Flex fuel policy of government to curb pollution worry automakers

The move will decrease pollution and encourage a diversion in the sugar industry’s output away from sugar and towards ethanol

January 18, 2016 02:34 am | Updated September 23, 2016 01:02 am IST

India can soon expect a policy on flexible-fuel cars, cars that can run on bio-ethanol and petrol, or a blend of both. The government is expected to make an announcement before January 26, according to Union Transport Minister Nitin Gadkari.

The move to flex-fuels will decrease pollution and encourage a diversion in the sugar industry’s output away from sugar and towards ethanol, Mr. Gadkari said at the annual meeting of the Indian Sugar Mills Association (ISMA) last month in New Delhi.

Biofuel production would help farmers by supporting the diversification of agriculture into energy, power and bio-plastics, Mr. Gadkari said.

Implications for auto industry

A policy on flex-fuel vehicles is likely to affect the automotive industry in several ways. Flex-fuels are widely used in several countries, famously Brazil and the United States, where they are available at the pump; examples include E10, E15, E85, the number reflecting the proportion of ethanol.

The technology for the engines that can take these fuels is certainly not new but making the engines available in India (Mr. Gadkari said he had asked Volkswagen to come up with a flex-fuel engine) will take the greater part of a year at least. It requires modifications along the supply chain and calibrating the engine for Indian conditions.

Additionally, such a policy will give manufacturers who are already in flex-fuel markets an advantage over indigenous producers, according to industry expert V. Sumantran, Chairman of Celeris Technologies. Volkswagen, Chevrolet, Ford, Toyota, Nissan and Hyundai are among those who have a presence in Brazil and manufacture flex fuel cars.

This begs the question: how viable is running existing petrol engines on blended fuels? While a regular vehicle not especially made for biofuels could run on these fuels for a few years, this is not a feasible strategy in the medium to long-term for several reasons.

One of the reasons is that ethanol, unlike petrol, is prone to oxidation and this can cause gum-like sediments to accumulate in various engine parts. Ethanol also reacts with other materials in the car, such as rubber, and this causes degradation, according to Mr. Sumantran.

Consequently, if flex fuels are to be rolled out, engines will have to be built for them — and this will mean an additional variant for manufacturers’ production plants.

“For companies [car manufacturers], it is the variety that kills them. Adding an additional line of engine variants is not cheap. All this accumulates as internal costs within the company and they do not like doing this unless they are forced or required to do it,” Mr. Sumantran told The Hindu . Additional manufacturing costs are likely to be passed on in some measure to customers.

Impacts on other industries

At present, the most obvious and reliable source of bio-ethanol in India is sugarcane. The world’s second largest sugar market, India produces some Rs.800 billion of sugar and supports approximately 40 million people.

Ethanol is produced from cane molasses, a by-product of the sugar production process. The government’s current Ethanol Blending Policy mandates five per cent blending of ethanol with petrol, though in reality the average ethanol blending achieved has been just two per cent. The government wishes to achieve 10 per cent blending.

A new flex-fuel policy will mean a diversion in the production process to support the production of ethanol rather than sugar. The government is keen to increase the ethanol component in this mix partly because the sugar industry has an excess supply problem and consequently sugar prices are depressed. Mills are mired in debt to cane farmers.

An industry paper by McKinsey & Company suggests that 5 million MT (metric tonnes) of excess sugar could be exported or diverted to ethanol production.

If a flex-fuel policy comes into effect, the additional ethanol demand will likely exceed what can be produced by diverting resources from sugar.

However, according to Abinash Verma, Director General of ISMA, this demand does not necessarily have to be met via additional acreage under sugarcane. Some of it can come from sources other than molasses, such as cellulosic ethanol, made from bagasse or sugarcane tops, and some can come from improved farming practices or planting higher-yielding varieties of cane.

Such differences in productivity are already evident across the country; Tamil Nadu yields 100 tonnes of sugar per hectare of cane, while Uttar Pradesh and Bihar yield 50-55 tonnes per hectare, Mr. Verma told The Hindu.

“Even if a ten per cent increase in sugarcane yield happens, this would produce 3 million tonnes extra of sugar or 2 billion litres of ethanol,” Mr. Verma said, adding that this quantity of ethanol was equivalent to 7-8 per cent of India’s total petrol consumption. India imports more than 80 per cent of its crude oil so this will mean significant reductions in the oil bill.

Social and environmental impacts

Flex-fuel cars, and biofuels in general, are promoted because they are cleaner alternatives to fossil fuels. However, their ability to generate more energy than is used in their production is in question.

Additionally, an increase in bio-ethanol production has also raised concerns about food security, farmers’ livelihoods and the environment, including water usage.

The National Policy on Biofuels (2009) , which directs the nation’s overall approach to biofuels, says these fuels will be produced using non-food feedstock (source materials) on wastelands, thereby allowing India to stay clear of the traditional food versus energy security debate that other countries have had to deal with.

This claim is a hard-sell for some, such as P. Sainath, founder of the People’s Archive of Rural India and an expert on famine and hunger. He does not believe these claims, saying there are no conclusive studies that can say categorically that food crop lands have not been encroached on in the past.

Memories of India’s infamous and unsuccessful experiment with jatropha — a plant used to produce bio-diesel and promoted by the government across the country, are still fresh. The purported ability of the weed to grow on wastelands and its drought-resistant properties were not reflected in the ground realties of its commercial cultivation and the programme was not successful.

Water shortages too are a problem, especially when it comes to sugarcane. Maharashtra for one just does not have enough water, with the Marathwada region already in the middle of a drought, Mr. Sainath said.

“Sugarcane is the largest water-guzzler we have,” he said, adding that sugarcane farms constitute 6 per cent of land use but consume 70 per cent of the irrigation water in the State.

Well-considered policy needed

It seems that a clear and well-considered policy, based on a considered approach that learns from past experience and does not lose sight of overarching objectives is needed, no matter where you stand on the flex-fuel debate.

“There is no sincerity in developing alternative fuels. This is just a magic bullet approach,” Mr. Sainath says.

Sugar mill operators would benefit from a clear and well-thought-out policy too. Considering whether oil marketing companies have enough storage capacity for ethanol, and reforming tax structures so transport of ethanol across State boundaries was not prohibitively expensive, are among the issues that needed to be considered, according to Mr. Verma.

Investments have to be made to install special dispensing units at petrol pumps across the country and such investments should follow demand for the product, which comes after a clear policy has been articulated, Mr. Verma said.

The policy ought to be carefully considered and aligned with the country’s overall objectives in the sector, according to Mr. Sumantran, who supports a larger scale shift towards biofuels as a national policy provided no food production is diverted.

“I think like a lot of our policy today, a serious matter like expansion of the use of bio-fuels as a national policy requires very careful consideration and planning to be successful,” Mr. Sumantran said. For instance, he questions the utility of using more than 85 per cent ethanol in a blend, saying Brazil has stopped the practice for good reasons, and a technical and economic case study has to first be made. Automobile manufacturers also need to be given adequate lead time to comply with a new policy, Mr. Sumantran said, adding, “In our hurry to appear to do things, we need to avoid hasty steps that will hurt the progress we wish to make.”

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