Modi Govt's Top Advisor Says Bring E10 Back, Stop Blending at E20

New Delhi: Ethanol blending does not offer limitless benefits, India's chief economic advisor V. Anantha Nageswaran has suggested in an editorial in the Indian Express. Beyond 20%, ethanol mixed with fuel can come at the expense of oilseed farmers, write he and co-writer Akash Poojari, a consulatant with the finance ministry. Already,  7.5-8 crore vehicles that run on carburettors cannot run effectively at 20% blending, they write.

"Restoring a lower blend at the pumps, say, E10, alongside the option to buy E20, would calm most public concern, lower total ethanol use instead of raising it, and protect the existing fleet while the retrofit programme catches up," they write.

Nageswaran and Poojari contradict the position of the Union Road Transport and Highways Minister Nitin Gadkari, who approved of regulation that allows vehicles to potentially use ethanol up to 100% in June.

Instead, they write, owners of older vehicles should be given the option to use 10% blended fuel and no higher blends should be introduced beyond E20.

Gadkari has repeatedly dismissed vehicle owners' concerns over engine performance and damage due to the existing 20% blend. The CEA and Poojari agree in their write-up that there is a minimal loss of fuel efficiency (around 6%) but no damage to vehicles, provided they are equipped to use 20% ethanol blended fuel.

However, they back the demand of vehicle owners that 10% ethanol blended fuel should be a choice available for them, since 75–80 crore vehicles are incapable of using the 20% blend without having to replace parts. The spare parts market, including mechanics, cannot handle a switchover at speed, Nageswaran and Poojari point out.

"The original roadmap anticipated this and requested that a lower-blend fuel remain on sale for these [older] vehicles, but that fuel quietly vanished from the pumps and needs to return," writes the CEA.

Ethanol blending has helped save on the crude oil import bill, but these savings don't extend indefinitely into the future, the authors suggest.

To keep trying to reduce the crude import bill by blending ever-higher proportions of ethanol will mean that India will begin replacing oilseed crops with maise. Even so, the crude bill is unlikely to drop by more than the 3–4% mark, they write.

The unstated suggestion is that benefits will not accrue indefinitely because fuel demand will keep rising over time and, in any case, crude prices fluctuate.

On the other hand, since maise is one of the primary sources of ethanol production in India, the authors point out, oilseed farmers will bear the brunt of the steady expansion of farming geared towards supplying ethanol to the fuel industry.

"Maise now supplies about half of India’s ethanol, and grains together nearly 67%," they write, adding, "Maise competes with soybean, groundnut and mustard for the same fields."

The strongest argument against further blending is made by the authors when they say the ethanol blending programme is disrupting the oilseed self-sufficiency goal: "The crude oil bill is huge, around Rs 11-12 lakh crore a year. The edible oil bill is far smaller, roughly Rs 1.6 to 1.75 lakh crore. Ethanol at E20 trims only 3 to 4 per cent of the crude bill. The edible oil gap looks less daunting and is far more closeable.

The current push for higher blending rations has a two-fold impact on farmers: 'ethanol' farming operates under a fixed price system, unlike oilseeds, whose farmers operate under a price discovery mechanism. Second, leftover maise grains after distillation into ethanol is sold as animal feed – and this, too, costs less than soybean meal.

"The oilseed farmer loses twice," write the CEA and Poojari.

They point out that environmental benefits of blended fuel exist, including lower emissions, but that India must take into account the use of water to grow crops (sugarcane, maise, etc.) meant to produce ethanol. In some states like Maharashtra and Karnataka, they write, sugarcane "draws heavily on already-stressed sources".

"The green argument for going further [than 10–20% ethanol blending] may not withstand closer scientific scrutiny," they write.

"Fix the price and water distortions that unintentionally favour maise over other crops, relook at the import duty on edible oil to support the push towards domestic self-sufficiency and hold at E20 until India has thoroughly costed the food-versus-fuel trade-off, rather than assuming it away," they conclude.

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