The bio-fuel revolution may bypass sons of the soil

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If the sugar industry was allowed to produce ethanol and market it at the right price, the farmers could make about Rs 1,500 per tonne of sugarcane.
If the sugar industry was allowed to produce ethanol and market it at the right price, the farmers could make about Rs 1,500 per tonne of sugarcane.

Sharad Joshi

The increasing volatility in the prices of crude oil, which crossed $146 a barrel before dropping over $20 from that level, provides the right background for promoting exploration of domestic sources of petroleum. It provides an even better opportunity for developing bio-diesel and ethanol as a valuable additive or substitute for petrol.

It would appear from the addresses given by Central ministers at the recent Bio-Fuel Summit 2008, organised jointly with the CII, that the advent of bio-fuels is unlikely to change the pattern of thinking of the government. The Minister for Agriculture, Mr Sharad Pawar, was the chief guest at the Summit, and the Minister for New and Renewable Energy, Mr Vilasrao Muttemwar, delivered the keynote address.

Bio-fuels, whether in the form of bio-diesel or ethanol, are produced from plants. Bio-diesel can be produced from edible oilseeds, such as rapeseed, soyabean, palm, sunflower, etc., as also from non-edible oilseeds such as Jatropha curacas, Pongamia, neem and karanja.

Ethanol, a petrol substitute, is produced in India from sugarcane/sugar-beet and molasses, and can be produced from corn, sweet sorghum and most forms of wet bio-mass.

Farmers have been cautiously optimistic about this new development. In the past, they have had the bitter experience of the rapid expansion of the co-operative sugar industry, which not only brought little benefit to them but also actually added to their indebtedness and misery.

Remunerative prices

For years now, farmers have been agitating that they be paid at least the statutory minimum price (SMP) for their sugarcane, around Rs 900-1,000 per metric tonne. The sugar barons are protesting that the industry is in no position to meet even this demand.

Rough calculations show that if only the sugar industry was allowed to produce ethanol and market it at prices not too far below the present retail price of petrol (Rs 56 per litre), sugar factories could earn an income of around Rs 1,900 from every tonne of sugar-cane crushed.

The farmers would then be able to demand a price of around Rs 1,500 per tonne of sugar cane. This example only suggests the kind of advantage the farmers could get from the advent of bio-fuels, if only the government did not come in the way.

If a farmer had the possibility of producing ethanol, using technologies that are already available, on the farm, he would be able to make an extra income of around Rs 2,500 per day about 200 days per year.

The farmers hoped that the Government, this time wiser by the experiences of the Nehruvian socialist regime of “negative subsidies” on agricultural produce, would follow policies that would, at least, not deprive the farmers of their legitimate dues. The farmers hoped that, in the present epoch of economic reforms and liberalisation, the Government would liberalise the licence-permit regime and make it possible not only for the sugar industry but also for smaller units manufacturing khandsari and even jaggery to produce ethanol.

Ethanol manufacture would be worthwhile not only if the present market situation of crude oil continues but if the Government stops its policy of bearing a major proportion of the cost burden. The present policy of keeping petrol artificially cheap has proved to be counter-productive in many respects. The new rich of the Indian economy vie with each other to acquire cars that are increasingly petrol guzzling, indifferent towards proper maintenance of the car engines as also towards economic driving. Recourse to public transport and pooling of cars among people with identical routes is frowned upon as ‘infra dig’.

The policy of state subsidy on petrol prices has proved not only counter-productive but also anti-national.

A number of relatively small neighbouring countries, such as Indonesia, Malaysia and Thailand, have made rapid strides in producing bio-diesel and generalising its use.

Brazil stands in a class of its own as regards manufacture of bio-diesel and ethanol and encouraging their widespread use. Brazil at present allows an ethanol blending up to 25 per cent and even the Thai government has been implementing a blend of 10 per cent. In India, however, it would appear that there are vested interests that wish to promote import of fossil oil from abroad and discourage the use of bio-fuels.

Mandating a blend

Car owners in India are a highly enterprising and innovative lot that have been modifying the car engines depending upon the balance between petrol and diesel prices. Recently, when the Supreme Court ordered the conversion to C&G engines, it took place without much hassle.

It is quite clear that if the Government shows the necessary political will, car-owners will opt for the best blending solution and modify, if and when necessary, their car engines. The owners of two-wheelers in India have been, for a long time, accustomed to blending petrol with the desired quantum of engine oil. It should not be too difficult to provide the possibility of ethanol blending from zero per cent to 20 per cent in near future.

The NDA government made a good beginning by mandating the use of 5 per cent ethanol in petrol. The UPA government has gone back on this on the pretext that such a mandate did not correspond to the realities of the demand and supply situation.

And in the market system encouraged by the present Government, it is the petroleum companies of India that called for tenders from the ethanol manufacturers after setting up a maximum price, which has been around Rs 21.57 per litre. This, again, is clear evidence of the anti-farmer bias of the existing government. The marketing flow could have been easily reversed by leaving it to the ethanol manufacturers to call for tenders, specifying a minimum price that could be fixed as a certain percentage of the retail petrol price.

The mindset of the present government was evident from the fact that the Agriculture Minister himself made it very clear that the government is in no position to recommend any specific variety of Jatropha on the basis of its yield or economics.

On the contrary, a delegate from Chhattisgarh gave a brilliant account of the work done by the State Government there, not only in increasing production of Jatropha but also making a high blending popular, even for the existing models of vehicles in India. He categorically stated that the Chief Minister himself used unadulterated bio-diesel in his ‘Tata Safari’.

Flawed policy

The inclination of the UPA government to discourage bio-fuels is patent from the number of clauses it is trying to build into the national bio-fuels policy at present on the anvil. The Government has unnecessarily decked up the food vs. fuel controversy and clearly shown its unwillingness to use edible oil seeds as also agricultural cultivable lands for the promotion of bio-fuels.

The experience in Chhattisgarh and Thailand has clearly shown that the debate is entirely pointless and that promotion of the use of even edible oils for the production of bio-diesel has not affected the food situation there. It would also appear that the UPA government is thinking of keeping the farmers away from the production of both of bio-diesel and ethanol and relegated them to the position of mere suppliers of raw material at a minimum support price (MSP) that is to be fixed on the basis of cost of production rather than the market situation.

Dr Manmohan Singh gave the green signal to a loan waiver scheme only six months back. He is, however, depriving the farmers of a golden chance to make their vocation the most lucrative of all by making use of the bio-fuels revolution.

(The author, a Rajya Sabha MP, is Founder, Shetkari Sanghatana. Responses to

(This article was published in the Business Line print edition dated August 27, 2008)
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