Ambitious, but...

New biofuel policy needs a few revisions

The ambitious plan announced by Prime Minister Narendra Modi to triple the production of biofuels in four years is a positive move to reduce the excessive dependence on imports for meeting the country’s energy needs. But the proposal to use various kinds of farm produce — and not just agricultural wastes — for this purpose is not beyond dispute. It can potentially distort the pattern of agricultural output in favour of energy crops — a trend that even the land-rich countries are finding hard to sustain. This part of the programme, therefore, needs to be revisited and suitably amended. On the upside, the new biofuel strategy, mooted under the recently-approved National Biofuel Policy 2018, is aimed at raising ethanol doping of petrol to 10 per cent by 2022 and 20 per cent by 2030 from the present national average of around two per cent. Biofuel blending of diesel, which is almost negligible now, is proposed to be stepped up to five  per cent by 2030. This is estimated to help save Rs 120 billion in import bill. The intended objective is to create Rs 1 trillion biofuel economy.

Significantly, oil marketing companies are already in the process of setting up 12 biofuel refineries with an investment of Rs 100 billion. These units would deploy second-generation technology, which can make biofuels from even solid municipal and industrial trash and problematic agricultural wastes such as paddy straw and crop stubbles that are generally torched in the fields itself, causing pollution. The government is offering subsidised credit, viability gap funding and relatively higher purchase prices for the ethanol produced by these plants. The goods and services tax has been trimmed from 18 per cent to 5 per cent on ethanol and from 18 per cent to 12 per cent on biodiesel.

The contentious part of the new game plan is the liberties granted to ethanol manufacturers to choose their feedstock from a generously expanded basket of crops and other farm materials, many of which are part of the human or animal food chains. These include sugarcane juice; sugar containing crops such as beetroot and sweet sorghum; starchy crops such as maize and cassava; and damaged food grains such as wheat, broken rice and potato. For biodiesel, the new plan envisages utilisation of non-edible oilseeds and short-gestation oil-bearing crops, disregarding the fact that most of their oils find gainful use in the pharmaceutical, cosmetic and other industries. This aside, the sugar industry has already been permitted to produce ethanol directly from cane juice, completely bypassing sugar production. The mills are being incentivised to set up biofuel refineries on their premises with liberal government assistance. Going a step further, the government has, for inexplicable reasons, fixed a higher procurement price for the ethanol drawn directly from cane juice than for that manufactured from the byproducts like molasses.

This is an open invitation to the sugar mills to mop up more sugarcane and, worse still, to the farmers to produce more of this water-guzzling crop even at the cost of the other crops that can be grown on these prime irrigated lands. Such moves, even if intended to help the farmers earn higher incomes, are not in the wider economic interests and may pose problems which even the government might eventually rue. Some judicious alterations in the otherwise well-intentioned biofuel plan are, therefore, imperative.