Promoting Biofuels

New policy focuses on reducing oil imports

In May 2018, the union cabinet approved a national policy on biofuels that seeks to not only help farmers dispose of their surplus stock in an economical manner, but also reduce India’s dependence on oil imports. Although the government introduced the National Mission on Biodiesel in 2003, it was not until 2008 that a formal biofuel policy was devised by the Ministry of New and Renewable Energy. The draft National Policy on Biofuel was approved by the cabinet in 2009. However, the targets set under the policy could not be met. The petroleum ministry prepared a draft for a new policy in 2017, which has now been passed. This policy outlines the responsibilities of all the ministries and departments concerned with respect to biofuels.

Three generations of fuel

Under the new policy, biofuels are categorised as first generation, second generation and third generation fuels. The first generation of biofuels consists of bioethanol and biodiesel. Ethanol and municipal solid waste (MSW) are second-generation fuels, while bio-compressed natural gas is a third-generation fuel. The first generation fuels are called basic biofuels, whereas the second and third generation fuels are referred to as advanced biofuels.

Widening the scope

The policy has allowed the use of several materials for the production of ethanol, which can be blended with petrol. These are sugarcane juice, sugar-rich materials like sugar beet and sweet sorghum, starch-rich materials like corn and cassava, damaged food grains like wheat and broken rice, as well as rotten potatoes. During a phase of surplus production, farmers risk not getting the right price for their output. The policy addresses this issue by allowing the use of grains in surplus for the production of ethanol. The ethanol produced would be used for blending with petrol in accordance with the approval that the National Biofuel Coordination Committee provides. This development goes hand-in-hand with the government’s objective of doubling the income of farmers by 2022.

Projected benefits

In order to promote the use of advanced biofuels, the policy has allocated Rs 50,000 million for second generation ethanol bio-refineries as part of a viability gap funding scheme. Further, tax incentives and a higher purchase price will be set for advanced biofuels as compared to first generation fuels. The government claims that the policy will reduce import dependence in the case of fuels. Since India is the third largest importer of oil in the world with a consistently rising import demand for oil, the impact of this policy is of crucial importance.  It has been estimated that 10 million litres of E10 (fuel containing 10 per cent ethanol) saves Rs 280 million at the current foreign exchange rate. The supply of ethanol during 2017-18 is estimated to have reached 1,500 million litres, which would have led to a saving of Rs 40 billion in foreign exchange. The policy aids the process of reaching the prime minister’s target of reducing oil imports by 10 per cent to reach 67 per cent by 2022. India is the third largest emitter of greenhouse gases (GHG) after the US and China. Biofuels are a low-emission alternative to traditional fossil fuels. One million litres of E10 is estimated to cut down carbon-dioxide emissions by 20,000 tonnes. For the estimated ethanol supply in India in 2017-18, the emissions are expected to reduce by 3 million tonnes. Besides, if agri-wastes and residues are used to produce biofuels instead of being burnt, GHG emissions can be cut further.

Potential feedstock

Used cooking oil can also be utilised as feedstock for biodiesel. Consistently reused cooking oil is a health hazard. Converting this into biodiesel will effectively prevent its prolonged reuse in the food industry. Another feedstock for biofuel is MSW. India produces around 62 million tonnes of MSW on a yearly basis, which holds massive potential to be converted into biofuels. One tonne of such waste has the potential to provide around 20 per cent of fuel. The policy also encourages establishing supply chain mechanisms for the production of biodiesel from non-edible oilseeds, used cooking oil, as well as short gestation crops. According to estimates, a bio-refinery that produces 100 kilolitres of biofuel per day requires a capital investment of about Rs 8,000 million. Currently, oil marketing companies (OMCs) are in the process of setting up 12 second generation bio-refineries at an investment of Rs 100,000 million. State-run OMCs have invested in the long-term offtake of second generation ethanol by assuring their engagement in 15-year offtake contracts with suppliers.

Outlook

Promoting the diversion of farmland or crops towards the production of biofuels could spark a “Food vs Fuel” debate, wherein one side of the argument would be that more resource allocation towards the production of biofuels could threaten food security. The government policy, however, focuses on the positive impact where the conversion of surplus grains and agricultural biomass into fuel can help price stabilisation. The policy aims to propagate the production of biofuels from non-food feedstock to avoid the diversion of food crops.

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