Ethanol-fuelled policy haze

Ethanol-fuelled policy haze
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First Published: Tue, Mar 17 2009. 10 22 AM IST
Updated: Tue, Mar 17 2009. 10 22 AM IST
Amid crises, governments prioritize: At least that’s the hope. But some misguided ideas never die. India’s government continues its environmentalist zeal by supporting ethanol.
Last week, the Planning Commission indicated that the government may provide incentives to companies to acquire sugar cane plantations, mainly in Brazil, and import more ethanol. To its credit, the government has at least adjusted its ambition in accordance with reality. Last year, the government had announced that it would be mandatory to blend 10% ethanol with petrol for vehicles. The recent crash in oil prices has now sidelined the plan.
Yet, the Planning Commission now wants to reduce the import duty on industrial ethanol from 7.5% to 5%, among other measures, as a first step to become less reliant on oil. But as far as energy security goes, this is at most a swap from the Persian Gulf to South America, not an improvement. It may be worse: Transporting ethanol in bulk from Brazil, without the benefits of infrastructure such as pipelines, can prove more expensive than transporting oil from Saudi Arabia.
But the easier alternative —ethanol production at home —has its pitfalls, too. The sugar cane crop’s water demands are already a problem in Maharashtra; more ethanol production will only compound the problem. What’s more, consider the unintended effect focusing on one industry can have on others: Food prices in the US skyrocketed last year thanks to excess corn-based ethanol production that is subsidized heavily by the state.
Ethanol in India, too, may not survive in the short term without state support. Sugar farmers may encounter the same obstacles dairy farmers did in the 1940s, in distributing and marketing ethanol. Cornell University’s David Pimentel has also argued that biofuels are inefficient: They need more energy to produce than they actually yield.
This doesn’t mean that India shouldn’t explore alternative fuels. But the government should recognize that any change has trade-offs, some worse than others. And with a ballooning fiscal deficit, it’s best to save firepower for more pressing matters. Doling out cash for ethanol is not a luxury any more.
Should the government invest in ethanol now? Tell us at views@livemint.com
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First Published: Tue, Mar 17 2009. 10 22 AM IST