Biofuels in India will turn water tables dry

Indian Prime Minister Narendra Modi made headway for biofuels in India last month, inaugurating the country’s first E-20 dispensing pump at India Energy Week, ahead of a 11-state rollout from next month, where gasoline blended with 20 percent ethanol will be dispensed.

Oil minister Hardeep Puri proclaimed that India has moved to E-20 at warp speed — the target was set at 2030 but later brought forward by five years. He expected ethanol blending to exceed 20 percent in the future, as Indian automakers gear up to produce flex fuel vehicles.

India’s role model in biofuels substitution was Brazil, Puri said, referring to Brazil’s success in running ethanol-fired vehicles. But what Puri conveniently forgot to mention is how Brazil burns tens of thousands of acres of the Amazon to raise plantations.

Both nations use sugarcane, a water guzzling crop, to produce the fuel. New Delhi plans a phased E-20 rollout across the country from next month . The policy will end up diverting 6 million tons of sugar to ethanol production by 2026, 70 percent higher than last year.

India is set to become the third-largest market globally for ethanol demand by 2026, after the U.S. and Brazil, the Paris-based International Energy Agency said. New Delhi is projecting ethanol supply to reach 10.2 billion litres for E-20 in the December 2025-November 2026 supply year.

Doubts over biofuels in India

But the Modi government’s ambitious and aggressive policy to substitute 20 percent of gasoline with ethanol may eventually end up as a shortsighted approach to  India’s energy security, experts say.

The plans will have an adverse impact in the long-term on India’s most critical resource — water. Unlike Brazil and the US, India is short on land, water, and has the world’s biggest population, making biofuels a questionable choice for its energy transition.

The ethanol programme has to be approached with much caution because sugarcane consumes huge amounts of water, and will lead to scarcity of water in the medium-term, VB Kasi, a global  commodities trader and angel investor, who has worked for Noble and Cofco, told Gas Outlook. A speedier transition to EVs may be a better option, he said. India has set ambitious EV targets by 2030.

But Indian bureaucrats, with little input from industry experts, helped Niti Aayog, India’s policy think-tank, devise an ethanol blending policy on the premise that it can save the country $4 billion/year, miniscule for a $3 trillion economy, on oil imports. The costs for motorists increase if one considers that ethanol has a lower energy density than gasoline, and more must burn to travel the same distance.

The recommendations also ignored a separate report by NITI Aayog, which estimated that sugarcane and paddy are using 70 percent of the country’s irrigation water, depleting water availability — it takes 2,500 liters of water to produce 1 kg of sugarcane.

India is“suffering from the worst water crisis in its history, and millions of lives and livelihoods are under threat,” Niti Aayog said in a report in 2018, when blending targets were first announced. Groundwater resources are severely overdrawn in India, with some water tables declining at a rate of 8 centimeters year since 1990.

Water-stressed nation

India ranks 13th for overall water stress and has more than three times the population of the other 17 extremely highly-stressed countries combined, according to the World Resources Institute. WRI considers Brazil and the U.S. as low-medium baseline water- stressed nations.

“We are one of the most stressed countries in terms of arable land and water,”said Swapan Mehra, founder of IORA Ecological Solutions, which works on climate policy. “We have to be cautious managing our land. If we can grow sugarcane in rain-fed areas, perhaps it helps. Otherwise, biofuels are a poor trade off,” Mehra told Gas Outlook.

State-run refiner Bharat Petroleum is the coordinator of India’s biofuels programme, PS Ravi, executive director of marketing at Bharat Petroleum, told Gas Outlook.  State refiners IOC, Bharat Petroleum and Hindustan Petroleum have contracted for 4.8 billion litres this year, with plans to take it up to 6 billion, Ravi said. 85 percent of the ethanol comes from sugarcane, and the rest from grains because only some states grow sugarcane.

Diesel is more polluting, and the biggest consumed fuel. But a meagre 5 percent of the biodiesel mandate is planned for 2030 where biodiesel is made from domestically-procured used cooking oil. Nor have any of the twelve 2G ethanol refineries, planned by state oil companies at a cost of $2 billion — where ethanol is extracted from waste and agri residues — made much progress. 2G ethanol is unviable on a commercial scale as of now, industry officials said.

Appeasing farmers

That begs the question: why would a $3 trillion economy — soon to be $5 trillion — bother saving $4 billion a year, especially with $550 billion in foreign exchange reserves, on sugarcane-derived ethanol?

The government’s real reasons lie in politics. Uttar Pradesh and Maharashtra are two of the most critical states for the ruling BJP government. Farmers, who constitute the biggest voting group, prefer to grow sugarcane because they receive a state-set price from the government, insulating them from market volatility.

But farmers have complained about non-payment of dues for sugarcane by the mills, especially when sugar prices crash amid excess output. By ensuring an alternate outlet for sugarcane as fuel, and setting a high rate for ethanol, Modi’s government has partially solved the issue for farmers, and ensured their votes.