Non Peer-reviewed Article
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Biofuels and Rural Development in India: Public-Private Partnerships in Andhra Pradesh

In What is New from IGES November 2008 Series: 2008-11

Biofuels have been promoted in many Indian states as part of their rural development strategies, long before the recent finalisation of India’s national policy on biofuels, in order to generate employment and produce fuel locally using existing wastelands. To promote employment, some states have promoted biofuels using nationally sponsored programmes such as the National Rural Employment Guarantee Scheme, which aims to provide guaranteed employment of a minimum of 100 days in a year to small and marginal farmers and landless labourers. State governments are given flexibility to identify their own development projects depending on the local requirements, and some focus on developing biofuel crops.

While much attention has been on jatropha, other crops such as pongamia have also been tried. In February 2008, IGES visited the state of Andhra Pradesh, whose government is promoting biodiesel based on pongamia (Pongamia pinnata (L.) Pierre) trees, which have been planted on wastelands in 13 drought affected districts, using a public-private partnership. These wastelands are farmers, fields that are uncultivated due to water scarcity, poor soil fertility, rockiness and unevenness. The government has identified several entrepreneurs to supply grafted pongamia seedlings and assist farmers by providing technology. These entrepreneurs are allowed to enter into agreements with farmers and the district administration to procure seeds at a minimum support price fixed by the government (USD 0.22 per kilogram). Farmers can sell the seeds in the market if they can get a higher price.

Farmers are strongly motivated to plant pongamia trees by generous support programmes which nearly eliminate risks. In addition to minimum support price, there is a 100% government subsidy for inputs, which include 60 kg of nitrogen and 64,000 liters of water per hectare. Subsidies also cover transport of the water and labour. The flowering gestation period of pongamia is reduced from 5-6 to 2.5-3 years with the help of a grafting technique. One hectare of pongamia produces about 3.5 tons of seeds producing an income of about USD 750 per year. In addition, farmers can grow intercrops such as pulses and castor that yield between USD 420 to 580 per hectare, to earn income during pongamia’s initial gestation period. Employment generation potential is 66 persondays per hectare per year. The entrepreneurs benefit from a minimum support price of USD 0.53 per litre of biodiesel. Biodiesel from one hectare of pongamia can yield a gross income of USD 650 per year for the entrepreneur, not including income from by-products (glycerine, glycerol, seed cake manure etc).

Environmental benefits such as GHG emission reductions, increasing land cover in dry tracts, supply of organic manure from pod shells, etc. are expected, though not conclusively demonstrated yet. However, it is clear that rural development programmes promoting biofuel production under public private partnerships are showing signs of benefiting rural communities while providing energy. With ever-growing fossil fuel prices, minimum support prices for biodiesel may become unnecessary.

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