Warning on bio-fuels

The ethanol-doped petrol and plant-based bio-diesel programme seems to have run into a bad patch even before it got going in any real sense. The recent slide in international crude prices has adversely affected the economics of using some of these green fuels. The worst affected is the economic viability of bio-diesel, derived from plants like Jatropha (Ratanjyot), Pongamia (Karanj) and others, as their production costs work out to be higher than the current prices of diesel. This is not to take away from the genuine need to search for alternatives to non-renewable and environment-unfriendly fossil fuels, especially in an economy that has poor endowments when it comes to fossil fuels, but the available options need to be evaluated with care and assessed for their financial viability. It goes without saying that blending petrol with ethanol, priced between Rs 21.50 and Rs 23 per kilolitre, was amply justified when crude prices hovered above $60 a barrel. But that is no longer the case. As a result, the oil-marketing companies are now jittery about participating in the mandatory bio-fuel admixing programme""and who can blame them!

On the supply side, too, the situation is different for ethanol and bio-diesel producers. While the sugar industry, where heavy investments have been made in putting substantial ethanol production capacity in place, may not find it difficult to find alternative buyers for their produce because of varied industrial uses and the substantial demand for alcohol, the real problem would be for the bio-diesel companies, whose output could go abegging. This scenario calls for a fresh look at the country's bio-fuel policy. While the emphasis on ethanol production as part of the sugar industry's by-product initiatives may not be misplaced, the enthusiasm for raising bio-fuel plantations is debatable. In fact, sugarcane cultivation for the sole purpose of ethanol production, as has been suggested by some, is not a sound proposition under Indian conditions, though it may be all right for Brazil, which is the world's leading bio-fuel-consuming country. Unlike Brazil, India has neither abundant agricultural land nor a climate tailor-made for the cost-effective and ecologically safe production of a water-guzzling crop like sugarcane. Even in Brazil, ethanol admixing has to be directly or tacitly subsidised when the prices of crude oil are low. Where Jatropha and other bio-fuel plantations are concerned, these would necessarily be competing with other food and commercial crops for land, water and cash and kind inputs.

What may not have been realised when the drumbeats began on the subject a year or so ago, is that not enough research effort has gone into evolving low-cost technologies for the cultivation and oil extraction from these plants. The move to introduce Jatropha in Haryana flopped as the young seedlings could not withstand the state's severe winter. This apart, one of the studies sponsored by the Planning Commission is reported to have cautioned that large-scale Jatropha plantations could encroach on animal habitats and lead to drinking water scarcity. Pongamia, too, poses the risk of overwhelming other vegetation in agro-forestry because it tends to spread laterally to adjoining areas. Besides, there are concerns about the disposal of the by-products of plant-based bio-fuel production as many of these may not have other applications or commercial demand. Therefore, it may be advisable for the government to revisit such issues and consider the totality of the situation before committing huge investments in bio-fuel plantations on millions of hectares.