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Commercial fuel farming still unfeasible

The commercial viability of biofuels will depend on future oil prices and technological breakthroughs, writes Saikat Neogi.

business Updated: Jul 02, 2007 02:56 IST
Saikat Neogi

Having acknowleged the benefits of biofuels in the seventies, India is yet to formulate a comprehensive policy to promote this non-fossil fuel. As a result, UNCTAD estimates that India loses Rs 20,000 crore of foreign exchange annually due to a spiralling oil import bill.

India’s biofuel progress has been like going one step forward and two steps backward. In 2003, as a part of the Planning Commission’s Biofuel Mission, the Ministry of Petroleum and Natural Gas made it mandatory to sell five per cent ethanol-blended petrol in nine states. Though the initiative started off well, two successive sugarcane crop failures had put the initiative on the backburner. But last year’s record cane production has pushed the ministry to restore its target, with plans to double it by 2010.

Most of India’s ethanol is made from molasses, a byproduct of the sugar industry. This is a less profitable process as compared to Brazil’s, which produces ethanol directly from sugarcane feedstocks. Though Indian sugar mills have shown interest in producing ethanol from sugarcane, Dr P P Bhojvaid, senior fellow at The Energy and Resources Institute, says like Brazil, the government should provide financial assistance to these mills.

About 80 per cent vehicles in India run on diesel and its demand is five times higher than petrol. The Biofuel Mission has set an ambitious target to meet 20 per cent of the country’s diesel requirements from biodiesel by 2012. And since the demand for edible vegetable oil exceeds supply, the government has decided to use non-edible oil seeds from plants like jatropha and pongamia for the feedstock.

It is estimated that a 20 per cent biodiesel blend will require 110 lakh hectares of jatropha plantation. Since there are only 4 lakh hectares under cultivation currently, the country’s ability to meet its ambitious target is quite questionable. Satish Lele, Member of FICCI core group on biofuels and author of Biodiesel from Jatropha, says that since commercial production of biodiesel has not yet taken off in the country, it will be difficult to produce biodiesel for 5 per cent blending with diesel now, let alone 20 per cent by the end of 2012.

One of the main problems in initiating large-scale jatropha cultivation is that of feasibility. For example, sugarcane plantation, on an average, fetches the farmer Rs 70,000 per hectare. In comparison, a jatropha farmer gets up to Rs 15,000 per hectare.

Farmers are further discouraged by the absence of support prices or long-term purchase contracts. Joseph B Gonsalves, biofuel consultant with UNCTAD says that the Centre needs to sponsor confidence-building measures, establish a minimum support price for jatropha oilseeds, and assure timely payments to farmers. Public-private partnership can help set up infrastructure for seed collection, oil extraction, and blending.

The national programme on biodiesel is based on the availability of wastelands for producing jatropha. Since wasteland use and development comes under six different ministries and a plethora of laws, the Planning Commission had suggested a comprehensive biofuel policy to cut the red tape.

The commercial viability of biofuels will depend on future oil prices and technological breakthroughs. To boost the share of fuel mix and achieve maximum yield, the policy needs to encompass the entire economic chain right from research and farming to production and marketing.

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