India is witnessing an unprecedented hike in fuel prices, resulting in petrol crossing Rs 100 milestone in several cities including Mumbai and ready to breach the mark in several other cities as well. This incessant hike in motor fuel prices is impacting the already tough situation in the Indian economy in a multi-pronged way. What should be the fuel policy of the country in such a situation?
The crude internationally trading at above $70 and inching higher coupled with higher state and central taxes has already breached the physiological barrier of Rs 100 in the country, it is important to look at alternative fuel policy in a holistic manner so that not only the Countries dependence on crude imports is reduced but also is carbon neutral.
The Government of India, therefore, has mooted a roadmap for reduction of import of crude oil dependence by 10% by 2021-22 and reducing the energy emissions intensity by 33%-35% by 2030 as per the NDC targets agreed in COP 21 at Paris, by increasing production of natural gas; promoting energy efficiency and conservation measures; giving thrust on demand substitution; capitalizing untapped potential in biofuels and other alternative fuels/renewables; and implementing measures for refinery process improvements.
So far none of the policies has achieved the desired penetration or goals set in the policy documents.
India has announced policies for use of CNG, Ethanol, Bio Fuels, Bio Diesel, Hydrogen, Electric vehicles, etc. from time to time by different Government Ministries and policymakers. However, so far none of the policies has achieved the desired penetration or goals set in the policy documents.
The policies have normally been general in nature and also have been changing which is one of the reasons for not achieving the goals set as many of the policies are without the desired focus and coordination amongst the Ministries.
A holistic integrated approach is essential if the country has to reduce its dependence on imported crude and insulate the Indian consumer from the rising prices of Petrol and Diesel which is linked to the international crude price.
There is a need to develop a multi-fuel policy based upon sound cost-benefit analysis with a focus on availability, cost, infrastructure, geographical area, and the targeted segment of the industry.
The government of India needs to roll out infrastructure for the spread of alternative fuels to help customers accept the new technology vehicles and at the same time provide clarity to the industry to develop vehicles
Therefore, there is a need to develop a Multi Fuel Strategy based upon sound cost-benefit analysis with a focus on availability, cost, infrastructure, geographical area, and the targeted segment of the industry.
While the policy development by the government may be to aim for bigger and higher usage of alternative fuels. But considering the requirement of a roadmap by the industry to plan vehicle development, the target of the policy can be achieved by taking small but confident and concrete steps.
As far as Bio Fuels are concerned, though the Government had formulated the biofuel policy in 2009, with ambitious targets of 20% biofuel blending the actual blending was far less due to a number of reasons. There is still a possibility for achieving the targets set up under initiatives like Ethanol Blended Petrol Programme, National Bio-diesel Mission, Bio-diesel Blending Programme etc.
Prime Minister Narendra Modi on the World Environment Day on June 5, 2021, announced the advancement of the 20% Ethanol blending target to 2025 from 2030 announced in 2017.
Recently the Prime Minister on the World Environment Day on June 5, 2021, announced the advancement of the 20% Ethanol blending target to 2025 from 2030 announced in 2017. Currently, the blending stands at about 7.2% in the last 4 months of 2021.
The Prime Minister also launched three E100 ethanol dispensing stations in Pune under a pilot project on the occasion of World Environment Day, to promote ethanol as a standalone fuel for vehicles.
Similarly, India embarked on an ambitious plan of spreading CNG across various regions of the country. Manufacturers developed vehicles and today most of these vehicles are made in house meeting all emission and safety norms. However, the spread of CNG did not happen as per plan and today the penetration is limited only to areas where either it is mandated by law or the gas infrastructure is developed, limiting its impact on fuel substitution.
Similarly, the National Electric Mobility Mission Plan (NEMMP) 2020 was launched in 2013 by the government. It aims to achieve 6-7 million sales of hybrid and electric vehicles each year from 2020 onwards. Further, to achieve the objective, the government is also supporting and promoting electric mobility through financial support from the Faster Adoption and Manufacturing of Electric (Hybrid) Vehicles (FAME) India.
The NITI Aayog, a think-tank of the Government of India, in May 2017 took a major step to push electric mobility in the country by 2032 and prepared a report on “India Leaps Ahead: Transformative Mobility Solutions to All” envisaging a roadmap for electric mobility in the country. The report was prepared jointly with Rocky Mountain Institute (RMI) for 100% electric mobility for the public and 40% for private vehicles by 2032 for achieving zero-emission vehicles after having consultations with all concerned stakeholders
It is recommended that fuels should be targeted to achieve maximum cost benefit to all stakeholders including the consumer.
However, the focus is still missing, as a fuel may be ideal for two-wheeler but another fuel may be better for passenger cars while third fuel may be best for medium and heavy commercial vehicles. It is important to understand that just like one shoe does not fit all similarly one fuel may not be the best solution for all type of vehicles from energy efficiency and emission reduction. Therefore, it is recommended that fuels should be targeted to achieve maximum cost benefit to all stakeholders including the consumer.
It is recommended that the pricing policy should be based upon Energy Content instead of a volume basis.
Further, the interest of the consumer needs to be taken into consideration while framing the policies. It has been seen that for the success of any such initiative it is important that there is an economic benefit to the end consumer. For example, the calorific value of ethanol is lower than petrol but the blends are sold at the same cost which results in lower mileage to the consumer. It is recommended that the pricing policy should be based upon Energy Content instead of a volume basis. The same assumes more importance as a blend of ethanol with petrol may vary from time to time till a uniform blend target of 20% is achieved in 2025?
Further, there is a need to have a time targeted roadmap with an assured sustained supply of the fuel at a fixed cost differential to petrol and diesel to enable the industry to develop necessary models for that fuel and the customer to purchase such a vehicle and the energy companies to put resources for developing the necessary infrastructure.
Also Read: High oil prices and health of the economy
( K. K. Gandhi is the Convener & Founder of Centre for Auto Policy & Research, Founder Member Secretary, Hydrogen Association of India and Sector Expert Transportation, Bureau of Energy Efficiency, Ministry of Power.)
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