Confusing signals on bio-fuels

The optimists may focus on the fact that the policy aims to better utilise all the waste/under-utilised capacities in the country — wasteland in the case of bio-diesel and molasses in the case of ethanol — while enhancing the country’s energy security. The ‘green’ in them could also be happy, as carbon emissions from bio-fuels would be lower than that of the fuels they would be substituting. This view may also hold some merit and we could possibly live with the views of the cynics as well. The policy, however, has some serious flaws that need to be addressed if it is to pass scrutiny. The bio-fuels policy, which was quoted in the media as a done deal, has been retracted and a complete review of it is being undertaken. This is a very good development, as the policy, in the form in which it was, sent very confusing signals as regards its purpose and the intended beneficiaries. To the cynical, the policy reflects a desire to provide income ‘protection’ to the sugar industry vis-à-vis its role in ethanol production or a mechanism by which the under-recoveries of the oil marketing companies can be contained by facilitating access to cheaper blending options. The cynics may be justified in their views, given the policy’s focus on the minimum procurement price of bio-fuels and the use of molasses for ethanol production. The optimists may focus on the fact that the policy aims to better utilise all the waste/under-utilised capacities in the country — wasteland in the case of bio-diesel and molasses in the case of ethanol — while enhancing the country’s energy security. The ‘green’ in them could also be happy, as carbon emissions from bio-fuels would be lower than that of the fuels they would be substituting. This view may also hold some merit and we could possibly live with the views of the cynics as well. The policy, however, has some serious flaws that need to be addressed if it is to pass scrutiny. One of the key aspects of the policy is the target of blending 20 per cent of ethanol and bio-diesel in petrol and diesel, respectively, by the year 2017. This, obviously, is a completely unrealistic target, given that we have a mere eight to nine years between now and the year 2017 in which to put millions of hectares under bio-diesel plants — compounded by the fact that a plantation needs five to six years to stabilise the yield. The focus on ethanol is even more disturbing, as it would more naturally compete with consumptive utility of ethanol than bio-diesel based on the Jatropha plant. The government has already burnt its hands a few years ago when it announced a 5 per cent blending of ethanol with petrol, and the sugar markets crashed. It is also surprising that the proposed policy, in its current form, does not address itself to the issue of targeting the livelihood or the vulnerability of farmers who may engage in bio-fuel plantations, due to the increasingly volatile international oil market. Given the recent experiences that we have had on the extreme vulnerability of farmers — be it in Andhra Pradesh or Maharashtra — one would have expected some fairly clear messages to emerge from the policy on mechanisms for securing farmers’ interest. These mechanisms could range from a minimum guaranteed price for the oilseeds, to access to micro-finance and insurance coverage for the farmers. It also needs to be recognised that the attractiveness of bio-fuel plantations for the farmers would be a function of the pricing policy adopted by the government for all other agricultural crops. It is also important that the entire value chain of bio-diesel production, in particular, is evaluated to assess the distribution of benefits from bio-fuel plantations. Farmers should not become mere providers of input material, with no stake in the processing of the seed (the value-added components) or in the utilisation of the output at a local level. It is well known that 90 per cent of rural India meets its cooking energy requirements through the use of firewood and other wastes, and 57 per cent of this population does not have access to electricity. The government should invest adequate resources in exploring how the straight vegetable oil produced from non-edible oils can be used directly for meeting electrical and thermal energy requirements in rural areas, without necessarily going through the refining process. This would ensure that we have an alternative energy option at a decentralised level, which, if the refining process is bypassed, could also be at a significantly lower cost. Obviously, the government would need to make some investments in developing the institutional structures for maximising the local economy from bio-fuel production. If the government is not careful about analysing, a priori, the distribution of benefits of its programme, it could end up exploiting the rural economy for urban gains.