Aluminium Sector, Media Sector, Alternative Fuels

Aluminium Sector, Media Sector, Alternative Fuels

India's first bio-fuel pump to start soon

In winter 2005, Chief Minister Narendra Modi was at the Gujarat Agriculture University campus in Navsari, riding a tractor with a difference - it ran on bio-diesel. Come September, that bio-diesel will be available at a pump for the first time in India.

The bio-diesel production, from Jatropha plants, is the brainchild of 40-year-old Dharmendra Parekh, chairman and managing director of Aditya Aromedic and Bio-Energy. Since April, the firm has been producing bio-diesel from the jatropha plant.

Registered in 2005 and set up with a capital outlay of Rs 5 crore, the company produces 17,000 litres of bio-diesel per day at its 140,000-sq ft plant located in Tarsadi village on the Navsari-Bardoli highway in Navsari district.

The bio-diesel is sold at Rs 38.90 per litre while the price of regular diesel is Rs 39.20 per litre and that of premium diesel Rs 40.40.

The firm has been pre-selling its entire output every day since April. "We don't have to do any marketing. On the contrary I take a deposit of Rs 5,00,000 from all my customers and everyone irrespective of the quantity purchased has to pay the full amount in advance. And the delivery is done only after 20 days," says Parekh.

"I have at least five customers waiting in the queue, each of whom has a daily requirement of over 500 tonnes of bio-diesel." Right now, the fuel is supplied from two depots - one at Navsari and other at Mehsana in north Gujarat.

The clientele is spread over Ahmedabad, Nadiad, Vadodara and north Gujarat, Mumbai and Delhi.

Importantly, diesel vehicles do not need to modify their engines to use bio-diesel. "I have been using my own bio-diesel in my Tata Indica diesel car for the past nine months and it runs very smoothly and also gives me a mileage of 21 to 22 km on the highway," says Parekh, a graduate in computer science and master in bio-informatics. "There is no problem at all even if you keep on changing the fuel from regular diesel to bio-diesel."

Parekh also claims that his bio-diesel was much better in quality than most of the premium diesel brands being hawked by the oil majors.

India Biofuel Sector

India Biofuel Sector

Biofuels - the next big thing ?

It is common knowledge that farm subsidies and technology infusion combined to boost global agricultural production in recent years. Rapidly increasing output unmatched by demand growth resulted in farm goods prices staying depressed for a large part of the period between 1995 and 2005. Inventories of major commodities expanded. Existing high consumption levels and issues such as obesity resulted in consumption growth stagnating in developed countries, even as the Asian economic crisis and frequent outbreak of diseases added to demand-side problems.
In rebound mode

A major transformation has taken place in the world agricultural markets in the last two years — 2006 and 2007. Global growth has rebounded. Asia is contributing to this growth substantially. Buoyed by strong GDP growth and demographic pressure, China, and more recently India, are now major consumer markets for a range of commodities including energy, metals and agriculture.

Corn, soyabean, wheat and vegetable oil markets have registered extraordinary performance, prices having reached multi-year highs in recent months.
Minor Alternative

Why did the market suddenly shift gear and begin to move northward? One dominant reason is the sudden emergence of biofuels as a minor alternative or addition to fossil fuel. Stung by the sharp rise in crude oil prices, major economies such as the US and European Union have announced policies to support production and use of biofuels, which are renewable sources of energy (unlike fossil fuel) and largely eco-friendly.

Technology to convert cane, corn and wheat into ethanol is available. Ethanol is blended with gasoline (petrol). Similarly, biodiesel is produced out of vegetable oil (rapeseed oil, soyabean oil, palm oil) through a process known as trans-esterification. Biodiesel is blended with fossil diesel.

In fact, production of ethanol from cane and mixing with gasoline has been going on in Brazil for over 30 years now.

Gasoline is blended with ethanol to the extent of 20-24 per cent.Similarly, Europe has been using biodiesel in notable quantities since the beginning of the current decade. In the last four years, demand for biodiesel has been growing by 30-40 per cent a year in the EU.

The announcement of a major policy initiative by the US to promote biofuels and mandatory blending has converted what was once a non-conventional source of energy into ‘green fuel’ to fight carbon emission and global warming.

Since 2005, huge investments have flowed into setting up humungous capacities for production of biofuels — ethanol and biodiesel. While Brazil produces ethanol from cane, the US produces it from corn (maize).

Wheat is also used as feedstock. Rapeseed oil is the major feedstock for biodiesel in Europe and soyabean oil in the US. Of late, Malaysia and Indonesia have also pitched in. A considerable quantity of palm oil is now diverted for biodiesel purposes.
Boost to prices

Buoyed by the sudden emergence of a new use for traditional food/feed products, prices of corn, wheat and vegetable oils have doubled in the last 12-15 months.

Among crops, there is now competition for acreage, especially in the US, the world’s largest producer of corn and soyabean. For instance, in 2006, a major expansion of acreage for corn resulted in soyabean acreage reduction, which, in turn, led to a sharp decline in the US soyabean output, with adverse impact on world oilseed and oil prices.

Policymakers across the world have advanced all the classical arguments in favour of biofuels. These include energy security through self-reliance, lower dependence on overseas energy products, encouragement to environment-friendly renewable fuels, support to growers through more remunerative prices and employment generation in rural areas.

Fuel of the future - Biofuel

As fossil fuels become increasingly scarce and expensive, the search for alternative energy sources is getting intensified. Till quite recently the low cost of petroleum products made most agro-based fuels uneconomic, but not any longer. Since taxes in most countries account for more than half the price the consumer pays, many countries lower the taxes on bio fuels to make them viable.

The world automotive industry is seriously worried because they know that the ever-increasing prices of fossil fuels will adversely impact their future sales. Their business is to sell vehicles, so unlike oil companies, they are quite serious about bio fuels.

Brazil was one of the first to introduce a mix of 25% ethanol, derived from sugarcane, with petrol to make Gasahol that was popularized with slightly lower retail prices over 30 years ago. 100% ethanol is used in Formula 1 cars as it does not catch fire but a 10% mix can be used in any petrol powered car without any modification to the engines or fuel systems.

Ethanol has a higher octane value than petrol but will result in slightly lower power and fuel efficiency. But since the Ministry of Petroleum was not interested in bio fuels and it was not a priority with the Ministry of Agriculture, no one pushed bio fuels in India till very recently. Now a 5% mix is being belatedly used in India but oil companies are reported to be dragging their feet in implementing the new mandate.

For trucks, buses and diesel cars, pure Jatropha oil with a small quantity of additives can be used instead of diesel without any modifications to the engines or fuel systems.

Earlier this biodiesel had been successfully tested on test beds and for many thousand kms on the plains but road tests at high altitudes have demonstrated that emissions and performance as well as power output is excellent when put to an extreme test on steep inclines in the rarified air and low temperatures of high altitudes.

Jetropha oil compares well with diesel. The Cetane number is about 15% better than diesel at around 58 to 60 resulting in smoother and quieter performance. But the calorie output is a little lower and should result in about 3% less power output.

However, as biodiesel contains a little oxygen it faces less oxygen starvation at high altitudes. The flashpoint though is about 160 degrees C as compared to 50 for diesel,making it much safer. On the emission front, bio diesel contains no Sulphur so there is no SOX while NOX continunes to be very low.

Jetropha by itself is a useless plant that came to India (originally it came from Mexico along with PL 480 wheat) from America in the 60’s. Animals and birds shun the berries and the stalks that are mildly poisonous. It cannot be used for food, fibre or fuel and its only use is as a hedge crop.

Bio-fuel has top investors powered up

India's fortune-hunters believe their new-found love for biofuel will pay off.

India's well-known investors who are known for their Midas touch have spotted an opportunity in bio-fuel, betting big on ethanol, bio-mass and even bio-fuel equipment makers in India and other parts of the globe.

Billionaires Rakesh Jhunjhunwala, C Sivasankaran, Vinod Khosla, founder of Sun Microsystems, and Nemish Shah, the media-shy joint partner of Enam Financial Services, are investing in bio-fuel makers quietly, expecting that bio-fuel will have a big play in the coming years as the world looks for a viable alternative to the fast depleting oil reserves.

Jhunjhunwala, who is known for his ability to spot a multi-bagger at a very early stage, recently invested in Hyderabad-based bio-fuel firm Nandan Biometrics.

He is also a 10 per cent stakeholder in Praj Industries, which is a bio-fuel technology provider and equipment maker.

“Bhai (as Jhunjhunwala is known in market circles) is bullish on biofuel and the broad alternative energy space. He is looking at several unlisted companies for more investments,” said a source.

Vinod Khosla, the founder of Sun Microsystems and a leading green fuel investor through his Khosla Ventures, holds a minor stake in Praj Industries.

But, Khosla, who is scouting for more investments in India, is playing a high stakes game in Brazil.

He has backed Brazilian Renewable Energy Company (Brenco) and also made investments in Segetis, founded by former Soviet scientists Sergey and Olga Selifonova, to develop renewable chemical products.

C Sivasankaran, who sold his stake in mobile phone company Aircel to Malaysian conglomerate Maxis Communications for over $1 billion, has set up “E85 Inc”, an ethanol producing company in Raleigh, North Carolina, investing $200 million late last year.

“Alternative energy, broadly, is an area which we are excited about as an investment opportunity,” said Rahul Bhasin, managing director, Barings Private Equity, which has invested in Auro Mira Energy, a wind energy company.

Market sources say Nemish Shah, who spotted multi-baggers Sesa Goa and Infosys when everyone was looking the other way in the early 1990s, is also making quiet moves in biofuel companies in India, both listed and unlisted.

Sources say little known IKF Technologies, which is entering bio-fuel production in a big way, has come on his investment radar.

A listed company, IKF Tech recently sought government leases for a total of 150,000 hectares of land in Swaziland, Mozambique and South Africa to cultivate jatropha to produce biofuel.

“There are several factors that can make India successful in the alternative energy space: availability of natural resources, cost-effective engineering and manufacturing talent and high cost of importing traditional fuels,” said Arun Natarajan of Venture Intelligence, a PE tracking firm.

“While I do not see alternative energy posing a threat to sectors that are traditional favourites with investors — like IT & IT-enabled services and manufacturing — any time soon, there is definitely a strong interest in this sector,” he added.