Indian Railways to Increase Use of Biodiesel

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Researched by Industrial Info Resources (Sugar Land, Texas)--As part of an energy management strategy, Indian Railways (New Delhi) has been testing the compatibility of biodiesel in its engines for the last five years. Test results have shown that biodiesel can be blended with high-speed diesel, normally used in locomotives, with little modification to the engine. Indian Railways has now decided to set up its own biodiesel plants with an investment of nearly $16 million per plant per year, including construction and operating costs. Indian Railways recently floated a tender inviting bids from companies to construct and operate four biodiesel esterification plants on a build-own-operate-transfer basis. The plants must be set up within 12 months and then operated for 20 years by the selected companies. They will then be handed over to Indian Railways.

Raw jatropha oil will be used as feedstock at the plants, which will be set up in Erode, Tamil Nadu; Itarsi, Madhya Pradesh; Raipur, Chhattisgarh; and Tughlakabad, Delhi. However, logistical considerations may require the locations to be changed.

Companies can bid for more than one plant. According to the bid document, the selected company or companies must source their own jatropha oil or oil seeds. Each plant must supply the Railways with 50 kiloliters of biodiesel each day. If raw material is difficult to procure, the target capacity can initially be brought down to 10 kiloliters per day and ramped up later. The Railways intend to blend 5% of biodiesel with high-speed diesel and later increase the blend up to 20%.

The companies bidding for the project must have the capacity to build and operate state-of-the-art biodiesel plants, have sufficient facilities to treat the effluent, and the plant must be set up with a high degree of automation such that very little human intervention is required. On a payment basis, and if required, the Railways will provide electricity and water. The companies will be able to sell the byproducts. Land for the plants will be provided by the Railways near the mainline diesel locomotive sheds at each site. It has been estimated that setting up each plant will require about $4 million while running each plant will require approximately $12 million per year. The companies must bear all establishment and operational costs.

Indian Railways is the nation's largest consumer of diesel, using a mix of electric traction and diesel. The organization's annual diesel consumption is about 2.27 million kiloliters. Further, 2008 saw oil-marketing firms significantly reduce the discount usually extended to the railways. From a discount of about $22 per kiloliter offered in 2006-07, the discount was brought down to about $3 per kiloliter this year.

In July 2008, Indian Railways finalized a tender to obtain 44,000 kiloliters of biodiesel at about $0.63 a liter. The tender was for 50,000 kiloliters and it was floated in late 2007. The biodiesel to be procured through the finalized tender is a derivative of imported crude palm oil that will be produced by a technology patented by Carotech BHD (KUL:CTEH) (Perak, Malaysia). Khard-Carotech is the 50:50 joint venture between Carotech and Khard Soaps Private Limited (Jhansi, Uttar Pradesh). The joint venture is expected to deliver the major part of the Railways' requirement. On a pilot basis, the Railways intend to use a 10% blend of biodiesel at all 38 of its mainline locomotive sheds. If successful, the blend level will be raised. Carotech's biodiesel is marketed as CaroDiesel.

The remaining 6,000 kiloliters required by the railways is likely to be supplied by India's Southern Online Bio Technologies Limited (BSE:532669) (Hyderabad, Andhra Pradesh) and Royal Energy Limited (Mumbai, Maharashtra). The two companies will be supplying jatropha-based biodiesel but their rates are much higher than those offered by Carotech.

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