The Hindu Business Line : Enervated on biofuel

Soaring energy prices and their impact on global economic growth have once again become a subject of intense debate ahead of the G-8 plus 5 meeting scheduled for July 17 at St. Petersburg. While developed economies, including the US, are concerned over high energy prices fuelling inflation, emerging markets, especially China, continue to show a ravenous appetite for energy to maintain their growth momentum. The global crude market has turned distinctly volatile because of strained fundamentals — tight demand-supply balance — exacerbated by huge flow of speculative funds. The market is increasingly seen biased to the upside, at least in the short to medium term. No wonder, discussion on development and promotion of cheaper and eco-friendly alternatives — biofuels — has now taken centre-stage. Although biofuels have been around for three decades, the last two years saw accelerated development of bio-ethanol (from sugarcane and corn) and bio-diesel (from vegetable oil) both of which have gained immense popularity in the US and in Europe respectively.

Growing by leaps and bounds, India's energy demand ranks sixth worldwide. If India continues to consume oil at the current rate, by 2030, it is estimated that 94 per cent of the country's petroleum requirement will have to be met through imports. This is a scary situation. On the other hand, for the last five years or so, the government has been talking of promoting biofuels, but little headway has been made. No policy worth its name is in place. There is hardly any concerted effort by petroleum, agriculture, consumer affairs, and rural development departments. Instead of blindly aping others, developing economies such as India have to make a critical assessment of the risks and rewards of promoting bio-energy. For a food-deficit country, diversion of productive land to fuel crops can be hurting. No doubt, high-priced fuel crops will fetch higher incomes to growers, but a part of it may be neutralised by the higher food prices they will be forced to pay. As Prof Peter Hazell of London's Imperial College, and Dr Joachim von Braun, Director-General of International Food Policy Research Institute, point out, not only does increased production of biofuels pose risks and difficult trade-offs, the impact on poverty, hunger and the environment is less clear. As biofuel production uses a lot of energy, the level of carbon emission reduction too may not be significant.

Using marginal, rather than prime agricultural, land for biofuel crops and employing labour-intensive technologies for conversion of crop to fuel are sure ways to deliver real benefit to the really needy growers without compromising food security. To draw greater environmental and social benefits, a system of incentives (fiscal and others) and penalties has to be put in place. Most importantly, a viable biofuel industry needs end-to-end solutions covering the entire gamut of activities including investments in farm and processing, and in infrastructure. Food security or energy security — the policymakers have a tough choice to make.

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