Special Biofuels Digest report on India’s new biofuels policy

By Biofuels Digest correspondent Joelle Brink

India at last enacts a national biofuels policy—but it won’t be easy

With less than a year to go before national elections, and after much wrangling between vested interests including SUV-driving yuppies, diesel-dependant farmers and truckers, and a national railroad system that consumes nearly three quarters of the country’s total diesel imports, India has finally negotiated a national biofuels policy, although most of the specifics still remain to be decided.

The new policy sets a general target of 20% ethanol and 20% biodiesel blending by 2017. This has already met with popular resistance due to fears of further inflation in food prices. While the new policy reiterates the government’s 2003 guideline that fuel crops are to be grown only on “waste lands”, the concept is a hazy one susceptible to interpretation and has already led to corn and soy biofuel plantations coming up in parts of the country unsuitable for tropical biofuel crops.

At present it remains unclear whether the existing ethanol targets for this year will be met–currently 5%, with a 10% target scheduled to take effect in October. Besides the challenges of ramping up ethanol production, domestic automakers have protested that many of their older models will not run on ethanol blends higher than about 3%. While this could be overcome by government subsidies to retrofit rubber fuel lines and other susceptible components of older fuel systems, it is not clear as yet if and how this would be done.

Biodiesel too faces challenges. While Indian Railways, the country’s largest land owner, will likely be able to implement its recently announced national Jatropha biodiesel initiative on land classified as industrial, many private and state producers may not be able to do so. Some of the largest private Jatropha plantations use agricultural land leased from “sin” industries such as brewing and tobacco, while others use land unilaterally allocated by state governments or districts without central government approval or oversight. Many Indian states are controlled by local parties that are effectively independent in many respects, such as the Dravidian DMK and AIADMK parties in Tamil Nadu, and the Communist Party of India (Marxist) in West Bengal, among others.

The food versus fuel controversy has been especially fierce in India, where many families are unable to afford food at the current inflated prices. Short-term, some of the government’s food grain reserve is being distributed to those unable to buy food at market rates, but food production will have to be increased and commodity prices controlled if India’s growing population is to feed itself in the long run. Increasing food production will in turn depend upon Indian Railways’ ability to transport more fertilizer and insecticide to farmers, more crops to processing plants, and to distribute more foodstuffs, fruits and vegetables to markets. Everything from raw milk to hot lunches now travels on Indian Railways. Over the past few years the railways have steadily increased the proportion of biodiesel content blended in their fuel, using everything from Jatropha and Karanj oil to waste vegetable oil collected from five star hotels and restaurants. On some routes the trains already meet the government’s 2017 20% biodiesel blending target, while on others trains run on B10-B15. Higher blends up to B100 are possible if they can be produced without adversely affecting food production.

Another key issue yet to be addressed is that of biofuel exports. In principle, the government is against biofuel exports because of the increasing domestic requirement for biofuel, and especially biodiesel. India is surrounded by hostile states with which it has often been at war, and that makes energy independence a primary consideration. Wind farms and solar panels now power the high electric fences separating India from Pakistan. India recently concluded a civilian nuclear deal with the US which, along with hydropower, will make it significantly more self-sufficient in power production. It would also like to be self-sufficient in biodiesel, or nearly so, since India currently produces 30% of its own petroleum requirement. The hard lesson World War II is not forgotten, when, as a British colony, Japan cut off India’s petroleum supply and the Japanese army reached its eastern border.

Many of the country’s biodiesel plantations are owned by foreign investors whose business model relies on high prices paid by European importers. It is doubtful that they would voluntarily accept a lesser government mandated price. But they could conceivably be forced to if the government decides to leverage its mandated partnerships with each of these corporate producers.

These unresolved issues and others will now land on the desk of outgoing Prime Minister Manmohan Singh and a recently constituted working group of ministers tasked with working out the conflicts and logistics. Though the reigning United Progressive Alliance is favored to win next year’s national elections, much can happen between now and then and biofuel issues will undoubtedly remain controversial.