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Rediff.com  » Business » How India can grow its own oil

How India can grow its own oil

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September 02, 2005 18:20 IST

India's energy challenge is particularly daunting today. Oil prices have remained above $60 per barrel for some time now and now touching $70 a barrel. Oil and gas imports cost the country Rs 120,000 crore (Rs 1,200 billion) annually and the cost of high oil prices for this year is yet to be estimated.

In 2003, India consumed 124 million tonnes (MT) of crude and petroleum products, of which 73 per cent was imported.

Given that our consumption of energy will only increase and that India has only about 700 million tonnes of economic reserves of crude left (enough oil for 22 years of production at the current level and six years of current consumption!), it is imperative we look for alternatives.

Some of the initiatives under discussion are energy efficiency, renewable energy, equity oil abroad, higher domestic oil recovery and production, and so on. These alternatives, however, are not enough to bridge the gap between growing future demand and the domestic supply of energy.

In the light of this energy quandary, oilseeds-based fuels are being discussed, viz. biodiesel and straight vegetable oil (SVO). These options could be used in the transport and agricultural sectors, respectively. What would this require?

At the national level, 15 million hectares of wasteland could give about 20 MT of oil equivalent output. Non-edible oilseeds can be grown along railway lines, wastelands, highways and fencing of various types. For mass cultivation, the long list of oilseeds has been narrowed down to two major candidates -- jatropha (ratanjot) and pongamia (karanj).

Other seeds such as neem and mahua can fulfil niche markets. The process of using such bio-fuels is fairly simple: it consists of growing plants, collecting oilseeds, installing expellers, and extracting raw oil.

To use SVO in stationary equipment, further minor processing is required and to use biodiesel of higher quality, transesterification is needed. Efforts to develop these mechanisms and technologies are under way in different parts of the country but the spark that ignites the whole programme is missing.

Let us contextualise the oilseeds plan with respect to other programmes of equivalent magnitudes of, say, 20-30 MT per year. ONGC produces about 26 to 30 MT of oil per year, which depends on limited and non-renewable sources discovered at great cost, risk, and effort over years.

The pipeline through Iran, which requires considerable investment and diplomatic effort, will also result in about 20 MT of supply per year (providing it materialises after international negotiations). Through oilseeds, India can reach a goal of producing 20 MT within 10 to 15 years.

As plantations can supply oilseeds for 30 to 35 years, 600-700 MT of oil could be obtained over this period. Thus, the programme should be given importance in terms of political will and investment.

Moreover, the programme will provide energy security not only at the national level but at the local level too, providing livelihood for the poor without the corresponding risk the above two have.

However, the point is to do all the three together because we do not add up to 50 per cent of current consumption. President APJ Abdul Kalam and the Planning Commission have emphasised these options. The latter has put forth a national mission report on biodiesel but not for SVO.

The national mission report on biodiesel discusses the techno-economic possibility of various bio-fuels, which develops a demonstration project of 400,000 hectares. There are, however, three additional points that must be considered beyond that project.

First, while this report has good analytical content, its plans rely on a coordination committee consisting of representatives from government departments.

However, for successful implementation, various management models will be needed with considerable input from the private and public sectors. For example, entrepreneurship at the micro-enterprise level (managed by NGOs) is one possibility for SVO.

This is especially appropriate for the block-level implementation of a few tonnes per day for local use. Large-scale implementation, consisting of all steps from growing to processing, can be handled by the corporate sector. Furthermore, various combinations of public-private partnership should be encouraged.

Second, the report currently looks at only the biodiesel for the transport sector. They may have their own reasons and priorities, but where do poor farmers, whose demands are not met, stand in this regard?

Their needs for oil for irrigation pumps, diesel generators, and farm equipment can be met from a variety of non-edible oilseeds available without the expensive transsterification process to convert SVO to biodiesel. Biodiesel used in the transport sector is meant for engines that are expensive and require high-quality fuels.

Moreover, for vehicles, strict pollution standards are required. Why should the farmers pay an additional Rs 8-10 per litre for the process needed for automobiles, when they only require SVO for their stationary equipment? A roadmap must be prepared for meeting farmers' needs and also private and public sector involvement.

Third, the possibility of getting additional revenue from carbon credits should be considered. Biomass-based fuels not only emit less local environmental pollutants; they also avoid greenhouse gases (GHG) emissions (emitted from fossil fuels) that are responsible for climate change or global warming.

Internationally, GHG reductions get carbon credits, which are valued at about $5 to $7 per tonne of GHG saved or avoided. These additional revenues can help bridge the gap between the supply cost and price to be charged to the consumer.

However, the condition for getting carbon credit is that the project should not be done for statutory requirement, such as any court order or Act of Parliament (because then the project is being undertaken for reasons other than saving GHG emissions). Announcing mandatory percentages of mix in biodiesel has to be done carefully if we do not wish to lose carbon credits.

Oilseeds energy relies on land, water, sunshine, and chemicals and fertilisers. A minimum purchase price for oilseeds or oil may be offered to motivate cultivation.

Renewable oil can be cultivated under employment guarantee schemes, the Akshay Urja initiative, Bharat Nirman, and others, so as to help the aam aadmi grow his own oil (although the aam aurat can do this as well, if not better). Public sector units of the petroleum sector and other sectors and enterprises can take the lead to galvanise this effort.

The author is Executive Director of Integrated Research and Action for Development (IRADe).

Jyoti Parikh
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