By R. Sasankan
India has finally decided to step on the gas -- quite literally when it
comes to ethanol blending of auto fuels. The ministry of petroleum and
natural gas (MoPNG) has suddenly decided to up its goal for ethanol
blending of petrol to 20 per cent by 2025 from its current level of 5
per cent. Many believe it is a laudable goal but wonder if the
government has really thought through the consequences of the strategy
with a clearly worked out assessment of the rewards and the risks that
such an enterprise involves.
Let us start with the basics: ethanol, also called ethyl alcohol, is
naturally produced by the fermentation of sugars by yeasts or via
petrochemical processes such as ethylene hydration. It has medical
applications as an antiseptic and disinfectant. It is also used as a
chemical solvent and in the synthesis of organic compounds. But its real
attraction today is that it serves as an alternative source of fuel at a
time when global fossil fuel reserves are at increasing risk of running
out.
The
largest single use of ethanol is as an engine fuel and fuel additive.
Brazil is one of the globe's leading producers of ethanol and has
achieved enormous success by harnessing ethanol as an engine fuel.
Gasoline sold in Brazil contains at least 25 per cent anhydrous ethanol.
Hydrous ethanol (about 95 per cent ethanol and 5 per cent water) can be
used as fuel in more than 90 per cent of new gasoline-fuelled cars sold
in the country. Brazilian ethanol is produced from sugar cane and is
noted for its high carbon sequestration. The US and many other countries
primarily use E10 (10 per cent ethanol, sometimes known as gasohol) and
E85 (85 per cent ethanol) ethanol/gasoline mixtures.
India first flirted with the idea of blending ethanol with petrol in
2003 when domestic crude production started to stagnate and fuel
consumption started to rise sharply. There was a sound logic behind the
move: the government wanted to tamp down on its mounting crude import
bill. But the country's has had a very chequered history with the use of
ethanol blended auto fuels. The scheme had floundered from the start
because it was launched without conducting a proper study to determine
the cost of production and availability of ethanol. The initial goal was
ambitious with the objective of 10 per cent ethanol blending with
petrol but was quickly scaled down to 5 per cent. It was once again
raised to 10 per cent but the blending rate never topped 5 per cent. The
Modi government tried to rescue the scheme by raising the procurement
price of ethanol for oil marketing companies.
The ham-handed approach to ethanol blending continues and this bedevils
the chances of success. The government had earlier fixed a target of 10
per cent ethanol blending by 2022, and 20 per cent blending by 2030. But
it has now reworked the plan and intends to directly focus on the 20
per cent target by 2025.
Will the strategy work this time?
I have written extensively on the topic but still thought it advisable
to seek enlightenment from subject experts. I decided to approach Dr
Surya P. Sethi, India’s top energy expert who worked as the country’s
principal advisor (energy) for close to a decade. (He returned to India
from the International Finance Corporation at the invitation of then
Prime Minister A.B. Vajpayee). Dr Sethi knows the subject pretty well.
According to Dr Sethi, advancing the 20 per cent ethanol blending goal
from 2030 to 2025 might be a laudable objective from multiple
perspectives including diversification of the energy basket, the
opportunity to reduce dependence on crude oil imports, lowering
greenhouse gas emissions, and addressing the stresses in the
politically-charged sugar sector. However, it is far from certain that
the move has been dictated by serious evidence-based research and
analysis of the economic and ecological costs and the benefits. If it
isn't, then one can only surmise that the policy initiative is being
driven by short-term political exigencies.
“One can live with the shorter-term exigencies only if the longer-term
benefits are clearly established. If indeed MoPNG’s decision is based on
solid evidence-based research, it would be worthwhile to place the
findings in the public domain and invite comments from area experts,”
said Dr Sethi. Petroleum minister Dharmendra Pradhan is known to be
receptive to ideas and a wider consultation on the subject will only
enhance his prestige and strengthen his stand on ethanol blending.
But let us first acknowledge three unpleasant realities while discussing
the issue of ethanol blending: first, India is not Brazil. Indian
sugarcane-based ethanol consumes more energy than it delivers; a higher
level of blending will necessitate major modifications in the current
breed of petrol engines. As a result of the way in which India produces
sugar cane and corn (with extensive use of pumped water, fertilizer and
pesticides), the energy used to produce a litre of ethanol is about 120
per cent of the energy contained in that unit of ethanol.
Brazil’s per capita arable land availability is over three times that of
India and its fresh water availability per capita is 25 times that of
India. It is also true that as much as 5 million hectares of arable land
has already been put under water-guzzling sugarcane cultivation in
water-starved India, including in States that are fast running out of
fresh water reserves. This is because sugarcane has become the most
profitable cash crop based on politically-driven pricing policies that
pay a high price for sugarcane irrespective of the prevailing market
price for sugar.
Second, there is a glut in sugar markets worldwide. The sugar price
realized by Indian sugar producers, even in the protected domestic
market, is roughly 12-15 per cent below their cost of production largely
because of the politically-driven fair and reasonable price of
sugarcane. While some private sugar mills have closed down, the
politically controlled cooperatives have continued producing. As a
consequence, sugar cane producers are owed huge arrears by the mills and
this has become a burning issue that makes State and Central
Governments vulnerable. The Central Government has been forced to
subsidize the export of surplus sugar. In effect, this has become a
subsidy for the export of already scarce water because producing one
kilogram of sugar requires up to 2 tons of water.
Converting molasses to ethanol with a guaranteed off-take price,
irrespective of the international crude-oil price will shift the problem
to the oil and gas sector which is arguably less politically sensitive
in the short run. But here is the paradox: just as the export of sugar
came at the cost of the tax payer, the lower crude oil import bill could
also be at the cost of the same tax payer.
Finally, there is the ecological footprint of sugar cane that needs to
be considered. Says Dr Sethi: “More important, though, is the ecological
footprint of sugarcane based bio-ethanol, given its high
water-dependence and the nagging doubts about the overall energy balance
of sugarcane-based bio ethanol under India-specific conditions that
varies from State to State. There are alternative lignocellulosic
feedstocks that might have a lower ecological footprint and a higher
overall energy balance on the basis of a detailed life-cycle assessment
under India and State -specific conditions. Such a life cycle assessment
of energy balance should not be limited to just the production of the
bio-ethanol but must also include end-use efficiency of the bio ethanol
produced since its heating value is only about two thirds that of the
fossil fuel it replaces. Higher levels of ethanol blending for the
transport sector could lead to non-linear loss in the overall efficiency
of the current breed of engines being used, without modifications or
the use of flex-fuel engines.”
That brings us to a politically inconvenient outcome. The solution to
the problem that might be in the long-term interest of India, her
farmers and her ecological sustainability is to reduce sugar cane
cultivation, especially in water-starved States. We could still pursue
ethanol blending based on alternative lignocellulosic feedstocks
available or grown locally and/or import of bio ethanol at
internationally competitive prices. But we must first learn to
acknowledge that the ethanol blending policy has been floundering in the
absence of a defensible and clear-headed analysis of its costs and
benefits and a strategy that addresses the concerns of all stakeholders.
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