With the government planning to start 20 per cent blending of bio-diesel with diesel, Indian oil [Get Quote] companies are fast firming up their bio-diesel ventures.

The state-run Indian Oil Corporation, for instance, is slated to announce a joint venture with the government of Chattisgarh shortly to take up large scale jatropha farming across 36,000 hectares.

Oil extracted from seeds of jatropha plant - which can grow in wasteland across India - is blended with diesel to manufacture bio-diesel.

"India is keen on reducing its dependence on coal and petroleum to meet its increasing energy demand. Encouraging Jatropha cultivation is a crucial component of the energy policy," said Anand Kumar, director, Research and Development, IOC.

On the other hand, Hindustan Petroleum Corporation Ltd [Get Quote] has joined hands with the Maharashtra State Farming Corporation, a Government of Maharashtra undertaking, for a similar jatropha seed-based bio-diesel venture.

Besides IOC and HPCL, the other state run refiner and marketer - Bharat Petroleum Corporation [Get Quote] - has also entered into an arrangement with Hyderabad-based Nandan Biomatrix, an R&D company, and Shapoorji & Pallonji to form a joint venture for producing bio-diesel from jatropha in Uttar Pradesh.

In the private sector, Reliance Industries' [Get Quote] arm, Reliance Life Sciences, has taken up a 50-acre jatropha plant pilot project in Kakinada - the land fall point of the gas from its blocks in the Krishna-Godavari basin.

According to a recent report by Rabobank International, bio-diesel in India still has a long way to go due to the short supply of vegetable oils - the primary feedstock for bio-diesel - in the country.

While the total bio-diesel production globally was 7.2 million tonnes in 2006 and could go up to 32 million tonnes in 2012, India's bio-diesel production is less than 10,000 tonnes per year. There is, however, a huge potential for increasing this and reducing the rising oil import bill.

According to data from the petroleum ministry, the estimated oil import bill for 2007-08 would be around $73.83 billion (Rs 2,98,432 crore) against an actual import bill of $57.28 billion (Rs 2,59,418 crore) in 2006-07.

With car ownership (currently 8 per 1,000) slated to go up considerably over the next two decades, diesel demand will rise from 52 million tonnes in 2006-07 to about 67 million tonnes by 2011-12.

Says S Venkatraman, director, Strategic Advisory and Research, Food and Agri Business, Rabo India Finance: "Jatropha has great potential. It is estimated that India has around 5 to 10 million hectares of wasteland available for jatropha cultivation. If 10 million tones of jatropha production potential could be realised by 2012, it would be sufficient to replace close to 10 per cent of the diesel consumption by then."