Biofuels from Marginal lands:Some insights for India

Deepak RajagopalEnergy and Resources Group, UC Berkeley

Outline

1. Agricultural context for Biofuel in India

2. Comparison of major biofuel crops

3. Implications for welfare analysis• Opportunity cost of marginal land

• Distributional aspects

• Electricity or Transportation fuel?

4. Conclusion

Agricultural Context for biofuel

Vast differences in comparison with US/Europe/Brazil• Food security

• barely self sufficient (considered an important policy goal)• High income elasticity, population growth, plateau-ing yield

• Climate• dry and semi-arid tropical (at least where low cost land exists)

• Water and Irrigation• Dependent on seasonal monsoon rains (less than 30% irrigated)

• Size of land holding• small and fragmented with mean land holding < 1 hectare• subsistence farming

• Energy needs• 60% of rural homes have no electricity connection• 90% of rural homes have no cooking gas

Land allocation for agricultural crops

These lands offer opportunities for sweet sorghum to produce biofuelwithout impacting food

Land Allocation to Prinicpal Crops as % of Net Cultivated Area (167 Mil. hect.)

27%

16%

6% 6% 5%4% 4% 4% 4% 4%

2%

0%

5%

10%

15%

20%

25%

30%

Rice

Whe

at

Sorghum

Millet

Cotto

nM

aize

Gram

Groun

dnut

Rapes

eed

& Mus

tard

Soyab

ean

Sugar

cane

% A

gri

. Are

a al

loca

ted

Source: Government of India, Ministry of Agriculture

Sorghum, Millet, Maize and Cotton comprise about 21% of India’scultivated land

Mean returns in Rs/hec during 1995-97 for major crops across major growing states in India

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Sugarcane Wheat Rapeseed &Mustard

Soybean Rice Groundnut Cotton Sorghum Millet Maize

Rs/h

ec

1996-97

1995-96

Mean profit for various crops

Source: Cost of Cultivation of Prinicpal Crops in India Survey, 2000, Govt. of India, Ministry of Agriculture

Semi-arid tropics

• Rain-fed areas, which were largely unaffected by Green Revolution,offer the most growth for an additional unit of investment compared tofertile and irrigated areas [Fan and Hazell, IFPRI 1999]

Semi arid zone in south central and south India

Source: Millienium Ecosystem Assessment 2005, Chapter 22

Climatic regions receiving low annual rainfall (250-500 mm or 10-20 in)

Targets for Biofuel• 16 billion litres biodiesel by 2011-12

• about ~ 20% of anticipated diesel demand• expected to require about 11 million hectares of land

devoted to Jatropha curcas (about 8 % of cultivatedland today)• in reality more land is need since assumed yield is high

• targeted lands are degraded forests, waste andmarginal lands

• target not adopted by parliament unlike US or EU

Source: Planning Commission Report 2003, Government of India

Marginal landAgricultural land is marginal due to several reasons

• Biophysical• Water scarcity• Soil fertility• Drainage• Slope

• Poor management practices• Distance from market

Several constraints can be overcome using investments in• modern technology like drip irrigation, fertilizers and micro

nutrients, improved crop varieties etc.• credit• better management practices

Comparison of oil seed crops

Jatropha - Low water, high water productivity, moderate yield and isnon-edible• Perennial crop, requires 3 to 4 years to mature• has not been grown commercially before

Oil seed crops

Rainfall mm/yr (low)

Rainfall mm/yr (high)

AverageCrop yield kgs per hectare

Oil content as % of seed weight

Average oil yield in kg per hectare

Oil yield per mm of water

Time to full maturity

Useful life (years)

Indian acreage (million hectares)

Coconut 600 1200 7800 60% 5000 5.56 5 to 10 years 50 1.86Oil palm 1800 2500 20000 25% 5000 2.33 10 to 12 years 25 insig.Groundnut 400 500 1015 50% 508 1.13 100 to 120 daysna 7.2Rapeseed 350 450 830 40% 332 0.83 120 to 150 daysna 6.6Castor 500 650 1100 45% 495 0.86 150 to 280 daysna 0.8Sunflower 600 750 540 40% 216 0.32 100 to 120 daysna 2.3Soybean 450 700 1105 18% 199 0.35 100 to 150 daysna 7.2Jatropha* 150 300 2000 30% 600 2.67 3 to 4 years 20 insig.Pongamia* 150 300 5000 30% 1500 6.67 6 to 8 years 25 insig.* - estimates that are typically cited, na - data not available or not applicable

Simple cash flow analysis for hypotheticalJatropha farm on wasteland with no irrigation

IRR based on point estimates is 25.6%Carbon and other externalities not monetizedNo land cost assumed

Seed production Year 1 2 3 4 5 … 30Trees per hectare 1660 1660 1660 1660 1660 1660Seed production per tree 0 0.1 0.4 0.6 0.8 0.8Sale price of seed 6 6.2 6.5 6.7 7.0 18.7Seed production per hectare 0 166 664 996 1328 1328Gross annual income from seeds 0 1036 4309 6722 9321 24849Cost of PlantationCost per seedling 4 0 0 0 0 0Yearly maintenance cost per hec 6 2.0 0.60 0.62 0.65 1.73Harvest cost per tree 0 0.1 0.5 0.8 1.1 3.0Total yearly cost 16600 3527 1858 2380 2942 7842Net income -16600 -2491 2451 4342 6380 … 17008Discount rate 12%Rate of inflation 4%NPV 30,998IRR 25.6%All amounts in Indian Rupees

Waste (Marginal) land use

Percentage of households reporting use of wastelands

Material collected from common lands

% surveyed households reporting collection

Fuelwood 66%Fodder 34%Roofing material 29%Timber 19%Fruits 25%Bamboo/ cane 20%Other leaves 37%

Household's landholding

% of households reporting collection

% of households reporting sale

Landless 60% 1%< 0.2 hec 30% 1%0.2 to 0.5 hec 30% 1%0.5 to 1 hec 37% 1%> 1 hec 33% 0%

Source: National Sample Survey Organization 1999 as reported in Gundimeda 2005

Survey results indicate the importance of wastelands whichare mostly common lands to rural households

Jatropha plantations do not provide fuelwood or fodder and sothey may be opposed by poor – requiring fencing and guardingwhich would increase cost

Wastelands have alternative economically viableoptions for regeneration

Review of 18 afforestation projects under taken on degradedcommon lands shows high IRR (intercept = 25.9)

Source: Balooni 2003

Sensitivity of NPV to land rent and oilseed price

Output Price (Rs/kg)Land rent (Rs/hect) 5 6 7 8

3000 -ve 2000 14000 250006000 -ve -ve -ve -ve

10000 -ve 18000 4600014000 -ve -ve -ve 2000

• Jatropha not viable on sugarcane land• Viable on land growing rice or wheat at higher output prices• Viable on very low quality land• Medium quality land seems “no cars land”

SugarcaneRice/wheat

Edible oil seeds

Coarse cereals

Crops grown atthese rents

Electricity or Transportation fuel?

2. LCA studies generally compare biodiesel with diesel• If marginal capacity addition is coal then using biodiesel to

offset coal power may have higher carbon benefit thanoffsetting diesel

• IPCC emission factor for coal = 96 g CO2 per MJfor diesel = 74 g CO2 per MJ

=> Additional offset = 22 g CO2 per MJNote: this is per MJ of fuel combusted, so will be different when weconsider energy delivered

• Need to also look at social and economic net benefits ofhousehold electricity access versus transportation

Distributional implicationsFor projects on common lands, need to compare the increase in

surplus from labor with decrease in surplus from losingaccess to fuelwood and fodder- may worsen energy poverty in rural areas

Adoption in private farms likely to be confined to large farmers• early evidence from State of Maharashtra (Prayas 2005)• barriers to small farms

• subsistence needs• long growth phase• risk and uncertainty

• lack of familiarity with cultivation practices• market

• Economies of scale

Sweet sorghum for ethanol

Sweet sorghum a variant of grain sorghum has- Low water demand, high water productivity, high yield- yields grain and fuel

Grain sorghum is already grown on 10 million hectares mostly bysmall farmers in semi-arid areas under rainfed conditions(Sugar beet, switchgrass and Miscanthus are not viable in semi-arid tropics)

Ethanol feedstock

Rainfall mm/yr (low)

Rainfall mm/yr (high)

Crop yield (tonnes per hectare)

Ethanol conversion efficiency (litre/ton)

Gasoline equivalent ethanol yield (litre/hec)

Ethanol yield per mm of water

Growing season (months)

Indian acreage (million hectares)

Sugarcane 1500 2500 70 70 3300 1.65 10- 12 months 3.6Wheat 450 650 2.6 340 600 1.09 4-5 months 26.5Sorghum 450 650 1.8 390 450 0.82 4-5 months 9.4Maize 500 800 1.8 360 450 0.69 4-5 months 6.3Sweet Sorghum 450 650 40 70 1900 3.45 4-5 months insig.Sugar beet 550 750 100 110 7370 11.34 5-6 months insig.Bagasse* na na 18.9 280 3550 na na na* - estimates that are typically cited, na - data not available or not applicable

Sweet sorghum and Jatropha

Characteristic Sweet sorghum Jatropha CurcasMean rainfall requirement mm/year 450 to 650 mm 150 to 300 mmFuel yield per hectare lit/hectare 1900 600Fuel yield per mm rain lit/mm rain 0.82 2.6Length of growing season 4-5 months 3-4 yearsCurrent acreage nil* nil

Co-products grain, bagasse,

fodder fertilizer* but sorghum is grown on about 10 million hectares in India

Electricity or Transportation fuel?Calculation comparing approximate land for biodiesel and electricity

a Number of households per village (assumed) 100b Electricity demand per household in watts (assumed) 100c Number of hours of supply per day (assumed) 8 hoursd Energy supplied per household per day (=b*c) 800 watt hourse Total energy supplied to village per year (=d*a*365/1000) 30000 kwh/yearf Specific fuel consumption of diesel generator (assumed)* 300 grams/kwhg Oil required to generate electricity for one year for one 9 tonnes/yearh Oil yield per hectare from Jatropha (observed today) 0.6 kgs/hectareI Total amount of land required to produce the oil required 15 hectaresj Total number of village households in India (assumed) 150,000,000 k % of households with no electricity access (assumed) 60%L Number of unelectrified households (=j*k) 90,000,000

mTotal land required to electrify all rural homes in India (=L*I/a) 13 million hectares

n Annual consumption of diesel in India (assumed) 52 million tonnes

o

Total land required to meet 20% of diesel demand (=n*0.2/h) 17 million hectares

Electricity or Transportation fuel?

1. All rural homes can be provided electricitywith less land than required to meet 20% ofdiesel demand

• But diesel demand growing at 5% per annum

⇒ Increasingly more land will be required unlessyield increases at that rate too, which is unlikely

Conclusion1. Jatropha on marginal land with low inputs will not

affect food and water• crop survives harsh conditions but yield is affected

2. Two different diffusion strategies to exploiteconomies of scale

1. Sweet sorghum on household farms for ethanol2. Jatropha on industrial scale with modern inputs on

marginal land for biodiesel but will have to impact oncurrent uses

3. Use of biodiesel for local electricity may encouragepeople to cooperate in use of common land

4. Finally, extension is happening ahead of R&D

AcknowledgementsProf. David Zilberman

Prof. Alex Farrell

Prof. Dan Kammen

Prof. Udipi Shrinivasa

Energy and Resources Group

EBI

Sorghum plot at Los Banos, Philippines

Land for Industry

Singur – 400 hectares of agricultural landin the State of Bengal was allotted toTata Motors Group for setting up acar factory

• Led to massive protests, hungerstrikes, etc.

• Land acquisition declared as illegalby the court

Nandigram – 5000 hectares of agriculturalallotted to Indonesian Conglomeratefor setting up a Special ExportProcessing Zone

• Led to massive protests, police firingresulted in the death of 14 villagers

• Led to major review of SEZ policy