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Sustainable Development of Biofuels: Prospects and Challenges

Sustainable Development of Biofuels: Prospects and Challenges

In the context of shrinking crude oil reserves, rising demand and the resultant rise in prices of petroleum, as well as the concerns about global climate change and energy security, bioenergy is becoming increasingly relevant as a possible and potential alternative to fossil fuels. However, with many developed countries pursuing aggressive policies for encouraging the production and use of biofuels, there are strong apprehensions that as more and more land is brought under biofuel crops, food prices would increase substantially affecting poor consumers, particularly those from low-income net food importing countries. Keeping in view these facts, this paper presents a brief overview of the current state of affairs of biofuels at the global level, with a special emphasis on the ongoing efforts of biofuel expansion in India. It throws light on the various policies at the national and regional levels and also on the implications of biofuels for changes in land utilisation, food security, social welfare and the environment.

REVIEW OF AGRICULTURE

Sustainable Development of Biofuels: Prospects and Challenges

S S Raju, P Shinoj, P K Joshi

In the context of shrinking crude oil reserves, rising demand and the resultant rise in prices of petroleum, as well as the concerns about global climate change and energy security, bioenergy is becoming increasingly relevant as a possible and potential alternative to fossil fuels. However, with many developed countries pursuing aggressive policies for encouraging the production and use of biofuels, there are strong apprehensions that as more and more land is brought under biofuel crops, food prices would increase substantially affecting poor consumers, particularly those from low-income net food importing countries. Keeping in view these facts, this paper presents a brief overview of the current state of affairs of biofuels at the global level, with a special emphasis on the ongoing efforts of biofuel expansion in India. It throws light on the various policies at the national and regional levels and also on the implications of biofuels for changes in land utilisation, food security, social welfare and the environment.

S S Raju (raju@ncap.res.in) and P Shinoj (pshinoj@ncap.res.in) are with the National Centre for Agricultural Economics and Policy Research, New Delhi and P K Joshi (pkjoshi@naarm.ernet.in) is with the National Academy of Agricltural Research Management, Hyderabad.

Economic & Political Weekly

EPW
December 26, 2009 vol xliv no 52

B
efore the advent of fossil fuels as a dominant source for energy in the later part of the 20th century, energy generated from biomass (agricultural and forest products, organic wastes and residues) occupied a prominent position. The period followed witnessed a role reversal with agriculture becoming increasingly reliant on fossil fuel energy for its inputs, viz, chemical fertilisers derived from fossil fuels and fuels required to power farm machinery. Moreover, the increasing reliance on road transport system for movement of produce has made it even more dependent on fossil fuels. Today, any small shock in the petroleum sector, either a cut in production or an upward movement of prices, has a direct impact on the agricultural sector. Like the agriculture sector, every other sector has become immediately dependent on fossil fuels, which is a nonrenewable source of energy. The shrinking reserves, rising demand and the resultant rise in prices of petroleum, the concerns of global climate change and energy security are forcing the world to look for its long-term replacement. It is in this context that bioenergy is becoming increasingly relevant as a possible and potential alternative to fossil fuels. Though, a number of other alternatives like water power, geothermal energy, wind energy and solar energy are being explored, bioenergy is viewed as a strong future source of energy.

Bioenergy is defined as the energy generated through biofuels that are produced from renewable sources of plant origin (Rao and Bantilan 2007). More specifically, bioethanol produced from sugar or starch derived from grains/biomass and biodiesel obtained from the processing of edible and non-edible vegetable oils can be used as fuel for powering automobiles. Apart from this purely technical angle, the growing attention on biofuels in r ecent years can be attributed to various other reasons as well. Biofuels offer a number of environmental, social and economic advantages. The use of biofuels may lead to reduction in vehicular pollution and greenhouse gas emissions as it is established that the emission of sulphur dioxide (SO2), particulate matter and carbon monoxide (CO), etc, are less from biofuels (Subramanian et al 2005). The economic and social benefits arising out of the development of biofuel sector through increased income and employment opportunities for the rural communities is also highlighted (UNCTAD 2006; Deepak 2008). The greening of wastelands and regeneration of degraded forest lands through cultivation of biofuel crops is another added advantage (Mandal and Mithra 2004).

However, with many developed countries pursuing aggressive policies for encouraging the production and use of biofuels, new dimensions on the adverse impact of expansion of biofuels have surfaced. Various studies have raised concerns over the environmental sustainability of production, overall greenhouse gas emissions based on lifecycle analysis, and the impact on land use and food prices (IEA 2008; FAO 2008). There are strong apprehensions that as more and more land is brought under biofuel crops, food prices would increase substantially affecting poor consumers, particularly those from low-income net food importing countries. Keeping these facts in view, this paper presents a brief overview of the current state of affairs of biofuels at the global level, with a special emphasis to the ongoing efforts of biofuel expansion in India. The implications of biofuels for the agricultural sector in India in terms of the changes in land utilisation, food security, social welfare and the environment are also discussed.

Types of Biofuels

For many, biofuels are still relatively unknown. Either in liquid form such as fuel ethanol or biodiesel or gaseous form such as biogas or hydrogen, biofuels are simply transportation fuels derived from biological (agricultural) sources. There are two types of biofuels:

First Generation Biofuels: First generation biofuels are made from biomass consisting of sugars, starch, vegetable oils, animal starch or biodegradable output wastes from agriculture, industry, forestry and households using conventional technologies.

  • Cereals like maize, sweet sorghum and sugar crops like sugar cane, sugar beet, etc, get fairly easily fermented to produce ethanol, which can be used either as a motor fuel in pure form or as a blending component in gasoline.
  • Oil seed crops (edible: rapeseed, soybean, sunfl ower, oil palm and non-edible: jatropha, pongomia, neem, etc) can be converted into a liquid fuel which can be blended with conventional diesel fuel or burnt as pure biodiesel.
  • Second Generation Biofuels: Second generation biofuel technologies are gaining importance because first generation biofuels manufacture has got major limitations. The primary one is that, they cannot be produced beyond a threshold level without threatening food security. They are also not cost-competitive with existing fossil fuels. The second generation fuels are more sustainable, affordable and have greater environmental benefi ts. However, they have not become popular because the technology for producing these is not yet standardised. Further;
  • Lignocellulosic materials, including vegetative grasses, trees, and various waste products from crops, wood-processing facilities and municipal solid waste, can be converted to alcohol. But the process is more complex relative to processing sugars and grains. Techniques are being developed, however, to more effectively convert cellulosic crops and crop wastes to ethanol.
  • Organic waste material converted into energy forms which can be used as an automotive fuel: waste oil (e g, cooking oil) into biodiesel; animal manure and organic household wastes into biogas; and special strains of algae, agricultural and forestry waste products into ethanol. Available quantities may be small in many areas, but raw materials are generally low cost or even free. Converting organic waste material to fuel can also diminish waste management problems.
  • – Various second generation biofuels like biohydrogen, biomethanol, butanol and isobutanol, Fischer-Tropsch diesel, wood diesel, mixed alcohols, etc, produced from different types of biomass feed stock are under development.

    Global Biofuel Scenario

    The world biofuel production has touched 62.2 billion tonnes which is 36.12 million tonnes oil equivalent (mtoe) in the year 2007-08. Currently, around 88% of the global production of liquid biofuels is in the form of ethanol. The two largest ethanol producers, Brazil and the United States (US), account for almost 87% of total production, with the remainder accounted for mostly by China, Canada, France, India, Russia, South Africa and the United Kingdom (UK) make up the rest (Figure 1, p 67). The highest per hectare yield in ethanol production is realised by Brazil which has set up an economically competitive national biofuel sector largely based on sugar cane. The bioethanol yield in Brazil is around 5,476 litres/ha (74.5 litres/tonne) which is higher than that of any other country. Brazil has developed a cost-effective technology of converting sugar cane juice directly to ethanol, in contrast to that of India, where ethanol is produced mostly from molasses, a by-product of sugar cane industry. In comparison, yield of maize-based ethanol in the US and China are much lower at around 3,751 litres/ha and 1995 litres/ha, respectively (Naylor et al 2007). In China, wheat, cassava and sweet sorghum are used besides corn for ethanol production (Table 1).

    Biodiesel production that accounts for a smaller proportion of liquid biofuels increased from 0.01 million tonnes in 1991 to 9.0 million tonnes by 2008. European Union (EU) is the major producer of biodiesel (above 60%), with a significantly smaller contribution coming from the US (17%). Other signifi cant biodiesel producers include China, India, Indonesia and Malaysia (Figure 2, p 67). In EU, 80% of the biodiesel is produced from rapeseed oil, the rest being animal fats and other used cooking oils. Oil palm is the major source of diesel extraction in Malaysia and I ndonesia, whereas both the US and Brazil are using soybean to extract biodiesel (Table 1). In India, bio diesel production is only in the nascent stage with around 45 million litres being produced from jatropha and pongamia oil.

    The biofuel production programme in most of the countries is being supported by subsidies. In Organisation for Economic Cooperation and Development (OECD) countries, both production and

    Table 1: Biofuel Feed Stocks and Blending Targets in the Selected Countries

    Country Feed Stock Production Forecast, Blending Targets 2009 (Million Litres) (%) Ethanol Biodiesel Ethanol Biodiesel Ethanol Biodiesel

    US Corn Soybean 38,600 2,415 3

    Brazil Sugar cane Rapeseed, 25,200 1,825 25 castor seed

    EU Wheat, corn, barley, Rapeseed, 3,830 5,304 5.75 5.75 sugar beet sunflower, soybean

    Canada Corn, wheat Vegetable oils 1,100 – 5

    China Corn, wheat, cassava, Palm oil, 1,750 – 10 sweet sorghum jatropha

    India Sugar cane molasses, Jatropha, 494 45 20 20 sweet sorghum pongomia

    Indonesia Sugar cane, cassava Palm oil, jatropha 405 – 10 10

    Malaysia none Palm oil – 140 –

    Source: F O Licht (2009); FAO (2008); FAPRI (2008).

    December 26, 2009 vol xliv no 52

    consumption of biofuels are subsidised, mainly under the banner of energy security and climate change mitigation. It is estimated that, on a per litre basis the support ranges between $0.20 and $1.00. Among the major producers, only the Brazilian sugar cane ethanol appears to be competitive without subsidies (FAO 2008).

    Demand-Supply Outlook for Biofuels

    A number of countries are moving towards the blending of biofuels with fossil fuels and governments are stipulating mandatory requirements of 5-10% blending (Table 1). Based on these mandatory requirements, FAPRI 2008 and F O Licht 2009 have

    projected the future demand for biofuels in several countries. For instance, the forecasted production of ethanol in China was estimated at 1,750 million litres in 2009. This is expected

    USA

    to rise to 2,093 million litres by 2017. In the 51% case of Japan, if the country were to meet its commitment to the Kyoto Protocol, its ethanol demand will increase in a span of four years from 719 million litres in 2007 to 897 million litres in 2010 and the country will have to meet the excess demand from imports. In the EU, approximately 15,514 million litres of biofuels are required by 2012 to meet 5.75% mandatory blending target. Of this, the biodiesel

    Figure 1: Ethanol Production by Country, 2008

    Others

    EU

    2%

    4%

    demand is expected to be 8,756 million litres.

    Canada

    Figure 2: Biodiesel Production by Country, 2008

    EU has a production capacity of 11,705 million Brazil

    Others 2%

    litres of biodiesel of which it produced 5,898 12% million litres, in 2008, up by 69% from 2005.

    In the US, the creation of new renewable fuel standard is expected to substantially increase the volume of renewable fuels to be blended into gasoline from current levels of about 3% for ethanol and about 1% for biodie-

    EU

    sel. India, Indonesia, Canada and Malaysia 60% are other countries that are mandating 5% to 20% blending in a phased manner over the next two to three years.

    Global trade in biofuels, even though limited, is picking up gradually. Presently, trade in ethanol represents just 20% of total ethanol demand, but the share has been steadily rising from about 12% in 2002 (F O Licht 2009). Brazilian exports, including volume re-exported from countries in the Caribbean Basin initiative account for about 45% of global trade. Brazil is the largest exporter of biofuels while the US is the largest importer. The Netherlands, Germany and the UK are the largest importers in the EU. Biodiesel derived from palm oil, exported from Indonesia and Malaysia to the EU, accounts for the majority of biodiesel trade. The US and Brazil also export soybean biodiesel to EU countries (IEA 2008). However, protectionist policies adopted by a number of governments to safeguard their emerging biofuel industry still act as a curb to biofuel trade. For example, Brazilian ethanol is kept out of the US through high tariffs and duties.

    In a nutshell, the outlook for global biofuels will depend on a number of interrelated factors, including the future price of oil, availability of low-cost feedstocks, and sustained commitment to

    Economic & Political Weekly EPW December 26, 2009 vol xliv no 52

    REVIEW OF AGRICULTURE

    supportive policies by governments, technological breakthroughs that could reduce the cost of second generation biofuels, and competitions from unconventional fossil fuel alternatives.

    Indian Biofuel Scenario

    The domestic production of crude oil from fossil fuels remains more or less stagnant over the years and meets only 30% of national requirement, while the balance is met through imports of nearly 146 million metric tonnes of crude petroleum products that cost the country close to $90 billion in 2008-09 (Figure 3, p 68). This is impacting the country’s foreign exchange reserves in a big

    India 4%

    1% petroleum products. This growing dependence on fossil fuels for powering the transport sector

    1% China 1%

    way (Ethanol India 2009). Over the last eight years, the consumption of motor spirit (gasoline) has grown by 6.64% from 7.01 million

    Brazil

    36% tonnes in 2001-02 to 11.26 million tonnes in 2008-09. For high speed diesel (HSD), the growth was 5.10% from 36.55 million tonnes to

    51.67 million tonnes (petroleum planning and analysis cell, MoPNG, GOI 2009). This growth is expected to continue over the next several years since it is projected that the m otor vehi-

    Canada

    cle population in India will grow by 10-12%

    2% China

    that would further increase the demand for

    is the key reason for the country to embrace biofuel production on its own. In addition to

    Indonesia

    4% this, various other socio-economic and environ-Malaysia

    mental benefits have also encouraged the shift.

    3% USA 17% Bioethanol Scenario

    Currently India’s biofuel production accounts for only 1% of the global production. This translates to around 425 million litres, consisting of 380 million litres of fuel ethanol (F O Licht 2009) and 45 million litres of biodiesel (FAO 2008). In India, ethanol is primarily produced by fermentation of molasses, a by-product in

    the manufacture of sugar from sugar cane. It is estimated that, out of one tonne of sugar cane, 85-100 kg of sugar (8.5 to 10%) and 40 kg (4%) of molasses can be recovered. The recovery percentage of ethanol from molasses is 22-25% as per Indian standards. Presently, about 70-80% of cane produced in the country is utilised for the production of sugar and remaining 20-30% for alternate sweeteners (jaggery and khandsari) and seeds. Thus only molasses produced during sugar production is available for ethanol production. Due to the cyclical nature of sugar cane and sugar production in India, sugar cane farmers and the processing industry experience periodic market gluts of sugar cane, sugar and molasses impacting prices and farm income.

    India has about 320 distilleries, with a production capacity of about 3.5 billion litres of alcohol per year, almost all of which is produced from molasses. More than 115 distilleries modifi ed their distillation facilities to produce ethanol with total ethanol production capacity of 1.5 billion litres per year. The alcohol produced in the country is used for various purposes. Around

    Figure 3: Domestic Production and Import of Crude Oil in India
    Million tonnes (MT) in billion $
    160 100
    120 80 40 0 80 60 40 20 0 Import bill (Billion $) Production (Million MT) Import (Million MT)

    1974-75 1978-79 1982-83 1987 1990-91 1994-95 1998-99 2002-03 2006-07 2008-09

    one-fourth of it is being used for industrial purposes while 30-35% is being used for potable purposes and 3-4% for other uses. The surplus available alcohol is being diverted for fuel.

    Biodiesel Scenario

    Unlike other countries, India is not using vegetable oils derived from rapeseed, mustard or oil palm for production of biodiesel. This is because, India is not self-suffi cient in edible oil production and depends upon large quantities of imports of palm oil and other vegetable oils to meet the domestic demand. Around 40% of the total requirement of the country is today met through imports. In the year 2006-07, 23.8 million tonnes of oilseeds were produced in the country that generated 8.0 million tonnes of edi ble oil, but the domestic consumption was as high as 11.4 million tonnes which necessitated the imports to the tune of 4.2 million tonnes. However, utilising non-edible seed oils extracted from tree and forest origin does not interfere with food security. Every year around 1.2 million tonnes of tree-born seed oil is produced in the country. Therefore, biodiesel in India is mostly produced from the oils extracted from the seeds of shrubs like jatropha and pongamia. Use of jatropha for deriving oils has multiple benefits. First, the oil produced is nonedible; second, it can survive in areas of low rainfall and low fertility; third, it requires very little inputs and care for cultivation; fourth, the cake left over after oil extraction can be used as an organic manure, for preparation of herbal insecticides and biogas; fi fth, jatropha has the ability to assist in the build-up of soil carbon; sixth, large-scale cultivation of jatropha in the marginal land can earn carbon credits for the country, and so on. However, as mentioned earlier, biodiesel industry in India is still at a nascent stage although the government has ambitious plans to expand the sector.

    National Biofuels Policy

    The Ministry of New and Renewable Energy (MNRE) is in the process of preparing a “National Policy on Biofuels” which is expected to lay the foundation for the accelerated development of the sector with a focus on research and development, capacity-building, purchase policy and registration for enabling biofuel use. The draft policy envisages utilisation of a wide range of crops such as sugar cane, sweet sorghum, cassava, maize and tree borne oil (TBO) seeds like jatropha, pongamia, etc, for production of biofuels. It also proposed setting up the National Biofuels D evelopment Board to develop a road map for use of biofuels in petrol and diesel engines in a time bound manner besides taking appropriate policy

    68 measures. The national indicative target of 5% blending by 2012, 10% by 2017 and 20% by after 2017 has also been recommended in the policy draft. Biodiesel plantations of non-edible oilseeds on community/government/waste/degraded/marginal lands would be encouraged, while, plantation in the fertile irrigated lands would not be supported. The minimum support price (MSP) with the provision of periodic revision for bio diesel oil seeds would be announced to provide fair price to the growers. The minimum purchase price (MPP) for the purchase of bioethanol by the oil marketing companies (OMCs) would be based on the actual cost of production and import price of bioe thanol. In case of biodiesel, the MPP should be linked to the prevailing retail diesel price. The National Biofuel Policy envisages that biofuels, namely, biodiesel and ethanol may be brought under the ambit of “declared goods” by the government to ensure unrestricted movement of biofuels within and outside the states. It is also stated in the policy that no taxes and duties should be levied on biodiesel.

    The Ministry of Agriculture is providing subsidy through National Oilseeds and Vegetable Oils Development (NOVOD) Board to the farmers, non-governmental organisations (NGOs), individuals, etc, for production of TBOs, including biofuel crops, under the

    Integrated Development of Tree Borne Oilseeds Scheme. U nder this scheme, 30% credit linked subsidy is being provided, which is linked with 50% term loan to be taken from bank, and 20% benefi ciary share in the form of land, labour, etc. Further, the Ministry of Rural Development has provided financial assistance to the tune of Rs 49 crore to nine identified states in 2005-06 and Rs 49.50 crore to 15 states in 2006-07 for the purpose of r aising jatropha/ pongamia seedlings and plantation of the same under the ongoing states/central sector area development p rogrammes.

    There are several ministries involved in policymaking, regulation, promotion and development of biofuels sector in India. The details on the responsibilities of each ministry are presented in Table 2.

    Table 2: Ministries Involved in Development of Biofuel in India

    Ministry Responsibility

    Ministry of New and Renewable Energy Overall policymaking, supporting research and technology development.

    Ministry of Petroleum and Natural Gas Marketing, development of pricing and procurement policy.

    Ministry of Agriculture Research and development of feedstock crops

    Ministry of Rural Development Promotion of jatropha plantations

    Ministry of Science and Technology Biotechnology research on feedstock crops

    Ethanol Policy in India

    India is globally one of the largest producers of sugar cane and ethanol made from sugar cane molasses. It is in view of this that the government of India launched Ethanol Blended Petrol Programme (EBPP) since January 2003. Subsequently, the Cabinet Committee on Economic Affairs in October 2007 has taken the following decisions:

  • Five per cent mandatory blending of ethanol with petrol with immediate effect across the country (except Jammu and Kashmir, north-eastern states and island territories).
  • Fixing of uniform purchase price of ethanol (ex-factory) all over the country at Rs 21.50 per litre in the next three years.
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    REVIEW OF AGRICULTURE

    To meet the targets for 5% blending with ethanol in 2008-09, about 0.62 million tonnes of ethanol was required, while about

    1.25 million tonnes would be required to meet the target of 10% blending (Table 3). The OMCs have been making all efforts to implement the 5% EBPP

    Table 3: Projected Demand for Petrol and Ethanol for which they have Requirements, India (Million tonnes)

    finalised tenders for pro- Year Ethanol Blending Requirement
    curing ethanol in vari- Petrol Demand @ 5% @10%
    ous states. The require 2007-08 11.00 0.55 1.10
    ment of ethanol for 2008-09 12.50 0.62 1.25
    the three-year (2007-10) period is 182 crore litres. The OMCs have been 2009-10 2010-11 2011-12 Source: MoPNG (2009). 14.50 16.50 18.15 0.72 0.82 0.91 1.45 1.65 1.82
    able to contract 146.6

    crore litres; however, they have procured only 49.44 crore litres as on January 2009 under this programme (MOPNG 2009). EBP releases have commenced in all the states except in Orissa, Chhattisgarh, West Bengal, Tamil Nadu, Kerala and Jharkhand.

    Issues in Implementing EBPP
  • (1) Taxation Issue: There is a delay in the procurement of ethanol in certain parts of the country due to the taxation policy and procedural measures adopted by the state governments such as levy of export/import duties, excise duty and sales tax procedure and issues of permits, etc (Table 4). Efforts are being made by MoPNG to resolve these issues.
  • (2) Availability of Ethanol: Ethanol supplies are not in line with the demands placed on the ethanol suppliers in all the states where EBP implementation is in progress. Ethanol supplies are affected due to erratic feedstock supplies and high cost of raw material. Sugar cane and sugar production in India typically follows a six to eight-year cycle, wherein three to four years of higher production are followed by two to three years of lower production. The Indian sugar industry crushes about 70-80% of the sugar cane for sugar production, with the remaining used for local sweeteners (khandsari and jaggery), seed, feed and cane juice, chewing and waste. The byproduct of the sugar industry, sugar molasses, is used for production of alcohol and ethanol. The availability of molasses in suffi cient quantities to meet the projected demand for ethanol depends on cane production and consequently sugar production and government policy on use of molasses, etc (70% alcohol for industrial and potable purpose and 30% of alcohol made available for fuel purpose). Lower molasses availability and consequent higher molasses prices affect the cost of production of ethanol, thereby causing disruptions in the supply of ethanol for the EBPP. Due to this, the implementation of 5% ethanol blending has not yet fully stabilised.
  • (3) Pricing Issue: As regards fixing of the minimum purchase price of ethanol, two years ago, the government and sugar industry agreed to fix the price of ethanol at the rate of Rs 21.50/litre. However, recent estimates show that, the cost of ethanol production in the country is around Rs 30/litre (Biofuels International 2009). The cost estimates arrived at by the authors based on the estimates of GoI (2003) also gives similar figures (Appendix, p 72).
  • Economic & Political Weekly EPW December 26, 2009 vol xliv no 52

    This has left the producers in a precarious position, wherein they are unable to sell to government agencies at the procurement price. Moreover, the final price of ethanol depends on sugar production and the price of molasses, which has been fl uctuating considerably over the years (Rs 2,000-Rs 5,000/tonne), leading to large variation in ethanol production costs. Also, the MoPNG would not be in a position to direct OMCs to purchase the ethanol at a predetermined price since the purchase price is discovered and finalised by them through open tender system as per the Central Vigilance Commission (CVC) guidelines.

    Biodiesel Policy in India

    The government of India is in the process of firming up various policies to encourage the use of biodiesel in its energy sector, with special emphasis on transport sector. Various steps in this direction have already been undertaken. The primary one is the biodiesel blending programme announced in the year 2003, which mandates blending of biodiesel in HSD before using in the vehicles. Similar to that of ethanol, the target is to have a 5% blending by the year 2012, 10% by 2017 and 20% blending after 2017. As a part of this, a minimum support price for biodiesel oilseeds will be announced to ensure a fair price to the growers. The details of the minimum support mechanism will be worked out subsequently and considered by the steering committee and the price will be revised periodically. A minimum purchase price for purchase of biodiesel by the OMCs will be also established and is to be linked to the prevailing retail market price of diesel. The MoPNG has already announced a biodiesel purchase policy, in October 2005, which become effective from 1 January 2006. Under this scheme OMC’s will purchase biodiesel for blending with HSD to the extent of 5% at identified purchase centres across the country.

    Table 4: Ethanol Tax Structure in Different States of India

    State Sales Tax (%) Import Fee (Rs/kl)
    Punjab 20 + 2% SC on ST 1,000
    Haryana and Chandigarh 20 2,000
    Uttar Pradesh 1,500
    Gujarat, Daman and Diu, Dadra
    and Nagar Haveli 4 3,000
    Maharashtra 4 1,500
    Goa 19 190/tank lorry
    Andhra Pradesh 12.5
    Tamil Nadu 8 + 5% SC on ST 1,000

    SC: surcharge; ST: sales tax. Source: MoPNG (2009).

    The approximate demands for biodiesel to satisfy the blending requirements at different rates and for different years are presented in Table 5. The estimates suggests that the demand for biodiesel would be 3.35 million tonnes at the rate of 5% and 6.69 million tonnes at the rate of 10%

    Table 5: Projected Demand for Diesel and blending in 2011-12. OMCs Biodiesel Requirement, India (million tonnes)

    Year Diesel Demand Diesel Blending Requirement

    would buy biodiesel at a

    @ 5% @ 10%

    uniform landed price, which

    2009-10 60.07 3.00 6.00

    is to be reviewed every six

    2011-12 66.90 3.35 6.69

    months. At present, the

    2016-17 83.58 4.18 8.36

    purchase of biodiesel is at

    2009-20 111.92 5.60 11.19

    Rs 26.50 per litre with ef

    2019-20 202.84 10.14 20.28 fect from 22 August 2006. Source: Planning Commission, GoI and TERI.

    69 However, public sector OMC’s has not been able to purchase biodiesel at the identified purchased centres so far, as the parties who have expressed interest are not willing to supply at the declared price. Now, jatropha seeds are mainly crushed for oil at village level or small-scale plants for local use or for sale to the unorganised sector.

    The availability of land is an important requirement for the large-scale national biofuel programme. The present strategy of the central government is to utilise wastelands for biodiesel plantations so as not to affect the food security of the country. Biodiesel plantation on wastelands mainly depends on two factors; availability of wastelands and suitability of different agroecological regions for biodiesel plantations. GoI (2003), estimated that with appropriate extension and availability of planting stocks, it would be possible to cover 13.4 m ha of land with jatropha curcas so as to meet the 5% blending requirement by the year 2011-12 (Table 6).

    An exercise was carried out to assess the required area under jatropha plantations for meeting the blending requirements of 5% and 10% set out by the Planning Commission. Since the yield of jatropha is highly variable depending upon the soil type, irrigation status and cultivation practices, area estimates for the yield range of 1 tonne/ha to 5 tonnes/ha were arrived at separately. An average biodiesel yield of 0.31 tonne per tonne of jatropha seed is assumed under standard conditions of oil extraction and transesterifi cation.1 The calculations suggest that, if the average yield of jatropha is 3 tonnes/ha, an area of 3.66 million hectres of land is required for producing 3.35 million tonnes of biodiesel to blend at the rate of 5% by the year 2011-12. By the year 2016-17, this needs to be expanded to 4.57 million hectares. At 10% of blending the corresponding area required by 2016-17 would be 9.14 million hectares. However, as the seed yield vary, the area requirement can vary from 2.20-10.99 million hectares by 2011-12 and from 2.74-13.71 million hectares by 2016-17 at 5% blending. The corresponding range of area requirement for 10% blending would be 4.39-21.94 and 5.48-27.42 million hectares, r espectively.

    However, jatropha plantations are slow to take off due to the lack of good quality planting materials, ownership issues of community or government wastelands and other factors (Kureel 2007). So far, nearly five lakh hectares of land in the country is only put under jatropha cultivation. Chhattisgarh is leading with around

    0.84 lakh hectares followed by Rajastan (0.33 lakh hectares), Tamil Nadu (0.20 lakh hectares) and Andhra Pradesh (0.16 lakh hectares) (Gopinathan and Sudhakaran 2009). Agriculture being a state subject, the responsibility for the promotion of jatropha plantation rests with the state governments. Biofuel plantation programme is in dire need of integrated approach across various states. While, the authority for transfer or leasing of government land rests with the district collector, the nodal agency for processing of application differs in each state. The type of land made available for plantation also varies across d ifferent states (Table 8, p 71).

    Recent Initiatives and R&D on Biofuels

    Sweet Sorghum for Ethanol: Sweet Sorghum (Sorghum b icolor (L) Moench) is a leading crop targeted for bioethanol production globally. Ethanol is extracted from the sugar richstalks of sweet sorghum thereby leaving the grains for human consumption and other uses. Globally, it occupies about 45 m ha, Africa and India accounting for about 80% of this. Although sorghum is best known as a grain crop, sweet sorghum is a close variant used mainly as livestock fodder since its high rate of photosynthesis produces leafy stalks that make excellent s ilage. The stalks are rich in juice, which can be processed into sugar, jaggery or distilled to produce ethanol. Therefore, the juice, grain and bagasse can be used to coproduce a combination of food, fodder, ethanol and electricity. The resistance to drought, saline-alkaline soils, to waterlogging has been proven by its wide cultivation. The comparative advantage of sweet sorghum with sugar cane is that its growing period is only four months against 12-16 months of sugar cane and water requirement is about four times lesser. The cost of cultivation is also about 60% lower than that of sugar cane which makes the ethanol produced from it is more cost-effective than that of sugar cane (Rao and Bantilan 2007).

    Tree Borne Oilseeds for Biodiesel: The National Oilseeds and Vegetable Oil Development Board (NOVOD) established a National

    Table 7: Area Required for Jatropha Plantations for Meeting the Biodiesel Blending Targets

    Jatropha Seed Biodiesel Yield Jatropha Area (million ha) Required for Blending at
    Yield (Tonnes/ha) (Tonnes/ha) 5% 10%
    2011-12 2016-17 2011-12 2016-17
    1 0.31 10.99 13.71 21.94 27.42
    2 0.61 5.49 6.86 10.97 13.71
    3 0.92 3.66 4.57 7.31 9.14
    4 1.22 2.75 3.43 5.49 6.86
    5 1.53 2.20 2.74 4.39 5.48

    Source: Authors’ calculation

    Table 6: Planning Commission Estimates on Potential Land Availability for Jatropha Plantation

    Type of Land Total Area Area Estimated for Assumptions
    (m ha) Jatropha Plantation (m ha)
    Forest cover 69 3 14 m ha of forests are under the scheme of Joint Forest Management out of which
    20% would be easily available for jatropha plantation.
    Agriculture land 142 3 It is assumed that farmers will like to put a hedge around 30 m ha for protection of
    their crops.
    Agro-forestry 2 Considerable land is held by absentee landlords who will be attracted to jatropha
    plantation as it does not require looking after.
    Cultivable fallow lands 24 2.4 10% of the total area is expected to come under jatropha plantation.
    Wastelands under Integrated Watershed
    Development and other poverty alleviation
    programmes of MoRD. 2
    Public lands along railway tracks, roads and canals 1
    Source: GoI (2003).
    70 December 26, 2009 vol xliv no 52 Economic & Political Weekly
    EPW
    REVIEW OF AGRICULTURE

    Network on Jatropha and Karanja in 2004 by involving Indian In India, nearly 70% of the population live in rural areas and de-Council of Agricultural Research (ICAR), state agricultural univer-pend on agricultural and related activities to earn their livelihood. sities (SAU), Council of Scientific and Industrial Research (CSIR), Moreover, in rural India, around 28.3%2 people are still below pov-Indian Council of Forestry Research and Education (I CFRE), Cen-erty line. Food security continues to be a priority for the Indian govtral Food Technological Research Institute (CFTRI), Indian Insti-ernment in all its developmental efforts. Even though India is food tute of Technology (IIT, Delhi) and The Energy Research Institute self-sufficient in terms of food production, almost 50% of children (TERI). Research is mainly focused on issues such as the identifi ca-and practically the same number of women suffer from protein calotion of elite planting material, tree improvement to develop high rie malnutrition as judged by anthropometric parameters (Bamji yield varieties (HYVs) with better quality of reliable seed source, 2007). Therefore, any large-scale biofuel programme has to ensure intercropping trials, developing suitable package of practices, that it does not compromise with the nation’s food and nutritional post-harvest tools and technology and detoxification of oil meal of security. In an effort to expand the biofuel sector in the country, it important TBOs. The Central Soil Salinity Research Institute should be ensured that the area under food crops should not be (CSSRI) under ICAR is conducting field trials on various cultivars of diverted for the purpose. However, utilising unirrigated, barren and wastelands for growing non-food biofuel crops would

    Table 8: Initiatives Taken by the States for Jatropha Plantations

    prove f ruitful with multiple benefits like greening up of

    State Nodal Agency Rajasthan Department of Agriculture Andhra Pradesh Department of Rain and Shadow Type of Land Made Available Waste lands and ravine lands Irrigated and rain-fed lands unused lands, creation of employment opportunities, greater people’s participation, and so on. In this regard,
    Area Development there is another point of view that diversion of forest
    Tamil Nadu Chhattisgarh Watershed Development Agency and Watershed Development Corporation Biofuel Development Authority Wastelands and degraded forest lands Wastelands or ravine lands and wasteland for cultivation of energy plantations may cause a conflict with pastoral livelihoods. Ambiguity in
    Gujarat Agro Industrial Corporation Hilly areas and barren lands land rights is also considered as an issue in develop

    jatropha and pongamia for developing site-specific genotypes that are tolerant to adverse climatic conditions. The Central Research Institute for Dryland Agriculture (CRIDA), another institute under ICAR is also undertaking studies on genetic diversity, variability and other biotechnological studies on jatropha. The department of biotechnology (DBT) has initiated a “Micro mission on production and Demonstration of quality planting material of jatropha” with the aim to select good germplasm and develop quality planting material. TERI has commissioned a social and environmental impact assessment on J atropha with respect to its own plantation project in Andhra Pradesh. As part of the bioenergy strategy the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) is also promoting non-edible oilseeds for the production of biodiesel. Jatropha and pongomia plantations are being introduced in watershed programmes.

    Implications of Biofuels on Food Security, Social Welfare and Environment

    Food Security and Poverty: Large-scale programmes for biofuels based on agricultural feedstocks can have considerable implications for the food and livelihood security of the people of a country. The recent debates over rising food prices and the associated fallouts as a result of large-scale shift of area from food crops to biofuel feedstock crops have created concerns among the policymakers in both developed and developing countries. This is mainly because the market response of a shift against food crops at the global level may affect not only the agricultural sector, but other sectors of economy, irrespective of the level of participation of a country in biofuel production. Moreover, huge sums of outlays for subsidies on biofuels essentially means a shift of money away from the poor and vulnerable who end up spending more on food due to increased food prices, with little left for energy, even though cheaper.

    Economic & Political Weekly

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    December 26, 2009 vol xliv no 52

    ment of wastelands for biofuel. Therefore, the facts regarding such arguments also need to be verified before opting for a full-fledged expansion of biofuels in the country.

    Appropriate Technology and Feedstock: Given the current crop yields, feedstock availability and conversion technology, the ethanol production in the country seems to be barely cost-effective. The country has to look for improved technology and management practices to bring down costs. Lower plant capacity, use of batch process technology, inefficient by-product and effl uent management practices, etc, are considered as major technological constraints. The long-term technological targets like biotechnological applications to increase sugar content of crops, commercial use of membranes and microbes for ethanol production, etc, should be devised. Even though, direct conversion of sugar cane to ethanol yields higher recovery, this would not be a viable option when weighed against sugar requirement of the country. At present, ethanol production is totally on sugar cane molasses, and there is an urgent requirement to search for alternate feedstock to enhance ethanol supply. Sweet sorghum is one option; however, concerted research effort should be focused on producing ethanol from second generation biofuels like lingo-cellulosic materials (TERI 2005).

    Socio-economic Development: The promotion of biofuel development is attractive for a country like India because of its potential for creating employment opportunities for the rural poor as well as offering opportunities for promoting local level entrepreneurship and enhancement of women’s participation. The availability of technologies for decentralised production of biofuels offers opportunities for the development of local level entrepreneurship. Local institutions like Joint Forest Management (JFM) committees, self-help groups (SHGs) and panchayats can play an important role in involving village communities in biofuel programmes. Locally produced biofuels can provide fuel for irrigation pumpsets and for electricity generation, which will improve access to modern energy services to rural population and help in improving productivity. The potential for engaging women in raising nurseries and in collection of TBOs could lead to their enhanced participation in the village economy. As there are uncertainties over the yields of oilseeds, for which suffi cient field data is not yet available, the financial viability of the biodiesel is yet to be proven. The varied experience in yield levels and crop management practices have raised some apprehensions among farmers leading to a hesitation for taking up planting of biofuel crops.

    Environmental Sustainability: Scientific studies on the environmental sustainability of biofuels have been rather limited in India. However, it has been established that biodiesel use in vehicles have resulted in reduction in several important air pollutants. It is also proved that biodiesel has a positive energy balance and life cycle carbon dioxide (CO2) emission from biodiesel is around 78% lesser than that of conventional diesel (Paramathma et al 2007). However, in an age when the world is getting increasingly concerned about global warming, comprehensive studies on the following aspects are extremely important before further expanding the sector: (1) Cropwise, location-specifi c impacts on primary energy consumption and emissions over complete production cycle; (2) impact on biodiversity; (3) effects on land and water resources as a result of change in cropping pattern; and

    (4) cost-effectiveness of achieving emission reductions through biofuels. Also, the potential for India to gain carbon credits under the Kyoto Protocol’s Clean Development Mechanism (CDM) has to be verified properly. However, its introduction has a potential to create new opportunities for biofuel promotion by making it fi nancially viable.

    Conclusions and Policy Suggestions

    Currently, India’s position in the global biofuel map is not very prominent. However, the country has ambitious plans to expand the biofuel sector, though cautiously. Due to various reasons, the development of the sector has been rather slow and right now the blending targets of both ethanol and biodiesel look unfeasible at least in the time frame of the 2017. For the sector to pick up momentum, it is important to encourage the producers with adequate stimulus packages and proper price and procurement policies. The decision in 2009 to reduce the basic customs duty on biodiesel from 7.5% to 2.5% to make it at par with petro-diesel is a welcome move in this direction.

    An up to date technology policy is central to bring in effi ciency in production which is also cost-effective so that the industry would survive on its own without any subsidies or support. The focus on research has to be sustained to explore the feasibility of environment-friendly and economically sustainable feedstocks. Research thrust to develop technologies for commercial production of second generation biofuels from cellulose-rich biomass should also go hand in hand. Efforts should also be directed to promote community participation and entrepreneurship through greater participation of local institutions in the process of biofuel development. Above all, it is important to ensure that the national policy on biofuels is comprehensive and is based on the pillars of economic viability, technological feasibility, environmental sustainability and market-friendliness. Such a policy should simultaneously ensure energy security and environmental sustainability without compromising food security of the nation.

    Notes IEA (2008): World Energy Outlook (Paris: Inter-Rao, P P and M C S Bantilan (2007): “Emerging national Energy Agency Publications), p 457. Biofuel Industry: A Case for Pro-Poor Agenda

    1 It is the process of converting the raw oil produced http: //www.fas.usda.gov, accessed on May with Special Reference to India”, ICRISAT from the oil seeds to biodiesel.

    2009. http: //www.ethanolindia.net, accessed Strategic Assessment and Development Path2 Poverty estimate based on uniform recall period.

    on June 2009. ways for Agriculture in the Semi-Arid Tropics, Kureel, R S (2007): “Biofuel Scenario in India, IREDA Policy Brief, No 12.

    News-Focus: Biofuels”, pp 5-12. Subramanian, K A, S K Singal, M Saxena and References Mandal R and P Mithra (2004): “Biofuels: Indian S Singhal (2005): “Utilisation of Liquid Bio-Scenario and Policy Issues”, proceedings of the fuels in Automotive Diesel Engines: An

    Bamji, S M (2007): “Nutrition Secure India – How Do “International Conference on Biofuels: Perspec-Indian Perspective”, Biomass and Bioenergy, 29, We Get There? Nutrition Conclave Discusses the

    tives and Prospects”, organised by Winrock 65-72.

    Way Forward”, Current Science, Vol 93 (11), International India, 16-17 September. TERI (2005): “Liquid Biofuels for Transportation: D ecember.

    Mittal Surabhi (2006): “Structural Shift in Demand India Country Study on Potential and Implica-Biofuels International (2009): Regional Focus: Biofuels for Food: India’s Prospects in 2020”, ICRIER tions for Sustainable Agriculture and Energy”, in Asia, 2(6): 30-32.

    Working Paper No 184. Report submitted to German Technical

    Deepak, Rajgopal (2008): Rethinking Current Strategies

    MoPNG (2009): Ministry of Petroleum and Natural Cooperation.

    for Biofuel Production in India, Energy and Resources

    Gas, www.petroleum.nic.in, accessed on June UNCTAD (2006): “An Assessment of the Biofuels Group (Berkley: University of California).

    2009. Industry in India” (Geneva: United Nations Con-Ethanol India (2009): http://www.ethanolindia.net/

    Naylor, R, A J Liska, M B Burke, W P Falcon, J C Gaskell, ference on Trade and Development).

    ethanol_demand.htm accessed on October 2009.

    S D Rozelle and K G Cass-

    FAO (2008): “Biofuels: Prospects, Risks and Opportu-Appendix: Economics of Ethanol Production from Molasses in India

    man (2007): “The Ripple

    nities” in The State of Food and Agriculture (Rome: Item Unit Stand-alone Integrated with Sugar

    Effect: Biofuels, Food

    Food and Agricultural Organisation). Distillery Production

    Security, and the Environ-F O Licht (2009): World Ethanol and Biofuels Report, 7

    ment”, Environment, 49(9): Cost of molasses Per MT 5,000 5,000

    (18): 365, 26 May. 31-43.

    Transportation cost Per MT 150 0

    FAPRI (2008): World Biofuels in Agricultural Outlook Paramathma, M, P Venkatach(Iowa: Food and Agricultural Policy Research alam and A Sampath Raja Total 5,150 5,000 I nstitute). (2007): “Jatropha Improve-

    Recovery of ethanol /MT of molasses Litres 220 220

    Gopinathan, M C and R Sudhakaran (2009): “Bio-ment, Management and fuels: Opportunities and Challenges in India”, Production of Biodiesel”,

    Recovery cost Rs/ litre 23.40 22.72 Invitro Cellular and Developmental Biology-Plant, Centre of Excellence in Direct cost of distillation Rs/ litre 6.69 5.17 45:350-371. Biofuels (Coimbathur:

    Finance and other indirect costs Rs/ litre 3.05 2.77

    GoI (2003): Report of the Committee on Development Agricultural Engineering of Biofuels, Planning Commission, Government College and Research Total costs Rs/ litre 33.14 30.66 of India. Institute). Prepared based on GoI (2003). Price of molasses has been revised to present rates.

    December 26, 2009 vol xliv no 52

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