The Hindu Business Line : Policy sans power

CONCEDED THAT SOARING crude prices and rising import dependence force examination of alternatives to fossil fuel, and what better than biofuel — the green, eco-friendly, renewable energy source — as partial replacement. Even developed economies are straining to ensure energy security by encouraging use of renewable sources and to guard against the vagaries of the highly unpredictable mineral oil market. Economic growth and rising incomes have pushed demand for energy products in India to a higher trajectory, forcing the country to import close to 100 million tonnes of crude a year. For us, the urgency to exploit natural resources is even greater. However, despite the lofty intentions, the bio-diesel purchase policy unveiled by the Ministry of Petroleum last week falls considerably short of expectations. The policy is most unlikely to succeed because of serious inadequacies in, or limitations of, its approach. Also, no groundwork seems to have been done about supplies. There is little clarity on such key issues as the target constituency (growers, processors or consumers); the manner of servicing the constituency; or the pricing of biofuel.

The country's diesel consumption, estimated at 40 million tonnes, is growing at close to 10 per cent a year. Even a modest 5 per cent doping would require two million tonnes of vegetable oil. Domestic production of vegetable oil (6.5 million tonnes) is as it is supplemented with imports (5 million tonnes), almost entirely for edible purposes. Any addition to the domestic pool has to come from non-conventional vegetable oil sources such as Ratanjyot (Jatropha) or Pongamia plants which have a gestation of about four years before they start yielding fruits on a large scale for crushing into oil. There is now neither a well-broadcast policy to promote cultivation of these plants, nor is the output available in any significant quantity. Worse, there is no incentive for any producer to sell to an oil marketing company at Rs 25 a litre, when he can find a ready market at Rs 30 or more. With diesel costing Rs 35 a litre, and the price of crude vegetable oils at Rs 32-35 a kg (with prospect of a rise), it would be surprising if there are any takers for the scheme.

Clearly, the policy makers have failed to think through all the issues. The Petroleum Ministry's position can be described as `all dressed up, but nowhere to go'. The biofuel policy cannot succeed by official diktat. It must create an environment for growers to produce, processors to supply, and consumers to use biofuel. The entire exercise has to be incentivised for active participation of stakeholders; subsidy is integral to biofuel policy world over. In pricing biofuel, domestic market conditions — shortage of indigenous vegetable oil and import dependence — cannot be overlooked. Ironically, ethanol worth Rs 400 crore lying with the sugar industry is yet to be lifted by the oil companies. Obviously, the Petroleum Ministry alone cannot drive the biodiesel agenda. Other ministries — of Agriculture, Food, Finance, and Rural Development — must be engaged, besides the State governments. Indeed, given the subject's urgency and national importance, the Prime Minister himself must take the lead to design a policy that takes a holistic, long-term perspective.

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