Role of various stakeholders in promotion of Biodiesel in India

1

• Role of various stakeholders in promotion of
  Bio-diesel in India
• Presentation by
• Parveen Mithra
• Vice President Advisory Services
• SREI Capital Markets Limited

2
Government of India
Evaluate Bio-diesel Sector Proposals and Policy
issues in light of following merits

• Contributes to the energy security of the
  country.
• Restricts imports of crude and/or HSD.
• Checks further land degradation and restore
  degraded lands, make them more productive and
  contribute to greening of the country.
• Contributes to poverty reduction and generate
  rural employment and income mainly for the poor,
  particularly in areas where under-employment is
  more pronounced and agriculture is relatively
  less developed.
• Contributes to the industrial development of the
  country.
• Checks pollution of air caused by emission from
  transport vehicles using HSD and achieve
  prescribed emission standards.
• Mitigates effects of climate change due to green
  house gases and to contribute to achievement of
  the objectives of the United Nations Framework
  Convention on Climate Change (UNFCCC)

3
Planning Commission

• Energy Policy Committee to put emphasis on
  Bio-diesel promotion and draw up long term goals
  and action plan to achieve those goals.
• Set up realistic achievable Bio-diesel targets
  for 11th Plan i.e. bringing around 2.5 million
  hectare area under Jatropha plantations by the
  end of Plan so as to achieve 5 blending of
  bio-diesel with petro-diesel
• Allocate sufficient Central Plan Funds for
  development of the sector
• Encourage State Governments to promote this
  sector through their various schemes under State
  Plans

4
Ministry of Rural Development

• Nodal Ministry for implementation of National
  Mission on Bio-diesel
• Expedite obtaining EFC/CCEA approvals for the
  Mission
• Take up setting up of National Bio-diesel Board
  or creation of a dedicated department/cell with
  adequate staff for Bio-diesel programme.
• Identification and selection of wastelands
  through Department of Land Resources
• Integration of Bio-diesel Mission with other
  rural upliftment schemes i.e. National Rural
  Employment Guarantee Scheme, Rural Infrastructure
  Development Fund of NABARD etc.
• Facilitating timely and smooth flow of Plan funds
  to different stakeholders
• Overall Monitoring Supervision of entire
  Bio-diesel program

5
Ministry of Environment Forests

• Identification of wastelands / degraded lands for
  regeneration of forests
• Nursery Raising of Jatropha other Tree Borne
  Oilseeds
• Undertaking plantation of Jatropha other
  bio-fuel crops over identified forest wastelands
• Facilitating Clean Development Mechanism (CDM)
  Benefits for emission reductions achieved through
  Bio-diesel projects
• Research Development through ICFRE

6
Ministry of Agriculture

• Nursery raising of Jatropha through NOVOD Board
  agencies under its network
• Undertaking plantations over non-forest lands by
  involving various Agriculture Universities NGOs
• Buy-back guarantee to farmers for purchase of
  seeds at MSP
• Training Extension Programmes for education and
  awareness in villages
• Research Development through ICAR, IARI etc.
  for multiplication through tissue culture, better
  seed and oil yields, control over pests
  diseases, detoxification of oil cake etc.

7
Ministry of Panchayati Raj

• Identification of wastelands for which ownership
  is of Panchayats
• Encouraging Panchayats /farmers/entrepreneurs to
  enter into MOU so as to take up Jatropha farming
  through Contract Farming model with buy-back
  guarantee

8
Ministry of Petroleum Natural Gas

• Regular Review and modifications (as and when
  required) of Bio-diesel Purchase Policy.
  Bio-diesel purchase price should match with
  Ex-depot price of diesel.
• Gazette Notification on mandatory blending of
  bio-diesel with diesel after availability
  position of bio-diesel improves in India
• Take up issue of Excise Duty concessions on
  Bio-diesel with Ministry of Finance
• Take up issue of Customs duty concessions on
  import of plant machinery and alternate
  feedstocks (i.e. palm oil etc.) till the time
  local availability of these items is as per
  satisfaction of entrepreneurs
• Mass Awareness programmes through network of Oil
  Companies and Petroleum Conservation Research
  Association

9
Ministry of Non-Conventional Energy Sources

• Draft National Policy on Bio-fuels with special
  focus on Bio-diesel
• Promote Bio-diesel sector through soft loans by
  IREDA
• Sponsor RD for development of alternate devices
  and applications of Bio-diesel

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Ministry of Railways

• Form JVs with entrepreneurs to undertake
  plantation of Jatropha over wastelands along
  Railway Tracks
• Purchase Agreements with oil companies to supply
  bio-diesel blended fuels
• Trials on Bio-diesel blended fuels in Railway
  Engines

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Ministry of Road Transport Highways

• Form JVs with entrepreneurs to undertake
  plantation of Jatropha over wastelands along
  National Highways
• Purchase Agreements by State Transport
  Undertakings with oil companies to supply
  bio-diesel blended fuels
• Trials on Bio-diesel blended fuels in STUs buses
• Involving Society of Indian Automobile
  Manufacturers (SIAM) for issues such as Vehicle
  Manufacturer Guarantees, Engine Modifications,
  Emission Norms etc.

12
Ministry of Science Technology

• Undertake RD studies on all products and
  by-products in bio-diesel link chain through
  institutes and departments like DBT, IIP, IICT,
  CSMCRI, NBRI, ITRC, IITs etc.

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Ministry of Finance

• Consider Excise Duty Concessions on Bio-diesel
• Consider Customs Duty concessions on import of
  plant and machinery
• Consider Customs Duty concessions on import of
  alternate feedstocks till the time local
  availability of Jatropha and other bio-fuel crops
  is ensured
• Ensure easy availability of credit at
  concessional rates through Financial Institutions

14
Ministry of Small Scale Industries Agro Rural
Industries

• Facilitate setting up of Seed Collection and Oil
  Expelling Centres through schemes of KVIC

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State Governments

• Set up Bio-fuel Authority or designate nodal
  department in the State for coordination work
  w.r.t. bio-diesel related projects with Central
  Government
• Facilitate identification of Government, private,
  public/community lands for raising of Jatropha
  Other bio-fuel crops
• Facilitating leasing of identified degraded lands
  to entrepreneurs for undertaking raising of
  Jatropha plantations/other bio-fuel crops on
  Contract Farming model
• The States which do not have such policy of
  leasing of large area of land can distribute the
  degraded land to the landless farmers _at_ 2 ha per
  family and synergise it with National Rural
  Employment Guarantee Scheme
• Consider offering tax breaks, irrigation subsidy,
  VAT concessions etc. to encourage entrepreneurs,
  farmers etc.
• Consider participation in certain projects with
  Private Sector through Special Purpose Vehicle
  (SPV) route
• Integrating various State Plan Schemes on
  development of rural sector with bio-diesel
  projects

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Private Developers / Strategic Development
Partners

• Can undertake consultancy assignments and act as
  a Strategic Group advising GOI on various
  bio-diesel sector related policy issues
• Can enter into agreement with GOI (i.e. nodal
  Ministry) to form Special Purpose Vehicles
  (SPVs) at Centre and pooling of resources is
  possible to for professional management of
  projects and generation of a big corpus of funds
• SPVs involving private developers can be formed
  in the States also for funding, implementation
  and monitoring of projects and as a single
  channel window at state for coordination with
  Central Govt/all other stakeholders
• Can assist GOI in attracting grants / low cost
  funds from international funding agencies.

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Current Models Suggested Approach
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Plantation Oil Processing Current Models
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Cash Flow in the Value Chain
Cash Flow for Bio Diesel
Cash Flow For Oil cake
Cash Flow for Oilseeds
Cash Flow for Oil
Cash Flow for Glycerol
From Local consumption
Seed Collection Centre
FARM
Expeller Unit
Transesterification Unit
To Glycerol Wholesalers
Oil Depot
To User Industries (Pharma, Soap Making, Wax
Making etc)
To Final Customer
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Proposed Implementation Structure
GoI (Ministry of Rural Development or Agriculture)
Grants, Concession Agreements
Strategic Development Partner
Designated Agency of GoI
JV Agreement
Special Purpose Vehicle
Equity Contribution
Equity Contribution
Grants
State Level Project SPV 2
State Level Project SPV 3
State Level Project SPV 1
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Proposed Implementation Structure
National Level SPV
Rural Employment Guarantee Scheme
Private Developers
Grants, Concession Agreements
Subsidies / Grants
State Level Project SPV
Banks / FIIs
CER Agreement
Loan Agreement
CERs Trading Agency
Marketing (Buy-back arrangement with oil
companies and other potential customers)
Share Holding
Contract Farming
Panchayat / Forest Department / Farmers
Cooperatives (Raw Materials)
Logistical Support Provider (Storage and
Transportation)
Oil Expeller Unit Trans-esterification Unit
(Oil Extraction)
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Role of Strategic Development Partner

• Appraise commercial viability and sustainability
  of the project.
• Assist in developing the IDENTIFIED PROJECTS on
  Commercial format on its other internationally
  known acronyms.
• Consequently, assist development of the Projects
  up to the stage of TECHNICAL AND FINANCIAL CLOSE.
  
• Professional Management through experienced and
  qualified Managers.
• The role would consist of
• Advisory services during the entire project
  development cycles.
• ESTABLISHING ELIGIBILITY for World Bank and
  Multilateral Agencies/ Commercial
  Banks/International funding / CDM Fund.
• MERCHANT BANKING SERVICES for reaching financial
  close
• To render assistance up to COD (Commercial
  Operation Date)
• Advise the State level SPVs on problems and
  issues requiring policy support from Centre.

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Role of Strategic Development Partner

• The Four Phase Advisory Services would consists
  of
• Phase I - Project Evaluation and Documentation
• Detailed Feasibility and Investment Banking
  Report
• Environmental and Social Assessment Report
• Risk Assessment and Management Plan
• Draft Contractual Documents
• Detailed process for implementation
• Phase II - Methodology of Implementation The
  stakeholders by consultation would decide about
  final organisation structure, which would
  implement the Project.
• Phase III - Selection of Private Developer
• Phase IV - Project Financial Close

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Role of Government / Designated Agency

• Agency shall take necessary steps to facilitate
  permissions/approvals required for the
  Project(s).
• Agency shall assist in collection of data,
  co-ordination of activities, supervision and
  shall assist in obtaining necessary approvals
  from appropriate Government Departments and
  render all assistance for the Project(s).
• Agency shall assist in the creation of
  appropriate legislation, if necessary to enable
  proper buy-back arrangement.
• Provide Grant on merits of each identified
  projects.
• Provide policy support for project through
  legislative framework i.e. exemption of VAT on
  Bio-diesel, irrigation subsidy for farmers etc.
• Monitor social responsibilities of SPV towards
  creation of employment opportunities for rural
  people.

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Advantages of the Model

• Mobilization of large corpus of funds through
  pooling of equity, loans, central grant and ODA
  from abroad.
• Policy/Legislative framework support assured
  through equity participation of State Government.
  
• Faster administration of Central Grants
  Subsidies to beneficiaries.
• Access to Rural Infrastructure Development Funds
  of NABARD through State Government.
• Good potential to attract ODA and equity
  participation from foreign funding institutions.
• Better bargaining strength to negotiate long term
  loans with Financial Institutions/Banks.

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Advantages of the Model

• Ensures availability of land since Panchayats /
  Forest Departments / Farmers shall be stake
  holder of the SPV.
• Provides for organized collection of seeds and
  raw oil thereby reducing losses and
  transportation costs.
• Can ensure consistent availability of bio-diesel
  to oil companies.
• Quality Inputs i.e. planting material,
  fertilizers etc. can be arranged thereby
  resulting in better seed/oil yields.
• Technical know-how and guidelines.
• Centralized knowledge / data bank for the State.

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THANK YOU