India’s Time Is Coming: Kurt Shultz, Senior Director-Global Strategy, US Grain Council
During his recent visit to India, Kurt Shultz, Senior Director- Global Strategy, US Grain Council tried to find export opportunities in India. He is also the craftsman of Ethanol policy in the US. In a detailed conversation with BW Businessworld, Kurt speaks on the range of issues from Ethanol policy framework of India to US interest in the domestic market.
Edited excerpts:
Why Ethanol?
Ethanol is an affordable fuel with environmental benefits, it has the nature of improving fuel octane which helps in improving the air quality. The US has a very strong ethanol industry, we produce some 15 billion gallons for our own domestic use and recently we started exporting ethanol, we have surplus production. It was going in industries, but it is also part of fuel. Our visit to India is to find opportunities and to understand market dynamics in India.
What will be an ideal ecosystem for Ethanol in India?
I see it as plenty of opportunities. You can see it in terms of domestic ethanol production and the government has policy push to it. There has been a mandate for it and it’s not being fulfilled. I think of it as an opportunity to encourage the Indian partners and to see imports as an opportunity and also to develop the infrastructure. India would use unutilised capacity that exists in existing refineries. It is very easy for ethanol producers in India. After molasses produce, farm field is vacant for four or five months. Those plants could be put on the operation for refining them which will create job and opportunity in that segment. It will then create supplies to oil refineries and petroleum companies so that they have constant availability to their production.
Is it a larger perspective?
Yes, in a way sugarcane producers will be benefitted.
India can become next big thing in the Ethanol market. Your comments?
Certainly, that could be the hope, there is an opportunity. China is in the process of going to Ethanol market, domestic corn production has somehow addressed air quality problem in China. Pollution is certainly a big problem in India. It is (Ethanol blending in fossil fuel) not the complete solution but it’s just the part of the solution.
Who do you think may win the race between electric and ethanol competition in India?
It depends on how your electricity is produced. If it’s solar than its one part otherwise electricity to e-vehicles (EV) using coal may just increase your environmental problems. So, the reality is that electric vehicles are again a part of the solution. But even in the USA or developed countries, they don’t have a 100 per cent vehicles fleet because they have a lot of challenges. You need to have a diversified strategy to address environmental problems. EV is nice, CNG is also good, even Ethanol is a good part of it.
You are an agrarian specialist, do you think fuel will surpass food in search of higher income/prices?
I don’t think so. There are similar concerns in the US about food versus fuel. We actually went to our worst drought in 2012, it was once in 100 years. We did suffer from higher food prices, but on the other side we have come out of the situation and have abundance. The R&D is expanding in food production technology. It’s going to be a pressure, but we need to increase yields.
Sugarcane, Wheat, Rice Bran, Sweet sorghum or corn, what is most profitable in Indian or South Asian continent as a whole?
Watching the availability, sugarcane is the best possible way for ethanol production. For cereals, the US is an example of corn and sweet sorghum can also be good, sweet sorghum is what we are looking at. It is similar to sugarcane in the sense of creating fuel. We have a long-term vision of 2G (second generation fuel mix), but how will it be done is yet to be answered.
How is a sustainable blend of ethanol possible, in case of Indian ecosystem?
If the market is open and you are able to meet your needs outside of India (through imports), when you are short then it’s sustainable. You cannot draw lines between domestic productions that can meet demands. If market is capped like cattle, the surplus production has no place to go in a way like if you have surplus sugar and you can’t divert it to market. Or you can divert it in ethanol, but if not, you are killing it. Problems with farmers are that they harvest at the same time. Because everyone is harvesting at the same time, it becomes the worst time for a farmer. They would get lowest prices. If you have a diversified market, consuming it or exporting it (agri-commodity) immediately that gives farmers the options. If farmers have options they can invest in every place. If you only have one market you will be facing bad condition.
India is largely middle-class driven economy on the domestic front, where fuel efficiency plays a larger role than environmental concern, do you think bio-fuel can ever be a bright alternative?
I think Ethanol works better in high compression engine. Any high compression engine is more, smaller in nature and more fuel efficient but that requires time to make a change in existing vehicle fleet. I believe that will be an evolution, even the US is working for more and fuel efficient engine, they are also working on standards. We will eventually get there but it takes a consistent push to the industry to change over time and I think it, may be changed. The growing middle class of India is going to demand these changes.
What is your point of view for quality grain production in India, it usually lacks the nutrient content, though the production has been increased.
Nutrient value is something I should not comment upon, I am not much aware of wheat but for corn, I can say that your prices are higher, why will someone buy Indian corn in international market when he can buy the same in 10 dollars less from Ukraine or the US.
The US, India trade ratio was 2:1 in India’s favour this year, your reaction to it?
I think of that as a good thing benefiting India. This is how trade could expand even further, I don’t have a problem with that but I find it difficult for the US companies. Distance, unfamiliarity or functions in bureaucratic channels are few problems. Everybody looks at Indian market that it’s the market we would love to be in. Just the way they looked China in past, they are looking at India now, there is a huge opportunity there. It’s just matter of time how we get that opportunity.
Are you trying to put that the US firms want to penetrate Indian market the way they wanted to penetrate in China two or three decades back?
Yes, absolutely. There is a dramatic change in Chinese economy now, see how wealthy they are how progressive they are. Much money that they have an investment in development, I think India’s time is coming.
What lessons have you learnt from Chinese experience?
China has its own regulations, it’s a different beast. It’s very top down, but India is very broad base, here you have a very large democratic structure.
Do you mean, India is more sensible as a state?
I don’t mean that who is more sensible, but India has problems in transparency, every state has its own rule.
What if a major sugarcane producer like Pakistan starts producing ethanol on a commercial level, its income may be used to fund extremist outfits. How will you react to it? Will there be any checks on it?
It’s a larger political question, but you can blame that on any industry. I know it’s also a huge consumer market. Well, those who want to do business its business.
They have experienced it with Opium. Why can’t they do it now when ethanol is a legitimate agriculture produce?
I think I should not answer it, I am not the right person to answer. I think it’s only a speculation.
