What is the issue?
- The new biofuels policy was released by the Union Government recently.
- While it is high on ambition, its success will depend on how it is executed.
What is the current scenario?
- 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.
What does 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.
What is the way ahead?
- 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.
Source: The Hindu
