Global oil prices are off their war-time highs, even if the US-Iran peace pipe coughs up fumes of anger now and then—crude futures rose mid-week on a White House threat to walk away.
Back home, however, petroleum has been simmering for a different reason. In India, motorists complain of reduced mileage and increased wear-and-tear observed in their vehicles due to the use of petrol blended with 20% ethanol as staple fuel, as mandated by the government.
E20 refills took effect last year, but protests grew shrill once a plan was announced to bump ethanol up to 25%. The Centre has assured vehicle users that such a step would be taken only after tests are done.
Those tests are unlikely to defy science. Ethanol has a lower energy value than petrol derived from crude oil. Also, it easily absorbs water, which can decay rubber parts like engine seals.
One needs to recognize that while recent vehicle designs overcome this handicap, the population of those susceptible to ethanol injury vastly outnumber users of newer cars.
Meanwhile, engine rejigs that could retain how far a litre of fuel runs have apparently lagged India’s blend shift so badly that mileage has emerged as a pain-point. On this, the science of internal combustion prevails.
From a policy perspective, though, the Gulf war’s oil supply squeeze offers India a compelling reason to diversify away from fossil fuels, especially since we depend on imports to meet nine-tenths of our oil needs.
As ethanol blends release less carbon in their tailpipe exhaust, their adoption aligns with our climate goals. Energy-security gains apart, a 20% blend shaves off an estimated 3% of India’s oil bill.
At times when every fifth import dollar goes into energy shipments, the savings are sizeable. And finally, farmers get a sales avenue by supplying feedstock for ethanol, from sugarcane to cereals like rice and maize.
While the imperatives of India’s political economy, energy security and carbon mitigation converge in the use of locally procured ethanol, the Centre should put its scale-up plan to scrutiny for big-picture trade-offs.
Here’s why.
India could source ethanol from Brazil and the US through the use of a tariff rate quota, one that caps the volume of duty-free imports so that local farmers are shielded from a gush of cheap imports. Today, New Delhi allows ethanol imports only for non-fuel use in industrial processes.
Ethanol blending may be a strategic initiative, but its cost arithmetic must work out well too. After all, it is one thing to cushion farm earnings, but it must not act as an implicit cross-subsidy for farmers at the expense of motorists; that would call for its own debate.
Second, while maize has emerged along with sugarcane as the chief feedstock for ethanol, the government should ensure that farmers do not switch beyond a point from foodgrain crops to fuel-input supplies, as this could have a fallout on food security that must be studied and weighed.
No less importantly, cultivators need a risk hedge against poor non-fuel crop harvests; oilseed farmers, for example, recently suffered a rough patch. Since the Centre has a handle on the price of ethanol sourced from distilleries, it must make judicious decisions.
And then, there’s another transition to consider. If street traffic must gradually go electric, has the flex-fuel programme been calibrated aptly for this? Any shift in policy gear must take an evolving blend of factors into account.