Monday, August 27, 2007

[PBN]: India: Coconut Farmer switches to Jatropha


Interesting related short video:

Jatropha Plant Gains Steam In Global Race for Biofuels
Hardy Shrub Is Tapped For Energy-Rich Seeds; Indian Farmers' Big Bet

August 24, 2007; Page A1

HIRIYUR, India -- Until recently, B.K. Nagendrappa didn't care much at
all about jatropha, an ugly wild green shrub that thrives in India. Now,
the coconut grower hopes to plant as many as 12 acres of the stuff on
his land near Bangalore.

Jatropha, a lowly forest plant that grows wild in India, has suddenly
found itself at the center of a new phase in the world's alternative
energy boom.

V. Venkateswarao is also raising the plants -- on a dried-up stretch of
dirt east of Hyderabad. So too is O.P. Singh, a horticulturist for
India's Ministry of Railways, in a quiet garden by an old airport in New

"This plant will save humanity, I tell you," Mr. Singh proclaims, as he
points to 4-foot-tall jatropha shrubs nearby. Someday, "every house will
have jatropha!"

With oil trading at roughly $70 a barrel, this lowly forest plant is
suddenly an unlikely star on the world's alternative-energy stage.

The seeds from jatropha's golf-ball-size fruit contain a yellowish
liquid similar to palm oil that can be made into biodiesel -- an
increasingly important renewable fuel used in Europe, the U.S. and

But unlike other biodiesel crops, jatropha can be grown almost anywhere
-- including deserts, trash dumps, and rock piles. It doesn't need much
water or fertilizer, and it isn't edible. That means environmentalists
and policy makers don't have to worry about whether jatropha diverts
resources away from crops that could be used to feed people.

Poverty remains an entrenched problem in India. Some rural development
experts fear that small Indian farmers could wind up serving as guinea
pigs for a failed jatropha industry.

These qualities are crucial at a time of intensifying concern over the
environmental and social consequences of a global alternative-energy
boom. It takes huge quantities of land, water and chemicals to grow
crops to make ethanol and biodiesel. And as more governments set targets
for their consumption, fears are rising that the world won't be able to
meet the demand without significant environmental damage.

Goldman Sachs recently cited jatropha as one of the best candidates for
future biodiesel production. A Bear Stearns analysis last year found
that U.S. farmers only have the capacity to replace about 7% of the
country's gasoline with corn-based ethanol, despite a new federal
renewable-fuels target of 15% by 2017. To reach that goal, the U.S.
would likely have to find a lot more land.

India, by contrast, has millions of acres of wasteland that isn't fully
utilized due to low water tables and infertile soil. Jatropha advocates
figure the crop can cover much of that area without causing
environmental distress.

In late June, oil giant BP PLC said it will invest $90 million in a
joint venture with U.K.-based D1 Oils PLC, a biofuels start-up that's
developing jatropha in India and elsewhere.

Another company, Australia-based Mission Biofuels Ltd., has raised more
than $80 million from investors and has representatives fanning out
across the Indian subcontinent to sign up growers. It has roughly 66,000
acres under cultivation already and expects to hit 250,000 by 2010.


• Plant Matter: Investors and farmers in India are looking to the wild
jatropha plant as a potential source of biofuel.
• Strong Kick: Jatropha yields energy more efficiently than corn and
other alternative-energy feedstocks, and thrives in harsh conditions.
• Future Yields: The plants take several years to produce large amounts
of oil, and the crop's market potential is still unknown.

Other countries -- including the U.S. -- may have similar bounties of
untapped land for jatropha, and farmers are already rushing to plant the
crop in Thailand, the Philippines, Swaziland and even Saudi Arabia.

The enthusiasm for jatropha and its ilk highlights how quickly investors
are shifting gears as the shortcomings of other renewable fuels become
more apparent. It also illustrates the risks of newer approaches, since
it's still far from clear whether jatropha and its peers are
economically viable on a large scale.

By some estimates, the per-barrel cost to produce biofuel using jatropha
-- about $43 -- is about half that of corn and roughly one-third that of
rapeseed, two other leading materials for alternative energy. At those
prices, jatropha biodiesel would be competitive with fuel made from
crude oil without significant government subsidies.

Used as a Hedge

But such calculations are based on limited experience with the crop.
Agronomists hardly studied it in the past because it was considered to
be mostly worthless. Until recently, jatropha was best-known in India
and elsewhere as a hedge to keep wild animals from wandering onto farms.

Even some of jatropha's biggest advocates concede the plant's oil output
is unpredictable and often lower than expected. Although it can grow
without water, it tends to do much better when water is added, raising
its cost of production and mitigating some of the perceived benefits.

Some farmers have already reported financial losses from jatropha
plantations after their crops yielded less oil than expected or buyers
failed to pay sufficient prices. In a worst-case scenario, some
rural-development experts fear, small Indian farmers could wind up
serving as guinea pigs for an untested industry, leaving them in debt if
the boom fizzles.

"Everybody is so excited, but is [jatropha] really happening? I'm not so
sure," says Amit Sachdev, a New Delhi area-based representative for the
U.S. Grains Council, which represents the interests of one of jatropha's
competitors: American corn.

More research is needed "instead of hype," adds Manfred Zeller, a
rural-development expert at the University of Hohenheim in Stuttgart,
Germany. Any ecological downsides -- such as the draining of water
resources to accelerate plant growth -- are thus far unknown.

Land Shortage

Still, jatropha's allure is undeniable. Planting more palm oil, corn or
other crops to make ethanol or biodiesel isn't really an option due to
land shortages and other constraints. Water tables are falling across
India, and production of some key commodities like rice has already
flattened out in recent years. The country could have trouble meeting
its own food needs even without a biofuel boom.

First cultivated in South America, jatropha was brought to India long
ago by Portuguese traders. Villagers used it as a hedge crop, and some
extracted oil and latex from the plants to make soap or fuel for lamps.
Many Indians recall using the latex from jatropha to blow bubbles when
they were children.

The Indian government started getting excited about jatropha a decade
ago. Officials were already worried about India's energy security and
asked a private, nonprofit research outfit called The Energy and
Resources Institute to look into jatropha's potential as a fuel source.

Researchers at TERI studied the plant in a lab on the sixth floor of
their New Delhi offices, and were encouraged. "You can put it in any
kind of soil, and it will grow," says P.P. Bhojvaid, a senior fellow at
TERI. If cared for properly, the plants can live up to 45 years.

As TERI made progress, other Indian leaders jumped on the bandwagon.
Former President A.P.J. Abdul Kalam planted jatropha in his
peacock-filled gardens in New Delhi and touted the plant in speeches to
the nation. The state railway ministry began using jatropha last year to
fuel some of its locomotives and planted 7.5 million jatropha plants
along its tracks. The government ordered state-run oil companies to buy
jatropha-made biodiesel at a minimum price of about 26 rupees a liter,
or about $2.40 a gallon. Several of India's local governments began
handing out free saplings.

All this set the stage for companies like Australia's Mission to move
in. Founded by a Malaysian-born businessman in 2005, it aimed to
capitalize on the new biofuel boom by building a palm-oil biodiesel
refinery on the coast of Malaysia.

But Mission officials wanted a backup raw material in case palm-oil
prices shot up, as they have since 2005. After some research, they
settled on jatropha, in part because it's inedible and therefore
unaffected by demand from food buyers.

The use of food crops to make fuel "will only push up the price of food,
and food has to win -- otherwise, the world will go into starvation,"
says Nathan Mahalingam, Mission's managing director. "We want to stay
clear of that, and that's why we're moving into jatropha."

Mr. Mahalingam estimates that each acre of jatropha planted will produce
about one ton of oil, with yields hopefully improving over time.

To seed a network of growers, the company recruited people like K.
Chalapathy Reddy, a 30-year-old plant breeder. Now, as a Mission senior
scientist, he spends much of his time touring the Indian countryside,
helping convince farmers to take up the crop and looking for ways to
boost their yields. His mobile phone rings constantly with calls from
farmers seeking advice on how to prune their plants or when to apply water.

In towns such as Hiriyur, about a three hours' drive across the dusty
flat lands outside Bangalore, Mr. Reddy relies on local agents who talk
up jatropha at agricultural fairs and town meetings. They hand out
Mission brochures that feature drawings of a car pulling up to a smiling
tree labeled "biodiesel."

Farmers' Contracts

Typically, Mission's agents sign up farmers to contracts that commit
them to sell all their jatropha to the company for 30 years. It charges
farmers three rupees per plant. But Mission says it often forgoes
payment until after the plants start producing significant quantities of
oil, a process that usually takes two to three years.

Mr. Reddy acknowledges jatropha promoters have come and gone, and that
sometimes farmers are skeptical. "There's nothing like hide-and-seek
here, we're not fooling the farmers," Mr. Reddy says. "We get nothing
unless the crop comes in."

Among Mission's growers is 42-year-old K. Nagaraj, who says he used to
grow groundnut on a small plot of land near Hiriyur. But the soil
conditions weren't ideal, and after water and fertilizer expenses, it
wasn't possible to make much of a profit.

He says Mission offered a guaranteed price of five rupees per kilogram
for his oil-bearing jatropha seed, which he reckons should translate
into a profit of about 10,000 rupees, or about $250, an acre.

"Initially, I was a bit skeptical," he says of jatropha. "But when we
got more information, and the president was telling people about it, we
gained confidence."

Other farmers in the area are also giving jatropha a go -- without even
knowing whom they'll sell it to.

One of Mr. Nagaraj's neighbors, a former politician named H. Ramaiah,
says he made his living in recent years from coconuts. But his trees are
dying from insufficient water, so he now hopes to have better luck with
jatropha. On a recent visit, his jatropha plants were hardly
distinguishable from other weeds on the property.

Jatropha "takes very little water, so maybe it will work," Mr. Ramaiah
said hopefully. When asked who might buy his future oil harvest, he was
uncertain. "Whoever is giving the most profit," he said.

--Tariq Engineer in Mumbai and Binny Sabharwal in New Delhi contributed
to this article.

Write to Patrick Barta at
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