India must weave biofuels into a rural energy network
India’s biofuel programme has served farmers well. To boost rural incomes, let’s now use fiscal resources to weave it into a wider web of rural feedstock supplies from diverse sources. The gains could justify the outlays.
Prime Minister Narendra Modi’s recent inauguration of a massive bamboo-based bio-refinery in Assam to produce fuel-grade ethanol is testimony to the government’s resolve to diversify feedstock for bio-fuels beyond India’s mainstay of maize and sugarcane.
The biofuel initiative has had considerable success. Filling stations today supply petrol with up to 20% ethanol content, aiming to serve three objectives: one, reduce foreign exchange outflows, since we import 88% of our oil needs; two, raise farmer earnings; and three, reduce carbon emissions.
But diversifying inputs is a challenge. To appreciate this, a review of the measures taken to arrive at the current blend is instructive.
Over the last decade, the Centre, through public-sector oil companies, has provided price and volume purchase support to the miller-distillers who mill farm produce and distil it for ethanol.
With rising volumes and fuel blending targets, maize has seen a 70% jump in prices over the last four years, while sugarcane prices have held firm. Without the ethanol blending programme, not only would prices slide, cash liquidity at the farmer’s end would also suffer, since the use of cane for biofuels has seen cane crushers paying their dues quickly.
On the other hand, reduced hydrocarbons in our fuel tanks, thanks to blending, has not stanched forex outflows much, since petrol constitutes only around 17% of India’s petroleum-product usage; also, rising EV adoption is likely to dampen demand for petrol.
Clearly, the scheme exists largely for the benefit of farmers. India’s acreage under maize cultivation is expected to expand robustly this year, but concerns of food security on account of farmers switching to this crop are unfounded at this stage; this crop’s share of overall farm acreage would still be modest compared to that of wheat and rice, which are diet staples in India.
Having achieved momentum in its blending programme, the government should take a closer look at its economic costs. After all, maize and sugarcane are the low-hanging fruits for the purpose, as they are laden with high starch that converts to energy-rich ethanol. Bamboo is a less efficient source, but given its plentiful availability in the Northeast, Assam is a good location for a biofuel project.
In time, a bustling service economy could come up around it. For greater diversity, though, we must harness raw materials like farm residue. The challenge here lies in developing supply chains for aggregation that would make it worthwhile for economic agents to collect, cart, crush, ferment and extract fuel-grade ethanol.
State support for this must also cover the use of baling machines that operate for two months a year at most, which deters farmers and service providers from buying them, but can bundle up crop residue neatly for transport. This would meet the twin aims of ‘Swadeshi’ energy and reduced pollution from burnt residue.
Such a network would weave India’s biofuel programme into the larger rural energy economy, which ranges from solid fuels like wood pellets that ‘co-fuel’ power plants to gaseous fuels like compressed biogas, which serves cooking, transport and industrial needs.
We must create the links needed for farmers to access various energy markets and find the best prices for their produce. This will raise incomes and insulate them better from farming vagaries like drought. Success would animate countryside commerce and justify our fiscal investment in such a network.
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