Green Alternatives: Non-food based biofuels such as Jatropha need to be encouraged (Pic By Sanjit Kundu)

India, which is yet to finalise its biofuels policy (it is currently before a Group of Ministers), is at a vantage point and can leapfrog mistakes made elsewhere. It can avoid corn-based biofuels predominant in the US because they fuel corn-based food prices. The US is responsible for 40 per cent of the world’s annual production and 70 per cent of total corn exports. In recent years, as much as one-third of US corn has been turned into biofuels rather than tortillas. India can also avoid ethanol-based biofuels because it fuels liquor and sugar prices.

An obvious option is to encourage non-food based biofuels such as jatropha (a type of shrub). It seems that the Ministry of New and Renewable Energy (MNRE), which prepared the draft policy, has done its homework. According to N.K. Singh, an advisor to MNRE, one key recommendation is that no edible oil plants may be used for biofuel production in India. He added that the policy would also prohibit agricultural land from being used to cultivate fuel crops. These will reduce the risk of food crops being turned into fuel in India.

However, only preventing the cultivation of fuel crops on agricultural land may not be enough to secure food production. There is always a danger that farmers could switch to cultivating fuel crops on non-agricultural land rather than food crops in their villages, especially since growing fuel crops may soon be more profitable than growing food. This could further threaten India’s abysmal productivity levels in agriculture.

Meanwhile, the World Bank report has caused much heartache for western nations. Earlier, the EU had mandated that by 2020, 10 per cent of all auto fuel should come from renewable sources. In light of the Bank’s report, the EU is expected to vote this year to decrease that target. Germany, the UK and France have already signalled they might support the vote.

The US, however, is predictably mum. Corn is the US’s largest crop, both in volume and value. In an election year, it is unlikely that the US government will revoke subsidies it provides to the powerful corn farmers’ lobby. Yet that is exactly what the World Bank wants it to do. In a letter addressing the latest G8 meeting, the World Bank asked heads of state to “commit to revising policies towards biofuels in the G8 countries in light of tensions between competing food security and energy security priorities”.

The letter singled out the US and Europe for subsidising biofuels derived from corn and oilseeds. It also urges developed countries to accelerate research on second-generation biofuels that can use the whole plant. Finally, it wants developing countries to be assisted in creating different sources of energy to minimise the risks of relying on just one source of fuel.

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(Businessworld Issue 15-21 July 2008)