India that imports almost 80 per cent of its oil requirements has seen prices spiralling upwards in recent weeks. To reduce imports, the Centre has looked towards renewable energy, electric vehicles and hybrid or blended fuel.

The Centre notified the National Policy on Biofuels–2018 (NPB–2018) to boost use of mixed gasoline in June 2018.

But little thought has so far gone into how this policy could threaten food security. It could lead to demand-supply disruptions of food crops leading to inflation. Also, increased production of water-intensive crops can deplete ground water table.

So, ethanol production using food crops is a double-edged sword.

To lower the carbon footprint and reduce reliance on petrol, the Centre has targetted a fuel standard of 20 per cent ethanol by 2030. This move will require about 10 billion litres of ethanol every year and about ₹500 billion to build additional biorefineries. The Prime Minister hopes to save $4 billion for the exchequer annually from this move.

Sugarcane is a major source for ethanol production. However, the Centre has plans to push for greater production from non-sugar sources and has offered credit-linked subsidy schemes to set up distillation units and bio-refineries that utilise molasses and surplus and damaged foodgrains.

The Centre’s plans to build ethanol distillation capacity of of 760 crore litres from molasses-based distilleries and 740 crore litres from grain-based distilleries will need 60 lakh tonnes of sugar and 165 lakh tonnes of grains per annum by 2025.

Promises and pitfalls

Given the dip in sugar consumption due to health consciousness, greater ethanol production could give a push to the sugar industry.

This is true for foodgrains as well as farmers will rely less on MSPs if alternative demand in bio-refineries is created. This will further increase the productivity of farmland in less fertile regions. Also they can grow low-value crops like maize, millet, barley, which can be used in second-generation distilleries.

So, the Centre’s plan will benefit both sugarcane and grain farmers as they would have multiple options to sell their produce.

But the adverse impact of grains diversion on ethanol production cannot be ignored. In years of deficit foodgrains production, the diversion of foodgrains and sugarcane to distilleries and bio-refineries can create pressure on the stocks earmarked for human consumption through the PDS, resulting in food inflation.

Currently, the Centre has permitted the use of sugarcane, molasses, sugar, maize, damaged foodgrains and surplus rice lying with the FCI for ethanol production. States like Chhattisgarh allowed the use of rice procured by the state government for ethanol production and even other states could undertake similar initiatives.

But this policy could also drive more farmers towards water-intensive crops.

Sugarcane and paddy consume almost 70 per cent of the total water used in irrigation.

Despite being a water-intensive crop and expensive raw material for ethanol production, the NITI Aayog Expert Committee has considered sugarcane as a lucrative food crop. On the other hand, maize, millet, barley require less water and are low-cost crops and farmers can grow them instead of water-intensive sugarcane and rice.

Similarly, tubers like potato, sugar beet, sweet sorghum, cassava can be used as raw material, which are used in a big way in the US, Brazil, European countries, and China.

So, a planned split between food and industrial use of foodgrains and sugarcane should be worked out, and a policy to govern the demand and supply of food and fuel needs to be devised.

To solve the food-fuel conundrum we need to strike a balance between promises and pitfalls.

Rauniyar is a doctoral student, and Dey is Chairman, CFAM of IIM Lucknow. Views are personal

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