India's ambitious programme to cut oil import bill by mixing a small percentage of non-edible oil in diesel has encountered an unexpected problem -- the price. A litre of non-edible oil for mixing in diesel has been quoted at Rs 70 a litre as against the diesel price of Rs 20.73 per litre.

Doping non-edible oil in diesel would make commercial sense only when its procurement cost is lower than the selling price of diesel.

"A limited tender for procurement of bio-diesel for the purpose of the first pilot project at Rewari has obtained response only from two parties at a price of about Rs 70 per litre," Petroleum Minister Ram Naik said at the consultative committee meeting attached to his ministry.

India spent Rs 84,000 crore (Rs 840 billion) last fiscal to meet its 70 per cent crude oil requirement. Such huge outgo had forced the government to introduce petrol doped with 5 per cent ethanol extracted from sugarcane in nine states. But imports would be dented only if such doping is adopted in diesel, which occupies 80 per cent of the transport fuel basket.

Naik said: "Keeping in view the high cost of implementation of the project due to high price and lower availability of bio-diesel, the ministry is seeking exemption of customs duty on the import of bio-diesel for the pilot project.

"Simultaneously, the ministry has decided to reduce the size of the pilot-project limiting the trial to some of the Haryana Roadways Depot buses. Funding is proposed from the Oil Industry Development Board."