2018-CGS-29: Mains Revision-17: Secondary Sector of Economy

National Policy on Bio-fuels

The Union Cabinet has approved a national policy on bio-fuels. The components of the new policy include

  • The policy together with helping farmers dispose of their surplus stock in an economic manner aims at reducing India’s oil-import dependence.
  • The policy expands the scope of raw material for ethanol production by allowing use of sugarcane juice, sugar containing materials like sugar beet, sweet sorghum, starch containing materials like corn, cassava, damaged food grains like wheat, broken rice, rotten potatoes which are unfit for human consumption for ethanol production.
  • The policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee to ensure farmers get appropriate price for their produce during the surplus production phase.
  • The policy also provides for a viability gap funding scheme of Rs 5,000 crore in six years for second generation ethanol bio-refineries in addition to tax incentives and a higher purchase price as compared to first generation biofuels.
  • To synergize efforts to improve biofuels production, the policy delineates the roles and responsibilities of various ministries and departments.
  • The policy will offer a mechanism to address the mounting municipal solid waste problem in the country by converting it into drop-in fuels.

The total ethanol production for fuel blending in 2017-18 is expected to be 150 crore liters, leading to forex savings of ₹4,000 crore. Together with forex saving the biofuels offer benefits like bringing down toxic emissions and improving the health by reducing the pollution levels.

How the policy aids in addressing various challenges?

Raw material
  • The policy tries to address supply-side issues that have discouraged the production of biofuels within the country.
  • The policy allows for a wider variety of raw materials to be used as inputs to produce ethanol that is blended with petrol. Until now, only ethanol produced from sugarcane was approved for this purpose.
  • The new policy allows feedstock for biofuels which includes sugar beet, corn, damaged food grain, potatoes, even municipal solid waste for the generation of bio-wastes.
  • This will likely reduce the cost of producing biofuels and improve affordability for consumers, particularly during times when oil prices reach discomforting levels.
Addressing the bottlenecks
  • In India the industrial-scale availability of ethanol was only from sugar factories which were free to divert it to other users such as alcohol producers who would pay more.
  • Even though oil companies used to float tenders for ethanol, the availability was in question due to the non-attractiveness of the price.
  • The Centre hopes the new policy will also benefit farmers, who will be able to sell various types of agricultural waste to industry at remunerative prices.
Saving of Forex
  • As per the government estimates ethanol supply of around 150 crore litres in 2017-18 could save foreign exchange worth over ₹4,000 crore.
Air pollution
  • The production of biofuels from agricultural waste, it is hoped, will also help curb atmospheric pollution by giving farmers an incentive not to burn it, as is happening in large parts of northern India. This will aid in tackling the pollution challenges of India. [The Hindu]

US Objections for India’s Export Promotion Schemes

To adjudicate on the complaints raised by US on the export promotion schemes a dispute settlement panel has been set up by WTO.

Objections raised by US

  • The United States has contended that India’s export promotion schemes provide subsidies that aren’t allowed under WTO regulations.
  • The US has objected to incentives given to Indian exporters under the Export-Oriented Units scheme, which promotes setting up of export industries.
  • The Electronics Hardware Technology Park Scheme, the good old scheme under which special economic zones were set up, the Export Promotion Capital Goods Scheme that allows imports of capital goods at zero duty and the duty-free imports against exports scheme have all been targeted by the US in its complaint.
  • The US has contended that these schemes extend financial benefits to Indian exporters, who in turn took advantage and sold their goods cheaply. Such exports affected American workers and manufacturing units.
  • US contend that earlier India was exempted from the subsidies since it per capita GDP was less than $1000. And the limit has been breached now and it no longer can afford such sops.
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