New Delhi, Jan 2 (IANS) The government should raise the price of bio-diesel obtained from the jatropha plant to support the bio-diesel industry's sustainability efforts, the Confederation of Indian Industry (CII) says.

In a proposal submitted to the ministry of new and renewable energy, the industry lobby suggested the price could be increased from Rs.26.50 per litre to Rs.36.

"A study recommends that the present procurement price of
Rs.26.50 as per the bio-diesel policy should be reviewed and corrected to sustain the investment and required growth of the sector," CII said in a statement.

The study estimates that if the industry becomes sustainable and achieves two percent growth in the blending of bio-diesel by 2011-12, it can save around Rs.3,000 crore and generate about Rs.5,500 crore of revenue for the rural economy.

"This initiative would also help in reduction of annual green house gas emission by three million metric tonnes," the report said.

The CII report further suggested that the government should create a suitable policy framework which may include incentives, grants and distribution mechanism to make the price of bio-diesel self-sustainable.

According to it, the record fluctuation in oil prices has created an opportunity for easier adaptation and integration of bio-fuels in the country's energy portfolio.

"To counter and mitigate the security threat in a dieselised economy like India, bio-diesel may be used as a true supplement to fossil diesel with appropriate technological, financial and policy interventions," the statement added.