Monday, January 22, 2007

Dumping Bio-Fuels

India is racing to emerge as a super economic power. Its rapid progress, however, has got some gaping holes which threaten coordinated and sustainable development. Take for example, the acute power shortage or the lack of infrastructure such as highways and expressways. Measures taken in fits and starts have failed to ensure uniform growth of different segments of the economy.
Bio-fuels can be partial solutions to the whopping needs of petroleum products of the country. Oil extracted from jatropha is blended with diesel to produce bio-diesel which serves as a substitute of diesel. Jatropha can be cultivated even in non-agricultural lands; its farming should receive governmental support by way of subsidies and relief from taxes so that at least for a part of its diesel consumption, India could become self-sufficient. The international crude oil price recently dropped to $50 a barrel and the whole economics of bio-fuels have gone up in smoke. As per a report in Economic Times, the cost of conversion of extracting jatropha oil and blending to produce bio-diesel is Rs5 (.09$) per litre. The current selling price of jatropha is Rs12, 000 ($265) per tonne. The cost of bio-diesel works to Rs43 ($.95) per litre as against the prevailing price of Rs35.75 ($.80) per litre of diesel. A price difference of Rs6 ($.15) per litre cannot compensate customer preference, if any. If more plantation of jatropha is undertaken, the competition should bring down the price of jatropha. The conversion cost will be also reduced if more bio-diesel manufacturers take up production and use efficient technology. By proper pricing of diesel vis-a-vis bio-diesel prices, bio-fuels will be accorded the importance in the economy from a long-term perspective. India will then be less dependent on foreign sources for its crude oil supplies.
Let diesel and bio-diesel thrive together and not at the cost of each other.

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