The Indian Biofuels Framework

India is the fourth largest ethanol producer after Brazil, the United States and China (Gonsalves, 2006). Ethanol in India is produced by fermentation of molasses which is a by-product of sugar manufacture. Sugar cane is grown exclusively by small holder farmers in India (Chipukunya and Kacelenga, 2011). India also has the distinction of being the largest sugar consumer in the world and this causes tension with the ethanol industry (Gonsalves, 2006).

The government of India mandated the blending of 5% (five percent) ethanol in petrol in 2003 in the nine sugar producing States and Union Territories 1. Andhra Pradesh 1. Damman and Diu 2. Goa 2. Dadra and Nagar Haveli 3. Gujrat 3. Chandigarh 4. Haryana 4. Pondicherry 5. Karnataka 6. Maharashtra 7. Punjab 8. Tamilnadu 9. Uttar Pradesh (Government of India, 2002). A phased expansion of the ethanol blend to the rest of the country is planned. Cane and sugar prices in India are government controlled (Chipukunya and Kacelenga, 2011). Gonsalves (2006, p.5) believes that policies such as this one, which he labels “protectionist”,

are stifling domestic growth of both sugar and ethanol production. This view is contradicted by the Indian National Policy on Biofuels released in 2009 (Shinoj et al., 2011). The policy envisages enhancement of rural development thus generating employment opportunities. As a consequence of the use of biofuels on a large scale, environmental and economic benefits would be reaped. Gonsalves (2006) view is of the classical free market where prices find their own level. Whereas the Indian National Policy deliberately sets out to empower rural populations as a development strategy by controlling prices.

Another aspect entrenched in the policy is that food related feedstocks would not be permitted, in order to avoid a conflict between food security and energy security. Notably ethanol from sugar cane molasses is included as coming from a non-food feedstock. Infrastructure such as irrigation canals, roads, water and power are provided free to sugar cane farmers by government. In addition no taxes are levied on sugar cane proceeds (Chipukunya and Kacelenga, 2011). The blending of biofuels to twenty percent (20%) for both petrol and diesel is targeted to be achieved by 2017 (GoI, 2009). There are a number of challenges, the principal being, the cyclic nature of sugar production causing molasses shortages (Shinoj et al., 2011). The result is that the five percent (5%) blending target for 2010 has not been met. An Increase in the price of ethanol is expected to help in reaching the targeted five percent (5%) blend by encouraging ethanol production. According to Shinoj et al. (2011, p.2) "Demand for petrol in India is galloping" due to rapid urbanisation, increasing incomes resulting in high vehicular density. Achieving the twenty percent (20%) blend by 2017 therefore requires measures to be put in place to anticipate the increased demand. The pathways suggested by Shinoj et al. (2011) include the following:

a) Increasing ethanol production

The required increase in ethanol production for the twenty percent (20%) blending target is estimated at three times that of the 2010 production levels. The yields of sugar cane per hectare must be significantly enhanced. It is acknowledged that ILUC issues could arise as some food crop land could switch to become fuel (energy) crop land. In the long term this may not be sustainable.

b) Importing ethanol

Importation of ethanol to meet the shortfall is another possibility for closing the gap between the rising demand of ethanol and the local supply. Policy as it stands does not allow the importation of ethanol. According to Shinoj et al. (2011, p.3), the cost of importation is prohibitive.

c) Technology development

Current methods of ethanol production need efficiency improvements. Biotechnology research to increase sugar cane yields per hectare and to increase the sugar content in sugar cane is a long term solution. Ethanol extraction techniques from molasses also require improvement in order to raise the yields of ethanol from molasses.

d) Complimentary feed stocks

Studies by Rao and Bantilan, 2007 and Reddy et al., 2005 quoted by Shinoj et al. (2011) indicate that sweet sorghum can be used as an alternative or complimentary feed stock to sugar cane. Sweet sorghum like sugarcane has varieties with different juice to ethanol yields. Woods (2000) found that sweet sorghum (Keller) yields 561 litres of ethanol per hectare compared to sugarcane which yields 936 litres of ethanol per hectare. Sweet sorghum is complimentary to sugarcane as it is harvested in sugarcane off season (Woods, 2000). Other feed stocks such as bagasse, crop residues etc. commonly called second and third generation biofuels could also provide a long term solution (Raju et al., 2009).

Lessons

a) A robust government biofuels policy is necessary to forestall arguments about indirect land use change (ILUC) and fuel versus food issues. Sugar is considered a food item in India consequently sugarcane cannot be grown for producing fuel ethanol. The price controls mean that free market forces cannot influence sugarcane farming for fuel.

b) Phase expansion of ethanol blend in fuel. As a start up measure the blending of ethanol with petrol should be done in bits. For example the policy allowed for blending to commence initially in nine (9) states out of the twenty nine (29).

c) No food related feedstock is allowed. The policy lists raw materials that maybe used in the production of ethanol. This ensures the exclusion of food crops that can be used to produce ethanol such as cassava.

d) Sugar cane molasses is non-food feedstock. The policy classifies molasses, a by-product of sugar production, as being a non-food item. This allows molasses to be used in the production of ethanol.

e) Anticipate growth of ethanol demand in the policy. The phased introduction of ethanol blending embedded in the policy means the demand for ethanol can be monitored and managed as it grows.

The notable feature of the Indian biofuel framework for promoting the development of ethanol is that it limits the growing of sugarcane to small holder farmers. Further the roll out of the blend mandate is phased.