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'We are not asking for incentives, but at least taxation can be aligned such that the rupee tax on consumers remains the same.'
India is working on Ethanol 2.0, an ambitious plan to expand biofuel-petrol blending beyond 20 per cent and potentially move to 100 per cent ethanol-fired vehicles.
The government claims that EBP20 (petrol with 20 per cent ethanol blending), the first phase which aims for a 20 per cent ethanol-petrol blending mix by the end of March, has led to billions of dollars in gains to farmers and savings on fuel imports.
But a sequel to this will not be easy unless India's automotive sector cooperates and makes flex-fuel vehicles.
Toyota Kirloskar Motor country head Vikram Gulati tells S Dinakar/Business Standard in an interview in New Delhi how flex-fuel vehicles can leave a mark on India's ethanol economy and what needs to be done to get these on roads.
What are the challenges in moving beyond EBP20?
First, E20 (20 per cent ethanol) is more relevant to the automotive industry than other sectors.
The reason is that material compatibility issues begin to arise beyond a 10 per cent ethanol blend.
Ethanol is much more corrosive, so it is essential to ensure that the engine, fuel pipeline, and all other components sensitive to higher ethanol blends are designed to withstand the effects.
Proper material compatibility must already be in place. The entire sector has been compatible with E20 from a material standpoint since last year or the year before that.
What about ethanol availability to meet higher blending ratios?
Not only do we have sufficient ethanol for E20, but we also have the potential to go beyond that.
This expansion will come not only from the sources I outlined but also from second-generation ethanol production.
It is not a question of food versus fuel because we have a surplus today.
2G ethanol seems a bit expensive at present...
It is a bit expensive, but with suitable technological evolution and incentives through policy mechanisms, it will become economically viable.
Of course, the challenge lies in how we aggregate parali (agri waste) and bring it in.
Even if we don't go there, even with 1G, we have a huge surplus beyond E20. That is where flex-fuel engine vehicles come in.
Like in Brazil, right?
The concept is very simple. Today, I have E20.
Tomorrow, we may say we have more than 25 per cent or 30 per cent.
But what guarantee is there that I am going to have that much? Let us say I am stretching it to 25 -- what guarantee is there that I will consistently maintain that level and not go beyond?
Additionally, when you change the limits, the entire system needs to be redone, which involves heavy costs. So, these are not the most optimal ways of using surplus ethanol.
Then how do we expand ethanol use?
The most efficient and clever way is to make a one-time change in the vehicle -- making it capable of taking in either E20 or 100.
It doesn't matter how; we do that by improving material compatibility to handle the higher corrosive nature of ethanol.
The engine system needs to detect the fuel blend -- whether it is 20, 30, 40, 85, or anything else.
This requires sensors in the fuel tank and electronic control units in the engine that can quickly detect and adjust engine settings accordingly.
Certain other modifications in the engine are also necessary. For the consumer using it, there should be no noticeable difference.
Flex fuel is an old technology, right?
Brazil has been using it for 30-40 years, maybe even 50. So, it is an established technology.
There are no technological barriers, and there is no dependence on any other country for parts.
Our ecosystem for engine manufacturing and the entire conventional internal combustion engine industry is very robust. We are globally competitive.
It is a self-reliant ecosystem from an automobile perspective.
What are the hurdles in the adoption of flex-fuel vehicles in India?
One major hurdle in increasing ethanol usage and introducing flex-fuel vehicles is that the current regulatory framework penalises original equipment manufacturers (OEMs).
The second hurdle is consumer adoption, which needs to be encouraged through incentives or at least neutral taxation.
Even after considering emissions, a study by the Indian Institute of Science confirms that a flex-fuel vehicle running on E100 has the lowest carbon footprint for any technology in India, including electric vehicles.
What about the cost of flex-fuel vehicles?
When you go from E20 to a flex-fuel vehicle, the cost of all necessary changes plus development costs may vary from company to company.
But just considering the bill of materials and development cost -- without any markup -- the additional cost would be something like ₹40,000 to ₹50,000 for a car and ₹15,000 to ₹25,000 for a two-wheeler.
And taxes on flex-fuel vehicles…?
Now, the issue is that in manufacturing there is no difference in taxation today -- whether goods and services tax, cess, or road tax -- between a petrol and a flex-fuel vehicle.
So, if taxation remains the same, the overall cost is bound to go up. That means an increase of ₹50,000 may even become ₹1 lakh.
There also are additional expenses -- when you go to E20, ethanol, being less energy-dense, results in a 7 per cent reduction in mileage.
For E100, it will be 30 per cent. So, operating costs increase so far as consumer adoption is concerned.
No technology -- whether clean energy or any other innovation -- can make inroads unless it meets the basic consumer requirements of convenience, performance, and economic sense.
If we cannot bridge this significant cost gap as an industry, along with the government, the consumer will not buy it.
What is the challenge for pricing ethanol in India?
Brazil has a market-driven pricing which allows flexible fuel blending. But, In India, fuel pricing is a political economy issue.
There are two possible ways to manage ethanol pricing. First, lower ethanol prices. But someone has to then bear the cost -- farmers, ethanol manufacturers, government subsidies, consumers. And second, increase gasoline prices. But that would be politically difficult.
Brazil smartly overcame this challenge by adopting electrified flex-fuel vehicles -- strong hybrids that work on flex fuel.
How does this help? While a flex-fuel vehicle loses efficiency, the hybrid powertrain compensates by boosting efficiency by 40-50 per cent.
This means a hybrid flex-fuel vehicle can have better fuel efficiency than a conventional E20 vehicle.
The next step should be plug-in hybrid flex-fuel vehicles. The world's first such vehicle was unveiled at the G20 Summit in Brazil four or five months ago.
Here is a cost breakdown:
* A conventional flex-fuel vehicle costs around ₹50,000 extra.
* A strong hybrid costs around ₹2.75–3 lakh extra.
* A plug-in hybrid flex-fuel vehicle would cost ₹3–3.25 lakh extra (including flex-fuel tech and hybrid tech).
What does the auto industry want on taxation?
All green technologies should have fair taxation.
When you buy a hybrid, you pay between ₹1.75 lakh and ₹3 lakh extra in taxes (including GST, cess, and road tax).
These technologies are new, and the taxation structure has not yet been adjusted to accommodate them.
Consumers should not pay higher taxes for clean technologies.
Even if taxation remains the same as petrol vehicles, the government loses nothing.
We are not asking for incentives, but at least taxation can be aligned such that the rupee tax on consumers remains the same.
When is the new CAFE regime (fuel efficiency norms) starting, and what does it mean for flex-fuel vehicles?
The third CAFE regime is going to come into effect in 2027, increasing costs.
CAFE is nothing but a regulation to ensure lower fossil fuel consumption by encouraging OEMs to improve the fuel efficiency or fuel economy of their cars. For an OEM, what matters to us is regulation.
Now, with the new CAFE regime coming in -- especially as we transition to E20 and flex-fuel vehicles -- the big ask from the industry to the government is: Please recognise this change -- for every E20 car I manufacture (not an E0 car), I am losing 7% fuel efficiency. For every flex-fuel vehicle (E100), I lose up to 30% efficiency.
There is a scientific way to overcome this so that I am neither overcompensated nor undercompensated.
This methodology is based on scientific principles and essentially identifies how much carbon is emitted.
Would the CAFE ratio change, or would flex-fuel vehicles be categorised separately?
There is a scientific factor that is calculated -- it is called the biogenic factor; it essentially determines how much of the energy used while driving the vehicle comes from ethanol and how much from fossil fuel.
The upcoming CAFE regulation should recognise the biogenic factor and transparently account for it.
There are two complexities in this calculation.
First, a simple volumetric approach -- for example, if I have 10 litres of fuel and 20 per cent is ethanol, it means I used 2 litres of ethanol. But that's not enough because ethanol has a 7 per cent lower efficiency.
And second, a scientific approach -- where we calculate exactly how much of the carbon emitted came from ethanol and how much from fossil fuel.
Using a scientific equation, we derive the biogenic factor. A committee is expected to decide on the CAFE biogenic factor by March.
The industry's unified request is: 14.3 for E20, and 22.5 for flex fuel (based on a 30 per cent average ethanol mix by 2030). The biogenic factor for E100 is around 79.
Feature Presentation: Rajesh Alva/Rediff.com
