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Government’s biodiesel programme holds the potential of sustainable entrepreneurship development and meeting all three objectives of economic growth — social equity job creation and environmental sustainability

The Government’s launch of a biodiesel programme represents a unique case for the development of numerous sustainable entrepreneurs employment generation empowerment of the subaltern masses by providing them ownership/occupational rights to wasteland and degraded forest land and reduction of carbon footprints without compromising on food security.  In other countries land rights particularly to occupy or use are taken away from traditional users like marginal farmers and cattle grazers and instead transferred to large companies for Jatropha plantation.

Of course local people find jobs in plantation-related activities which in any way will be created irrespective of whether the local people are planters or large corporates. This process of land-grabbing and depeasantisation not only disempowers the local people but also shrinks their traditional sources of livelihood.

In Mexico for example farmers were given subsidies so that they could switch land use from growing traditional crops to Jatropha. In some areas large estates cleared secondary forest land for Jatropha plantation which would have adverse environmental consequences and could also become a cause for concern.

Even in Brazil where the ethanol project for running vehicle was the most successful business the military Government over there played a major role in coercing the farmers to transfer their lands at nominal prices to the corporates for farming sugar cane. State coercion  thus helped the corporates in acquiring and consolidating millions of hectares of land for growing sugarcane.

The Government’s push for the biodiesel programme must be treated as a major innovation and deserves to be implemented more vigorously. The success of this programme will not only help meet energy targets but also help the country fulfill the global commitment to reduce greenhouse gas (GHG) emissions. Besides it will also help save foreign exchange reserves and create employment and entrepreneurial opportunities for millions of poor thereby bringing equity and social justice.

By fixing the biodiesel blending target the State will create a demand for biodiesel which will in turn create demand for entrepreneurs. Similarly by making available land and technology including higher yielding plant varieties and low cost transesterification machineries it will facilitate the supply of entrepreneurs.

The entire biodiesel supply chain has tremendous job potential. To be specific biodiesel production involves four distinct stages namely (i) cultivation of oilseeds bearing plants from which seeds would be harvested; (ii) trading of seeds which involve procurement of seeds from the individual farmers and selling the seeds to the processing factories; (iii) oil extraction from the seeds and transforming the extracted oil to biodiesel through the process of transesterification; and (iv) blending this biodiesel with the petrodiesel and its disposal to individual consumer through retail outlet.

This however does not include people engaged in research and development in various laboratories for the development of appropriate plant varieties as well as those involved in extension work. In the Indian context the nature of entrepreneurship differs at various stages. As a result job creation varies across different stages.

At the feedstock cultivation stage feedstock would be grown in wasteland forestland and surplus land. Marginal small farmers and landless labourers who have wastelands in possession would be  planters and thus the size of plantation would also be small.

These self-employed entrepreneurs would employ family members including women. Given the small size of the holdings the number of entrepreneurs that would be involved in the plantation would depend on the total available/allotted area for this purpose. The small size of entrepreneurship at this stage implies maximum job potential if India is to meet its announced blending target.

In the next stage namely seed  trading) landless people who fail to get access to a wasteland for plantation would be involved in trading seeds. They would purchase seeds from the planters in villages and sell them to the oil extraction plant in the neighbouring urban areas. Like the planters seed traders would also operate at a small scale. Their number would depend on the required frequency of visits to a planter per year — capacity of a trader to visit number of different planters for collecting seeds and their disposal to oil extracting plant usually located in the nearby urban areas.

In oil extraction and biodiesel production which is basically a manufacturing activity a minimum scale of operation is essential for financial viability. Available plant size data indicates wide variation in size — ranging from 100 litre per day in Kochi (Kochi Refineries Ltd) to 5000-10000 tonne per day in Chiplun Pune (Mint Biofuels Ltd). It is obvious that large plants would be suitable where farming is more concentrated as it would enable economies scale up.

On the other hand where farming is scattered which is the case in most of the feedstock growing areas relatively smaller plants would be appropriate.

Thus the manufacturing of biodiesel from seeds also creates substantial opportunities for the development of sustainable entrepreneurship.

Entrepreneurs in the final stage viz blending biodiesel with the petrodiesel and its disposal are the existing oil marketing companies. The scope for additional entrepreneurship or employment generation is low here since they will use the existing channels of the oil marketing companies.

What is the possible realm of job creation in this sector? Of course it will depend on several factors such as target level of blending (five per cent 10 per cent or 20 per cent); oil content of seed; average size of land at the cultivation stage; average number of entrepreneur at seed marketing stage and their marketing area and average size of processing plant.

Thus it is clear that back-of-the-envelope calculation also depends on various factors. We have attempted to estimate the same based on our previous estimates from field surveys. Our back-of-the-envelope calculation suggests that a very conservative estimate of meeting only five per cent blending of biodiesel would generate 1.59 million sustainable entrepreneurs of which 1.58 million would be engaged in plantation 8.46 thousand would be in trading and another 2.49 thousand as small and medium-sized manufacturers in biodiesel manufacturing.

Overall fulfilling this conservative target would generate as much as 46.29 million man-days. It can hence be concluded that the biodiesel programme has enormous potential of sustainable entrepreneurship development meeting all the three objectives of economic growth social equity and environmental sustainability.

The Government must therefore put wholehearted efforts to achieve 20 per cent biodiesel blending targets by 2020 if not before.

(Sanjib Pohit is Senior Fellow National Council of Applied Economic Research and Pradip Biswas is Associate Professor College of Vocational Studies Delhi University)

India though an early mover in the biofuel sector failed to embrace rewards from one of the safest and cleanest of energy sources. To tap this precious resource the Government has to formulate a new strategy

After lying in limbo for a few years concomitant with low oil prices India’s biofuel sector made headlines recently. It all began with Prime Minister Narendra Modi’s announcement on World Biofuel Day on August 10 that the Government aims to develop biofuel economy worth one trillion rupees with state-run oil marketing companies investing Rs 10000 crore for setting up 12 second-generation bio refineries. The Prime Minister also stressed upon the role of biofuels in boosting farm income aiding India’s energy security and creating jobs in a cleaner environment. Subsequently the operation of SpiceJet’s first experimental commercial flight from Dehradun to Delhi that ran on a combination of 25 per cent jet fuel blended with 75 per cent indigenously produced biofuel caught media attention.

All said and done the overall scenario is not too promising. The limitation of feedstock of biofuel limit the blending to about one to three per cent only. While India has given a push for the renewable sector in the Paris Agreement biofuel is not the one that is supposed to be in the driving seat for renewable push. This happened even though India was an early mover in the biofuel sector right after the first oil shock in the 1970s. By contrast countries in Asia Africa and Latin America who entered in this sector much later have achieved a better performance. 

There are several factors behind India’s dismal performance. Since neither the market nor the commodity related to biodiesel existed before the programme was launched the state has to play multiple roles for the emergence and growth of the sector.

First the state has to act as a facilitator for creating necessary infrastructure and provide various supports services or inputs for the producers.

Second it has to act as a regulator defining rules of the game ensuring adequate incentives for all stakeholders to retain long-term interests as is needed for  proper development of the market.

Third it has to act as an active player to not only produce the commodity but also create examples and demonstrations for others particularly private operators. All this requires development of efficient institutions for information communication among various agents to incentivise the farmers and other stakeholders.

Nevertheless these tasks are delicate and time-consuming. The development of the biodiesel sector hinges on how effectively the state performs these tasks and thus helps overcome the main constraints as discussed above. Given the state of progress in this sector it seems that the state has performed poorly in fulfilling these commitments.

A unique aspect of India’s biofuel programme is the use of under-utilised and degraded land to cultivate feedstock for biofuel. Although there are several sources of feedstock for biofuel such as tree-borne oilseeds (TBOs) edible vegetable oil animal fat and algae the Indian Government has emphasised on TBOs in its bio-diesel programme of 2003 and selected jatropha as the predominant plant variety.

Subsequently the Indian Government has allowed the producers to choose any TBOs that suit the local conditions and that will not affect regular crop production. TBOs are planned to be cultivated in the wastelands fallow lands other unused Government lands by roadside and across railway tracks around forestlands and as fencing in farmlands.

Apparently it seems that there is no dearth of wasteland for planting oilseeds bearing trees. But locating the actual land suitable for cultivation is a difficult proposition due to ownership issues. Furthermore many of these lands are being used by poor people for grazing animals or for collecting fuel woods or for minor crops. Bringing Government and communal land into plantation should ensure that the existing users’ livelihood is not snatched and if so alternative mechanism should be developed to satisfy their needs. Of course it would be appropriate to involve them as one of the stakeholders. There are instances of Joint Forest Management Programme where existing land users were not included as members but those with influence in the Panchayat became members. In case of small farmers who are already using their waste/marginal land for some income generation diverting it for plantation purpose must ensure higher income for the future and current level of earning for initial three years. Rural Landless Employment Guarantee Programme (RLEGP) is a good initiative in this direction for current earnings.

To raise confidence and ensure future income of the farmer it needs demonstration from the Government. There is also the need for some agreement of minimum income with progressive incentive for extra production. 

Further research and development for new and high-yielding plant varieties are the most important tasks for the Government not only because these require substantial resources but also due to its positive externalities. The state has made some arrangements for R&D and field trials involving almost all major research institutes and universities of the country for the development of jatropha plants. Based on these initial experiences with jatropha and the infrastructure created researches should be extended to other TBOs focusing on developing locally grown plants. 

In other words it is high time to broaden the biodiesel programme to include every possible TBOs with an emphasis on using and developing local varieties. The newly-approved biofuel policy has taken a right step in this direction. Efficient institutions capable of linking R&D centres to the demonstration of plants to farmers disseminating the right kind of information about cropping practice risk and return as well as designing the right kind of incentives are very much essential for the success of the biodiesel programme. 

Finally multiplicity of value chain organisations need to evolve in biodiesel production. The state is involved either as a part of the value chain or as a catalyst for its formation or both. In a number of these value chain organisations there exists a problem of incentive alignment. 

Since the plantation has substantial gestation lag the yield will be obtained over a long period. No doubt the plantation needs to be taken care of throughout the period primarily by farmers implying there should be adequate incentive and safeguards for them.

Incentive in some form of ownership rights would induce them to take a long-term interest. Buy back agreement is good but that the contracted price should be adjusted when the market price goes up and in any case the price should not fall below the cost of production. For the small farmers a floor price together with incremental price for additional output would provide them incentive to raise their farm productivity. Low yield is one of the major constraints in biofuel. Apart from the high yielding plant development through R&D there is a substantial scope for raising yield through better care and management practices at the farm level and the above mentioned incentives can play a significant role in this regard.

Thus the biofuel ecosystem needs to mature before India can garner the fruits of biofuel sector.

(The writer Dr Sanjib Pohit is Senior Fellow at National Council of Applied Economic Research)