The AP government has recommended the company's proposal for external funding of its Rs 14.84-crore bio-diesel project to the Centre for its approvaL The recommendation is the first-of-its kind by any state government.

Southern Bio's bio-diesel funding gets a boost.

Hyderabad, 4 May

The state government has recommended Southern Online Bio Technologies Limited's proposal for external funding of its bio-diesel project to the Centre for its approval. The recommendation of the project is the first-of-its kind by any state government.

The Rs.14.84-crore project is being appraised by a German financial institution, German Technical Cooperation (GTZ). Around Rs 6 crore is being raised through internal accruals, while Rs 9 crore is to be mobilised either through debt or equity. GTZ has linked any funding to the condition of an approval from the central government.

Southern Bio plans to set up the bio-diesel plant at Samsthan Narayanpur in Nalgonda district. The plant will produce 30 tonnes or 32,000 litres of bio-diesel per day from oil bearing seeds such as pongamia pinnata, jatropha curcas, etc. Raw materials can also be acid oils, distilled fatty acids and animal fatty acids. The commercial operations are to commence in April 2005. The project is expected to be scrutinised by the Union government within a month.

The Environment, Forests, Science and Technology Department of Andhra Pradesh has informed the Union Ministry of Environment and Forests that "the Government of Andhra Pradesh is in full agreement with the environmental, social and sustainable development objectives of the project, and have assured the proponents of full support and co-operation to make this first commercial bio-diesel project a success... It is good for the environment, the country's economy, and for the tribal poor and small farmers in the state. Therefore, the Andhra Pradesh government recommends the project for host country approval."

"The annual requirement of seeds forthe plant is around 32,000 tonnes of seeds. However, the current availability of seeds in the state does not exceed 4,000 tonnes. Till such time there is total availability of seeds, the company would use other raw materials like acid oils, distilled fatty acids, animal fatty acids and non-edible vegetable oils like neem, rice brawn etc," Southern Bio Managing Director N.Satish Kumar said.

He said that the company would shortly enter into Memoranda of Understanding (MoUs) with Andhra Pradesh Forest Development Corporation, the state forest department, Girijan Cooperative Corporation and AP Society of Elimination of Rural Poverty (Velugu) for procuring raw materials. Keeping in view the shortage of seeds, the company has also initiated negotiations with Saba Foundation of Malaysia to procure crude palm oil.

"Southern Bio has offered to purchase the seeds at Rs 4.50 per kg irrespective of quality of the material. In the case of fatty acids and acid oils, the company will procure them at Rs 15-16 a kg as against the prevailing prices of Rs l2-l4 a kg. The end product (bio-diesel) will be sold at 50 paise less than the prevailing high speed diesel (HSD)," he said.

The company has received expression of intent from various bodies to buy bio-diesel. The railways, which consume about two billion litres of HSD, plans to substitute five per cent of HSD with bio-diesel in the coming years. It expressed its interest in procuring bio-diesel from Southern Bio.

AP Lorry Owners Association offered to buy 12,500 litres per day of bio-diesel, while the Rig Owners Association of Andhra Pradesh expressed desire to procure 5,000 litres per day. Visakhapatnam Municipal Corporation has also expressed its desire to buy 20,000 litres ofbiodiesel per month from the company. Apart from being cheaper than HSD, bio-diesel will have to meet the quality norms of American Society of Testing Materials.

Meanwhile, the state government is also planning to persuade the Andhra Pradesh State Road Transport Corporation (APSRTC), Municipal Corporation of Hyderabad and the state secretariat to use bio-diesel for their fleet in a phased manner, Tishya Chatterjee' the principal secretary (environment & forests), stated in a letter to the Union Ministry of Environment and Forests.