Editorial 1: Changing how we move
Recent Context:
- Recently International oil prices are surging, nearing $100 per barrel once again.
India’s dependency over crude oil
- Idia’s import dependence on crude oil and products stood at an all-time high of 87.3 per cent in FY2023, and 25.8 per cent of the country’s import bill was spent on it.
- And India has the third-largest crude and product demand in the world with significant room for consumption growth.
- Therefore, over dependency on crude oil import put burden on import bill and Current account deficit that has spill over impact on economy
India’s initiatives to reduce crude oil import dependency
- As International Energy Agency suggest that in the last decade, up to 20 per cent of our total primary energy supply was met by biomass, and a large portion of it was used by households.
- And newly formed Global Biofuel Alliance under India’s G20 presidency must now convert this fuel into a form that can supply clean bio-energy to multiple end uses, improve energy security and get value for public spending
- In order to reduce dependence on imported crude, India launched its ethanol blending programme in 2003 but it saw little progress for more than a decade.
- In 2022, after a concerted policy push for five years, India’s blending programme achieved the significant milestone of 10 per cent ethanol blending in petrol. Plans are now afoot to increase the blending share to 20 per cent (E20) by FY25-26, a target that was brought ahead by five years.
Concern Ethanol blending programme:
- Currently, Ethanol producers supplied nearly 430 crore litres of ethanol in 2022. The demand for 20 per cent blending is set to increase India’s ethanol demand to nearly 1,100 crore litres by 2025.
- But achieving the 2025 target will require investments, and the ability to provide (and divert) the necessary feedstock for the domestic production of ethanol.
- In line with this aspiration, a NITI Aayog report also indicated a growth in petrol demand by over 45 per cent by 2030, compared to 2021. In such a scenario, blending alone can deliver a small reduction in the overall demand for petrol.
- Much of India’s supply of ethanol for the blending programme comes from first-generation production – using underlying sugars in food crops, mostly sugarcane (84 per cent) and grain (16 per cent).
- Given the predominance of first-generation production, the often-discussed food-energy-water nexus considerations must be put into practice at the earliest.
- Food crops require fertiliser and water, and these in turn require heavily subsidised energy (natural gas and electricity) to produce (or draw)
- While the prospects for second-generation (2G) technologies for ethanol production are immense, investments have been slow and even Indian Oil’s state-of-the-art facility will only produce 3 crore litres of 2G ethanol.
- There are 12 such facilities in various stages of planning and construction but are unlikely to contribute to the lion’s share of ethanol demand.
- While ethanol opens up a new income stream for the farming community by way of assured procurement, climate change considerations suggest that rainfall and yields will both see significant variations and can leave us vulnerable to supply shocks
- India needs a robust assessment of these tradeoffs, and a clear research and development plan for 2G technologies, before it can scale up ethanol production.
Bio fuel and Flex fuel engines are new alternatives to crude oil
- As, nearly 60 per cent of our petrol demand comes from two-wheelers, which cater to the mobility needs of citizens across the economic spectrum. The remaining 40 per cent demand is from four-wheelers and this share is likely to increase.
- I such a situation, biofuels and flex-fuel vehicles (that can run almost entirely on biofuels) may merit consideration. As a consequence of it Indian government recently unveiled India’s first flex fuel vehicle.
- EVs are also EVs are also solution to our mobility needs but the minerals, materials and components they need, present more trade, employment and economic concerns
Way forward:
- Even in diversifying our fuel base, the primary focus of policy must be to slow down the overall consumption of petrol in the economy and address the private demand for the fuel.
- Targeted promotion of EVs in public transit and pricing the use of private vehicles in urban settings could ease the transition to higher levels of biofuels.
Conclusion:
- At a time when the automobile industry is grappling with the challenges of transitioning to EVs, a well-thought-out and implementable plan to transform the way India moves, will not only help reduce the import bill but also buy us time to help transition a marquee industry of our economy.
Editorial 2: Delhi need not to choose
Recent Context:
- Recently, Leaders of Brazil, Russia, India, China and South Africa took a call last week to expand the BRICS grouping from five countries to 11.
- The Johannesburg declaration, issued after the summit, said Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates (UAE) had been invited to become full members from January 1, 2024
Origin of BRICS
- The acronym BRIC was first used in 2001 by Goldman Sachs in their Global Economics Paper, ‘The World Needs Better Economic BRICs’.
- On the basis of econometric analyses, the paper projected that the four economies of Brazil, Russia, India, and China would be among the world’s largest economies in the next 50 years or so.
- The first BRIC Summit was held in Yekaterinburg, Russia, in 2009. It was decided to include South Africa at the BRIC Foreign Ministers’ meeting in New York in 2010, and accordingly, South Africa attended the 3rd BRICS Summit in Sanya, China, in 2011.
- Currently, BRICS brings together five of the largest developing countries of the world, representing around 41 per cent of the global population, around 24 per cent of the global GDP, and around 16 per cent of global trade.
Why have so many countries of the Global South shown such unusual interest in BRICS?
- With the rise in uncertainty in the world and shifting political and security equations draw new geo political dimensions.
- There is widespread anxiety about their vulnerability to US sanctions of the kind that froze a significant part of Russia’s foreign exchange reserves.
- Promotion of trade in local currencies and the raising of funds through local currency bonds, which BRICS has been promoting, are a modest and useful beginning for attraction .
- In the 15 years of its existence, BRICS’ key achievement has been the BRICS New Development Bank (NDB), which has become a modest source of development finance for developing countries
- BRICS has set up a contingency reserve which may be drawn upon by a member who may be facing balance of payments problems. It has not been used so far.
- There has been more recent progress in promoting the use of local currencies for trade settlement, but the talk of creating an alternative BRICS currency rivalling the US dollar is a long way to achieve
- The interest in BRICS also reflects a growing frustration among developing countries that their interests and aspirations continue to be ignored by the developed countries.
- International institutions like the UN and multilateral financial institutions such as the IMF and the World Bank continue to be dominated by the G7.
- As the economic and security profile of the major emerging economies continues to expand, there is a more insistent demand for a greater voice in global governance.
Expansion of the BRICS vis-i-vis G7 :
- The role of BRICS will expand as the economic, technological and military capabilities of its members continue to increase and narrow the gap with the G7 advanced countries.
- India’s successful Chandrayan mission coinciding with the BRICS summit underscored the fact that this was a grouping of substantial powers, not like the gathering of the weak that was characteristic of the Non-Aligned Movement during the Cold War.
- The expanded membership will make BRICS an energy superpower, with Saudi Arabia, Iran and Russia dominating the global energy market. But unlike the G7, BRICS lacks a broad ideological affinity and coherence.
- The G7 has also matured over half a century since its birth in the wake of the oil crisis and resultant high inflation in 1973. BRICS has a history of only 15 years.
- Furthermore, while in terms of GDP, trade and investment volumes, BRICS has caught up with the G7, its members have sharper internal contestations. The India-China rivalry is an example.
- The G7 are also a tightly knit security grouping. All its members are also members of NATO and Japan is a US treaty ally. The BRICS countries do not have a common security perspective.
New BRICS with India’s perspective
- For India, a policy of participating in multiple groupings, which helps address its now multi-faceted interests and aspirations, has proved to be a sound one.
- An expanded BRICS need not detract from India’s interests and it does not need to choose between BRICS, the Shanghai Cooperation Organisation, the Quad and regular engagement with the G7 as has now become the practice over several years.
- These expand India’s diplomatic options and help in smoothing the rough edges of an increasingly polarised world.
Conclusion:
- It is more likely that this new architecture of international governance will be fashioned in forums such as the G20, where both advanced and major emerging economies are represented, rather than be spearheaded by BRICS or the G7.