03/01/2008 (The Hindu Business Line) - The soaring Sensex is as adrenalin to India Inc. Not many, however, seem to be unduly concerned about the galloping food prices. Almost everyone, from the Prime Minister downwards, is making pious noises on this score, without any tangible efforts to rein in the soaring prices.

A new dimension is being added to the galloping food prices. And that is the clamour for “green fuel”, which has to come from soyabean, rapeseed, sugarcane, sorghum, oil palm or corn, in the main, and also from jatropha, now added to the list.

In 2007, as wheat prices rose record levels, corn and soybean — both increasingly used for green fuel manufacture — climbed to multi-year highs. As the US is heading into recession, commodities are outperforming stocks and bonds. Palm oil, used to extract bio-diesel at $800 plus a tonne, is outpacing crude oil.

Bio-fuels are being touted as the new panacea for global warming. But, because this fuel from plants is being introduced without much thought about wider implications; it is becoming a good idea practised badly. Let us look at some scientific facts about bio-fuels.

Clamour for “green fuel”
With the announcement of the Peace Nobel, which has brought global warming to centre-stage, the attention of the developed world has shifted to “green fuels.”

The recent meet on climate change in Bali, Indonesia, where 10,000 delegates discussed the problem for a fortnight, and in the process emitted enormous amounts of GHGs such as carbon di-oxide, lends a note of urgency to the entire question.

Ethanol-blended petrol from cassava, corn and sugarcane, bio-diesel from rapeseed, jatropha, palm-oil, etc., are being touted as the fuels that will in the future drive cars in the US and Europe. Europe has mandated that 5 per cent of transport fuel must originate in crops by 2010, just two years away. As usual, developing countries are being targeted as the regions where crops for green fuels are to be grown. Look at the unfolding scenario.

Poor pay the price
Swaziland, a tiny nation in the African continent, is already in the grip of a terrible famine, where 40 per cent of its people face acute food shortages. The reason? The government there has allocated thousands of hectares of farmland in the district of Lavumisa, worst hit by drought and famine, for ethanol production from the Swazi people’s staple food crop, cassava.

Nearer home, farmers in Nagaland are being prodded to swap paddy in the traditional Jhum lands for jatropha cultivation. The International Crop Research Institute for Semi-Arid Tropics (Icrisat), in Hyderabad, an arm of the Washington lobby, has got a $1.5-million project on ethanol production from sweet sorghum and cassava. The UK-based D1 Oils is piloting a jatropha project.

Globally, D1 Oils plans to cultivate one million hectares of jatropha, spread across mainly India, Southern Africa, South-East Asia, China and Australia by 2011 to cater to the growing green fuel demand of the US and Europe. In India, it plans to have 3.5 lakh hectares. And in this onslaught, some of the country’s best farmland will simply switch from food crops to fuel crops.

Tortilla wars
In late 2006, Mexico experienced the tortilla wars, as people found the price of their staple, corn, had doubled. The reason? The price hike was triggered by the newfound use of the crop as a green fuel and the corporate control over it. Archer Daniels Midlands, the largest ethanol processor in the region with financial stakes in a Mexican oil company that makes tortillas and refines wheat, was the entity behind this.

So, Midlands benefits when tortilla prices increase and consumers switch from corn to wheat, more pertinently, when there is a switch from food to fuel.

India sucked in
India, unwittingly, is entering into this quagmire. Even in the tiny State of Kerala, in the “rice bowl” district of Palakkad, loud noises are being heard about the desirability of jatropha in preference to paddy. The bio-fuel policy of the US and Europe is sweet music to Africa, already reeling under food shortages, because, the governments there think that they can make a fast buck. What it does to food production seems nobody’s concern. India is not far behind. Or else, why the new-found enthusiasm to propagate bio-fuel crops at the expense of arable farm land?

The warnings
In short, the North’s bio-fuel appetite will pave the way for the South’s starvation. Even the International Monetary Fund, always ready to immolate the poor at the altar of commerce, now warns that using food to produce bio-fuel “might further strain the already tight supplies of arable land and water all over the world.”

The UN Food and Agriculture Organisation has announced the lowest global food reserves in 25 years threatening what it calls a “very serious crisis”. Even when the price of food was low, 850 million people worldwide and more than 220 million in India went hungry because they could not afford to buy it.

With every increment in the price of flour or grain, several more millions of poor will be pushed below the breadline. Look at the cost of staple grains. The price of rice has risen by 20 per cent over the past year, maize by 50 per cent and wheat by 100 per cent.

Effectiveness of green fuel
The demands of the motoring lobby and business groups clamouring for new infrastructure have to be metEven while the people being pushed off their lands remain voiceless. Even Tamil Nadu, where there is an entrenched automobile lobby, is fast catching up the green fuel bandwagon, with all kinds of subsidies and incentives. Poor farmers will find the lure too tempting to pass up, and food production will be the first casualty.

I am not saying India should say “no” to green fuel. But before we jump onto the green fuel bandwagon, we must do our math well. In principle, burning bio-fuels merely releases the carbon which the crops accumulated while growing.

If one counts only the immediate carbon costs of planting and processing bio-fuels, they appear to reduce GHGs. But, when you look at the total impact, one would realise that the bio-fuels cause more warming than petroleum.

Ethanol from maize causes between 0.9 and 1.5 times more warming as petrol does, while rapeseed oil, the source of more than 80 per cent of world’s bio-diesel, generates 1 to 1.7 times the impact of ordinary diesel.

These figures are brushed under the carpet by the automobile lobby, which wants its works to stay afloat. The answer to global warming is not a simple switch from fossil fuel to green fuel. It must address the road congestion India is creating due to a mindless automobile manufacturing policy.

In any case, green fuels are here to stay and food production, be it grains or oilseeds, will be the first casualty and the poor will be hit hard because of galloping food prices.

Jatropha’s viability
It would be naïve to think that jatropha will mitigate India’s soaring oil bills. Jatropha is not a small-scale farmer’s crop. It will be economically viable only on a large scale. India does not have much wasteland. Where it exists, the investments in infrastructure, in terms of easy transport and other machinery installation to make the unit economically viable, will be enormous The wastelands along railway tracks cannot be used, because they are in long, non-contiguous strips.

People and planners in New Delhi talk about several things without truly understanding the practical difficulties. The important by-product in jatropha oil extraction is glycerine. Where in India do we have the necessary infrastructure to use glycerine production on such a huge scale? Also, one must remember that the maximum oil extracted from jatropha seeds will not exceed 35 per cent.

The net result in large-scale jatropha cultivation is that India will lose a lot of fertile land to jatropha cultivation where the monetary returns could be better, but grain producing lands will slowly stop being arable.

The mandarins in New Delhi seem lost for a clear-cut answer to this grave and vexing question. Ultimately India’s food security will be threatened. The ambitious (at least on paper) National Food Security Mission of the UPA government will be severely dented by such ill-thought out projects. It is the foreign companies that will gain by getting into jatropha cultivation, like the UK-based D1 Oils, and make a lot of money at the cost of the country’s food security.

Sensible policy
The opportunity for a bio-fuel revolution is not in the rich world’s cities to run their vehicles, but in the grid unconnected villages in India and Africa, where electricity is scarce, with no generators to run pumps or vehicles. It is here that fossil fuels will grow because there is no alternative. Instead of bringing fossil fuel long distances to feed urban markets, this part of the world can leapfrog to a new energy future, if bio-fuel can come from non-edible crops, jatropha, for example.

This also means that the fuel market will need to be redesigned. In today’s business model, the company will grow the crops, extract the oil, transport it first to refineries and then back to consumers.

The new model needs distributed growth in which India will have millions of villagers growing the bio-fuel crops, and millions of distributors and users in the villages. Can the somnolent Indian planners think up such a strategy? The alternative is to simply cater to the whims of the corporate world.