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Copyright 2010 © Khaitan & Co All rights reserved BIO-FUELS 2010 Stein Auditorium, India Habitat Centre, New Delhi 19 NOVEMBER 2010 PRABJOT SINGH BHULLAR, PARTNER KHAITAN & CO LLP ADVOCATES, SOLICITORS, NOTARIES, PATENT & TRADEMARK ATTORNEYS NATIONAL POLICY ON BIOFUELS, 2009
Copyright 2010 © Khaitan & Co All rights reserved NEED FOR ALTERNATIVESROLE OF LAW & POLICYSTAKEHOLDER WISH LISTNATIONAL POLICY ON BIOFUELS, 2009WAY FORWARDINDIA’S EXPERIMENT WITH RE Overview
Copyright 2010 © Khaitan & Co All rights reserved Need for Alternatives ENERGY ‘SELF-SUFFICIENCY’... CRITICAL FOR ECONOMIC & SOCIAL DEVELOPMENT INCREASING DEMAND OF ENERGY & TRANSPORT SECTORS CONCERNS OVER ENERGY SECURITY …DEMAND MET FROM IMPORTS RISING FUEL PRICESIDENTIFYING “SUSTAINABLE” ALTERNATIVES CRITICAL!GLOBAL INITIATIVES FOR REDUCING GLOBAL WARMING
Copyright 2010 © Khaitan & Co All rights reserved Role of Law & Policy TRANSPARENCY & CLARITY ON STAKEHOLDER ISSUES BALANCING INTEREST OF STAKEHOLDERSADDRESS INTER-STATE CONFLICTSBUILD INSTITUTIONAL & REGULATORY CAPACITYCREATION OF A VIABLE & SUSTAINABLE MARKET
Copyright 2010 © Khaitan & Co All rights reserved Stakeholder Wish List CREATING A MARKET FOR BIOFUELS IMPORT OF TECHNOLOGY FEASIBLE & VIABLE PRICING TAX BENEFITS & INCENTIVES INFRASTRUCTURE TO SUPPORT STORAGE & DISTRIBUTION INCENTIVES TO PROMOTE PLANTATIONS AVAILABILITY OF WASTELANDS/ARID LANDS
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels,2009 (23.12.2009) PREAMBLE Fossil fuels are limited and need to be used prudently RE resources are indigenous, non-polluting and virtually inexhaustable and their use should be encouraged Domestic crude oil is able to meet only about 23% of the demand and rest is met from imported crude Energy security would remain vulnerable until alternative fuels are developed based on renewable feed stocks Biofuels are environment friendly Utilization would address concerns about containment of carbon emissions Biofuels provide an advantage to promote sustainable development Biofuels would stimulate rural development and create employment
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 VISION & GOALS Facilitate and bring optimal development and utilization of indigenous biomass feed stocks for production of biofuels Accelerated development and promotion of the cultivation, production and use of biofuels Substitute petrol and diesel for transport and be used in stationary and other applications Make minimum level of biofuels readily available in the market to meet the demand at any given time Indicative target of 20% blending of biofuels, both for bio- diesel and bio-ethanol by 2017 proposed Blending levels prescribed for bio-diesel are intended to be recommendatory Blending level of bio-ethanol are mandatory (effective Oct, 2008)
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 STRATEGY & APPROACH Cultivators, farmers, landless labourers etc. will be encouraged to undertake plantations that provide the feedstock for bio-diesel and bio-ethanol Corporates will be enabled to undertake plantations through contract farming by involving farmers, cooperatives and Self Help Groups etc. in consultation with Panchayats, where necessary. Cultivation / plantation will be supported through a Minimum Support Price for the non-edible oil seeds used to produce bio-diesel Appropriate financial and fiscal measures will be considered from time to time to support the development and promotion of biofuels and their utilization in different sectors.
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ENABLING MECHANISM…Plantations Minimum Support Price (MSP) for oilseeds should be announced and implemented with a provision for its periodic revision so as to ensure a fair price to the farmers. Details about implementation of the MSP mechanism will be worked out carefully after due consultation with stakeholders Statutory Minimum Price (SMP) mechanism prevalent for sugarcane procurement will be examined for extending such a mechanism for oilseeds to be utilized for production of bio- diesel by the processing units Payment of SMP would be the responsibility of the bio-diesel processors Different levels of Minimum Support Price for oilseeds has already been declared by certain States (?)
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ENABLING MECHANISM…Processing Setting up of processing units by industry for bio-oil expelling/extraction and transesterification for production of bio- diesel will be encouraged Difficult to specify percentage of bio-diesel to be blended with diesel at least in the initial stages in view of the uncertainty in the availability of bio-diesel…blending will be permitted upto certain prescribed levels initially and made mandatory in due course Blending would have to follow a protocol and certification process, and conform to BIS specification and standards, for which the processing industry and OMCs would need to jointly set up an appropriate mechanism and the required facilities Engine manufacturers would need to suitably modify the engines to ensure compatibility with biofuels, wherever necessary.
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ENABLING MECHANISM…Distribution & Marketing Responsibility of storage, distribution and marketing of biofuels would rest with OMCs For determination of bio-diesel purchase price, the entire value chain - production of oil seeds, extraction of bio-oil, processing, blending, distribution and marketing to be taken into account MPP for bio-diesel by the OMCs to be linked to the prevailing retail diesel price MPP for bio-ethanol, will be based on the actual cost of production and import price of bio-ethanol MPP both for bio-diesel and bio-ethanol … to be determined by the Biofuel Steering Committee and decided by the National Biofuel Coordination Committee In case diesel or petrol price falls below the MPP for bio- diesel and bioethanol…OMCs will be duly compensated by the Government
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ENABLING MECHANISM…Financing Plantation of non-edible oil bearing plants, setting up of oil expelling/extraction and processing units for production of bio- diesel and creation of new infrastructure for storage and distribution would be declared as a priority sector for the purposes of lending by financial institutions and banks NABARD, IREDA, SIDBI to be involved with financing of activities under the entire biofuel value chain, at different levels Investments and joint ventures in the biofuel sector proposed to be encouraged Biofuel technologies and projects would be allowed 100% FDI through automatic approval route, provided biofuel is for domestic use only, and not for export. Plantations would not be open for FDI participation.
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ENABLING MECHANISM…Financial & Fiscal Incentives Financial incentives, including subsidies and grants, may be considered upon merit for New and second generation feedstocks; Advanced technologies; Conversion processes; Production units based on new and second generation feedstocks. Biofuels…derived from renewable biomass resources they will be eligible for various fiscal incentives and concessions available to the New and Renewable Energy Sector from the Central and State Governments Bio-ethanol already enjoys concessional excise duty of 16% & Biodiesel is exempted from excise duty. No other Central taxes and duties are proposed to be levied on bio-diesel and bio-ethanol Custom and excise duty concessions would be provided on plant and machinery for production of bio-ethanol and bio- diesel
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ENABLING MECHANISM…R&D Thrust be given to Innovation, Research & Development and Demonstration in the field of biofuels Intensive R&D work would be undertaken in the areas Biofuel feed-stock production based on sustainable biomass, conversion technologies for first generation biofuels and emerging technologies for second generation biofuels, Technology for end use applications & utilisation of by-products of bio-diesel and bio- ethanol production processes such as oil cake, glycerin, bagasse, etc. Demonstration projects for biofuels based on PPP mode Subcommittee under the Biofuel Steering Committee (led by Department of Bio-Technology and coordinated by the Ministry of New and Renewable Energy)comprising following be constituted: Department of Bio-Technology, Ministry of Agriculture, Ministry of New and Renewable Energy Ministry of Rural Development would be constituted
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 IMPORT & EXPORT Import of biofuels permitted to the extent necessary, and wIll be decided by the National Biofuel Coordination Committee proposed under this Policy Duties and taxes would be levied on the imports so as to ensure that indigenously produced biofuels are not costlier than the imported biofuels Import of Free Fatty Acid (FFA) oils will not be permitted for production of biofuels Export of biofuels would only be permitted after meeting the domestic requirements and would be decided by the National Biofuel Coordination Committee
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 ROLE OF STATES The role and active participation of the States is crucial in the planning and implementation of biofuel programmes State Governments would be asked to designate an existing agency, or create a new agency suitably empowered and funded to act as nodal agency for development and promotion of biofuels in their States. States would need to announce suitable policies in a time bound manner in line with broad contours and provisions of the Policy State Governments would also be required to decide on land use for plantation of non-edible oilseed bearing plants or other feedstocks of biofuels, and on allotment of Government wasteland, degraded land for raising such plantations Creation of necessary infrastructure would also have to be facilitated to support biofuel projects across the entire value chain
Copyright 2010 © Khaitan & Co All rights reserved National Policy on Biofuels, 2009 INSTITUTIONAL MECHANISMS In view of a multiplicity of departments and agencies National Biofuel Coordination Committee (NBCC) headed by the Prime Minister members from concerned Ministries be set up Committee would meet periodically to provide overall coordination, effective end-to-end implementation and monitoring of the biofuels programmes. To provide effective guidance and oversee implementation of the Policy on a regular and continuing basis, a Biofuel Steering Committee headed by the Cabinet Secretary, and comprising Secretaries of concerned departments be set up
Copyright 2010 © Khaitan & Co All rights reserved WAY FORWARD Proposed initiatives under Policy are welcome Is the price in line with the policy ? Has it been fixed taking into account the entire value chain comprising production of oil seeds, extraction of bio-oil, its processing, blending, distribution and marketing ? Is there a remedy available if pricing is not in line with policy directives? Does the biofuel sector need a pricing regulator to ensure a viable & sustainable pricing? CONCERNS Evaluate actions taken & pending under existing policy, legal and regulatory framework Identify hurdles...pricing & market.. Seek corrections Identify changes required in policy, legal and regulatory framework Interface and consensus with Ministries/Bodies and States for building consensus on issues Address issues which trigger and facilitate investments & creation of a market for biofuels Make representations before concerned Ministries & Bodies Evaluate approach adopted in other sectors Seek appropriate changes in the policy/law APPROACH
Copyright 2010 © Khaitan & Co All rights reserved INDIA’S EXPERIMENT WITH RE CHALLENGES Creating a market for RE power even though its more expensive than conventional power Need for a differential tariff until technologies can compete with conventional technologies Unavailability of RE power in each state … States unable to meet RPOs ERCs regulating power procurement of distribution licensees APPROACH… Law, Policy & Regulation Electricity Act, 2003 mandated SERCs to specify a percentage of power to be procured by distribution licensees from renewable sources Removal of inconsistencies with Centre & State laws SERCs issued regulations specifying the percentage of RE power Policies issued under Act - National Electricity Policy and Tariff Policy justified the determination of a differential tariff for non-conventional technologies for a transition time until these technologies could compete. CERC issued regulation to address mismatch between availability of renewable energy resources within the State and the requirement of the obligated entities to meet the RPOs... Regulations issued for interstate sales & RECs IMPACT ON SECTOR Creation of a market has triggered investments in the RE sector Investors assured of generic tariff or project specific tariff approved by ERCs Clear market for RE power … long term PPAs 19 Is the Policy sufficient for effecting change ?
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