
Particulars Unit price (Rs.) Ist yr. 2nd yr.
3rd yr.
4th yr.
5 th yr.
6 th yr.
7 th yr.
8th yr. onwards
1 Planting material 1000 plants/acreCausality replacementLand ClearingPit preparation & TransplantingManures & FertilizersWeeding and Soil workingWatering etc
(The per Acre cost breakup under 11 subheads as per planning commissions format submitted separately in Sheet no. I)
11150 3850 1900 - - - - -
2 Pruning 200 200 200 250 250 250 250 250
3 Harvesting - - - 300 500 500 500 500 500
Total cost of cultivation 11350 4050 2400 750 750 750 750 750
* Total cost of cultivation for Jatropha in Normal soils for the first three years including Pruning / Harvesting is @ Rs.17800/- per acre
** Additional Cost to be incurred for Plantation in the first year on
** Sodic Soils is Rs. 4000.00
** Rocky Soils is Rs.3950.00
26
SODIC & ROCKY SOIL TREATMENT
SODIC SOILS:
For making Sodic Soils suitable for the cultivation of Jatropha curcas Gypsum has to be added for amending the soil. Gypsum should be
added @ 10 tons/acre. For that in addition to the cost of cultivation of Jatropha in Normal soils Rs.4000.00 per acre has to be incurred
additionally to improve the soil condition.
ROCKY SOILS:
For making Rocky Soils suitable for the cultivation of Jatropha curcas in addition to the cost of cultivation of normal soils extra cost
@ Rs 3950/- per acre has to be incurred for the pit preparation and soil mixture.
27
REVENUE EARNINGS TO THE FARMERS: SHEET - III
Sr. No. Particulars
Unit price (Rs.)
Ist yr.
2nd yr.
3rd yr.
4th yr.
5 th yr.
6 th yr.
7 th yr.
8th yr. onwards
REVENUE TO THE FARMER FROM ONE
ACRE JATROPHA PLANTATION
1Benefit through NREGS In Rs. 7064 2664 1600 - - - - -
2 Yield (Kg.) - - 500 1000 2000 3000 3000 3000
3 Crop value in Rs. Rs.6/kg seed - - 3000 6000 12000 18000 18000 18000
Total in Rs. 7064 2664 4600 6000 12000 18000 18000 18000
Yearly Earning to Farmers on per acre cultivation 7064 2664 4600 5250 11250 17250 17250
17250
* The earning to the farmer in first 3 years is considered from NREGS based on only labour component works out to Rs. 11328/- .i.e. the computation of benefits through NGER excludes items 4, 5 & 7 given in Sheet I.
28
** If the cost of plantation material / manure etc. as well as labour cost is reimbursed, to the farmers under NREGS / Other schemes the in the first three years, and thereafter the earning to the farmer is based on crop yield, then the farmers earning is estimated at Rs 11,350/- in the first year and Rs.4050/- in the second year, Rs.4900/- in the third year, Rs 5250 in the fourth year, Rs 11250/- in the fifth year, with a regular income of Rs.17250/- per acre / per annum from sixth year onwards as under.Rupees Per Year Per Acre
1
Yearly Earning to Farmers on per acre cultivation if the total labour and material cost is reimbursed to the farmers for the first 3 years
11350 4050 2400 - - - - -
2Earning from the Crop Yield excluding the cost of Pruning / Harvesting
2500 5250 11250 17250 17250 17250
TOTAL : Yearly Earning to Farmers on per acre cultivation
11350 4050 4900 5250 11250 17250 17250 17250
State Governments may kindly consider reimbursement of cost of sapling material and labour, by suitably extending their existing schemes for Jatropha Cultivation for first three years of Rs.11350/- + 4050 + 2400 = Rs.17800/-, first Rs.10,000/- from NREGS & Rs.7,800/- from Horticulture / Other Schemes currently operating in the State for Mango / Guava and other Agricultural / Horticultural items.