The Indian railways, which has been testing the compatibility of bio-diesel in its locomotives for the last five years, has invited tenders for setting up of four bio-diesel esterification plants at an investment of Rs 78.5 crore to supply bio diesel to the railways.
Esterification is the chemical process of converting the oil extracted from oilseeds, or say jatropha, to bio-diesel compatible for use in diesel engines.
The plants will come up at Tughlakabad, Raipur, Itarsi and Erode. However, the locations are tentative and may be changed on logistical considerations.
?We are targeting a capacity of 50,000 litres of bio diesel from each unit per day, totaling 2,00,000 litres a day. Initially we will blend five per cent bio-diesel with the high-speed diesel used in locomotives, and take it up to 20% in the future,? said Pradeep Kumar, chief administrative officer, Indian Railways Organisation for Alternative fuels.
?We have been testing the blending process over the last five years in our locomotives. We have completed the tests and found that bio- diesel can be blended with high-speed diesel (HSD) with least modifications in the engine,? added Kumar.
While the railways will provide land for the projects, the companies will have to meet the establishment as well as the operational cost and provide bio-diesel to the railways at a pre-determined and competitive price. The operational cost per plant per annum is Rs 60 crore.
The duration to set up the plants is twelve months and the completion period of the contract is twenty years. As far as the railways? contributions are concerned, it will provide land in the diesel sheds/workshops at locations convenient to the companies for setting up of the plants.
Sourcing oil-seeds/raw oil for making the bio-diesel will be the company?s responsibility. However, sourcing of raw materials has been the grey area in railways? earlier bio-diesel initiative.
?We got an MoU signed with the Indian Oil Corporation five years ago. As per the deal, IOC was provided land to grow jatropha by the railways and supply bio-diesel to it, which did not fructify,? said a railways official.
However, talking about the feasibility of the initiative, Amrit Pandurangi, India leader (infrastructure), PriceWaterhouse Coopers said, ?There is no issue as far as the market part is concerned. owing to the volatility in the oil prices, the railways too might be feeling jittery. In this scenario, why not have a captive production units so that they are not vulnerable to market volatility.?
However, the railways participation in the micro management of the projects like choice of project site is a critical issue as in that case it will be spending time which could have been spent on the core activities, he added.
On procurement of raw materials, he said this is a scenario where marketing the product is not difficult and those planning to enter into the business must be having a plan to procure the raw materials.
In fact, the bid document has given some relaxation to the participants on the raw material front. In case a participant feels that availability of raw-material is a constraint, it can offer to set up a plant of lesser capacity, which can be expanded in future on mutual agreement basis, bearing the cost of expansion on its own. Also, the companies will be free to sell in the open market the by products produced by this plant.
This is precisely the reason why railways, which consumes around two million kilo litres of diesel every year, plans to blend bio-diesel starting from five per cent and gradually increasing up to 20%.
The company bidding for the projects needs to have all the requisites to set up and operate state-of-the-art bio-diesel plant along with effluent treatment plant, and high degree of automation requiring bare minimum human intervention. Other inputs like water and electricity may be provided by railways if possible on payment basis.