|National Bio-fuel Policy – 2018
The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has approved National Policy on Biofuels – 2018.
- The Policy categorises biofuels as “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.
- The Policy expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.
- Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.
- With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding scheme for 2G ethanol Bio refineries of Rs.5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.
- The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, Used Cooking Oil, short gestation crops.
- Roles and responsibilities of all the concerned Ministries/Departments with respect to biofuels has been captured in the Policy document to synergise efforts.
- Reduce Import Dependency: One crore lit of E10 saves Rs.28 crore of forex at current rates. The ethanol supply year 2017-18 is likely to see a supply of around 150 crore litres of ethanol which will result in savings of over Rs.4000 crore of forex.
- Cleaner Environment: One crore lit of E-10 saves around 20,000 ton of CO2 emissions. For the ethanol supply year 2017-18, there will be lesser emissions of CO2 to the tune of 30 lakh ton. By reducing crop burning & conversion of agricultural residues/wastes to biofuels there will be further reduction in Green House Gas emissions.
- Health benefits: Prolonged reuse of Cooking Oil for preparing food, particularly in deep-frying is a potential health hazard and can lead to many diseases. Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.
- MSW Management: It is estimated that, annually 62 MMT of Municipal Solid Waste gets generated in India. There are technologies available which can convert waste/plastic, MSW to drop in fuels. One ton of such waste has the potential to provide around 20% of drop in fuels.
- Infrastructural Investment in Rural Areas: It is estimated that, one 100klpd bio refinery will require around Rs.800 crore capital investment. At present Oil Marketing Companies are in the process of setting up twelve 2G bio refineries with an investment of around Rs.10,000 crore. Further addition of 2G bio refineries across the Country will spur infrastructural investment in the rural areas.
- Employment Generation: One 100klpd 2G bio refinery can contribute 1200 jobs in Plant Operations, Village Level Entrepreneurs and Supply Chain Management.
- Additional Income to Farmers: By adopting 2G technologies, agricultural residues/waste which otherwise are burnt by the farmers can be converted to ethanol and can fetch a price for these waste if a market is developed for the same. Also, farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Thus conversion of surplus grains and agricultural biomass can help in price stabilization.
In order to promote biofuels in the country, a National Policy on Biofuels was made by Ministry of New and Renewable Energy during the year 2009. Globally, biofuels have caught the attention in last decade and it is imperative to keep up with the pace of developments in the field of biofuels. Biofuels in India are of strategic importance as it augers well with the ongoing initiatives of the Government such as Make in India, Swachh Bharat Abhiyan, Skill Development and offers great opportunity to integrate with the ambitious targets of doubling of Farmers Income, Import Reduction, Employment Generation, Waste to Wealth Creation. Biofuels programme in India has been largely impacted due to the sustained and quantum non-availability of domestic feedstock for biofuel production which needs to be addressed.
Assessment: Food grains can now be used for producing ethanol during surplus production years, according to the national policy on biofuels that was approved by the Cabinet on Wednesday.
The policy has expanded the scope of raw materials that can be used for producing ethanol, including sugarcane juice, sugar beet, sweet sorghum, corn, cassava, damaged food grains like wheat, broken rice, and rotten potatoes unfit for human consumption. Currently, ethanol is mainly produced from molasses.
Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee,” an official statement said.
Food for fuel has often been a controversial policy matter across the globe as many believe using grains for ethanol raises food inflation risk.
By limiting use of grains for fuel production only in surplus production years, the government has tried to limit the risk.
India has for years trailed the official target of blending 5 percent ethanol and biodiesel in petrol and diesel respectively to cut pricey oil import and save foreign exchange. The current blending ratio is about 2% for petrol and less than 0.5% for diesel.
India imports 83 percent of its domestic crude oil requirement.
“With a thrust on advanced biofuels, the policy indicates a viability gap funding scheme for 2G ethanol biorefineries of Rs 5,000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels,” the statement said.
The policy has also encouraged setting up of supply chain mechanisms for bio-diesel production from non-edible oilseeds, used cooking oil, and short gestation crops.
The ethanol supply year 2017-18 is likely to see a supply of around 150 crore litres of ethanol which will result in savings of over Rs 4,000 crore of forex and help ?cut carbon dioxide emission by 30 lakh tonne, the statement said.
At present state oil companies are in the process of setting up twelve 2G bio refineries with an investment of around Rs 10,000 crore.
- The government estimates that ethanol supply of around 150 crore litres in 2017-18 could save foreign exchange worth over Rs. 4,000 crore.
- Sugar industry is the key ethanol supplier for fuel blending at present, but prices offered to them for ethanol isn’t attractive.
- Hence, they’ve preferred to sell off their stock to better remunerative alcohol and other industries, which has been constraining supply for blending.
- Currently, rising oil prices are putting increasing pressure on the economy.
- In this backdrop, the government has mooted the new “National Biofuel policy” for encouraging Ethanol use, which gives some solace.
- The policy’s focus has been in addressing the supply side issues involving bio-fuels, which has long been a constraint in domain.
the new policy envision:
- The new policy explores a wider variety of raw materials to be used as inputs to produce ethanol (which is to be blended with petrol).
- Apart from sugarcane – government plans to include corn, damaged food grains, potato and even municipal solid waste as ethanol sources.
- These changes are likely to reduce the cost of producing bio-fuels and improve affordability for consumers, particularly during oil price hikes.
- The Centre hopes the new policy will also benefit farmers, who will be able to sell various types of agricultural waste to industry at remunerative prices.
- It will also serve as an incentive for farmers to not burn their stubble and other farmland waste, which has become a menace in the regions around Delhi.
- The policy also envisions a budget of 5,000 crores for supply chain infrastructure enhancement in the bio-fuel sector.
- Any bio-fuel policy must be strongly backed by sufficient technology and production scale in order to be financially feasible and implementable.
- Given the current market dynamics, sugar industry’s share in the bio-fuel mix is unrivalled – thereby underscoring the need for better pricing for ethanol.
- The consideration for using food grains is a tricky one as food supply chains might get affected if there aren’t proper checks.
- While source diversification is indeed a positive, proper enhancement of supply-chain infrastructure to reach the final consumer will prove vital.
- The government should also take steps to remove policy barriers that have discouraged private investment in building supply chains.