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The government is likely to fix a price of Rs 34 a litre for purchase of biodiesel by oil marketing companies, after biodiesel producing companies agreed to sell the fuel at that rate in a recent meeting between the government’s representatives and industry players.

“Most of the biodiesel plants are either running at 5 per cent capacity or lying idle. This move will help put the plants to use. Industry players quoted a price of Rs 36 a litre, but finally agreed on Rs 34,” a source from the Biodiesel Association of India said.

India’s biodiesel processing capacity is estimated at 200,000 tonnes per year but a majority of biodiesel units are not operational most of the year. “Given current crude oil prices, this price (Rs 34) looks viable. We had asked the government to link raw material prices to finished prices as it happens in other countries, where biodiesel is sold at a discount to conventional diesel since it is cheaper than crude oil,” an executive from one of the biodiesel producing companies said.

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