By Vritika Mathur
NITI Aayog plans to bring forward a policy to cut the annual oil import bill by $100 billion over the next 10 years. A policy think-tank, NITI Aayog stands for National Institution for Transforming India and is the successor of the Planning Commission. It was established in 2015 and is headed by Amitabh Kant while the Prime Minister plays the role of chairman. It focuses on fostering economic development throughout the nation by introducing reforms and forming action and strategy plans. The government institution works with different ministries to facilitate good governance and practices. It aims to act as a platform for cooperative federalism and redefine the relationship between the state and centre.
Importance of the potential new policy
The proposed policy will emphasise the use of methanol as an alternate fuel in cooking gas and transportation fuel. “The final roadmap for ‘Methanol Economy’ being worked out by NITI Aayog is targeting an annual reduction of $100 billion by 2030 in crude imports in line with our PM’s vision,” said Nitin Gadkari, the Minister of Road Transport and Highways. During the Zero Hour, Gadkari stated that the Government was “shortly” going to implement a scheme under which 15% methanol would be blended with petrol, which will result in the reduction of the cost of fuel by 10%. This switch in fuel would be beneficial in different sectors such as transport and marine.
India is heavily dependent on crude oil imports for about 80% of its needs. It is the third largest importer of oil in the world. By September 2017, India was importing around 4.83 million barrels of oil per day (bpd) to meet the fast growth in demand for fuel. According to OPEC, India’s oil demand will rise by about 150% resulting in an increase from 4.83 million bpd to 10.1 million bpd by 2040. Around 2,900 crore litres of petrol and 9000 crore litres of diesel is needed annually resulting in an import bill which is at almost 6 lakh crore. This acts as a cause for concern owing to the depleting foreign exchange reserves. Thus emerges the need for a policy to cut down on imports and its resulting cost.
Implications of the policy
Methanol provides India with the opportunity to replace existing sources of transportation fuel. By employing the use of methanol in railways, there can be a 50% reduction in diesel bills. The Indian Railways consumes about 3 billion litres of diesel annually costing around Rs.15,000 crore. High methanol blends can offer significant vehicle improvement up to 25%. Further, it can also give the country the opportunity to reduce its dependence on imported crude oil.
As a cooking fuel, methanol is perfect for consumers. It burns cleanly leaving homes smoke free and can be produced in large quantities from inexpensive materials. This makes the alternative an affordable option for low-income consumers. If 20% were to be blended with cooking fuel LPG, it would result in the immediate savings of about Rs. 6,000 crores a year.
Convenience and availability play a huge role in the promotion of methanol as the alternate fuel. It is a cheaper option than most available fuels such as petrol and diesel. Further, using resources such as biomass, high ash coal, natural gas, and stranded and flared gases, India has a large potential in terms of methanol production given its wide applications. The use of this fuel can be beneficial to the environment if used extensively. It can reduce consumption of diesel by at least 20% in the next 5-7 years.
Additional advantages of the proposal
As with most items in a market, the price of oil is determined by the supply and demand forces at play. Importing countries like India then purchase this oil at the determined price through the use of foreign exchange. The maintenance and growth of a country’s foreign exchange reserves are essential to allow the support of imports and exports and prevent limiting economic growth. The lower the oil imports, the lesser drain on the country’s limited foreign exchange reserves. This policy thus provides an escape from any potential risk of a dwindling reserve.
Also, methanol can be used for producing various chemicals like formaldehyde, acetic acid and olefins that can be exported and result in a greater inflow of foreign exchange.
Repercussions for existing strategies
Prime Minister Narendra Modi had earlier pushed for policies stressing on the widespread use of electric cars over those running on fossil fuel. By pitching methanol as a better alternative for India, the policy acts as a speed bump and challenges the hybrid vehicle policy. The main motive behind its emphasis lies in the fact that methanol does not cause pollution and has a higher electrical mobility and efficiency. It is also highly cost-effective vis-ŕ-vis electric vehicles, which would run on lithium-ion batteries and can be obtained from renewable sources. It would thus reduce India’s dependence on fossil fuels.
One of the first steps by the government should be to set up a fund that will support research and development activities for the emergence of methanol in India. Measures should also be carried out to ensure sufficiency in the production and supply quantity of the fuel. Once there is a certain amount of confidence established, simultaneous development should be made in all sectors.
Four methanol task forces have already been set up in collaboration with various agencies to give a push to the methanol economy in the country. It is essential for India to move steadily towards this economy in order to reduce its import dependence as well as its carbon footprint.
Featured Image Credits: Dreamicus
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