West Asia crisis must spur efficient use of resources, search for alternatives

In the 1970s, when the first oil shocks emanated from West Asia, Indian farmers were just starting to use urea and di-ammonium phosphate, while households overwhelmingly relied on firewood and dung cakes for cooking, and a minuscule minority wore polyester and nylon fabrics. That isn’t so today, with over 70 million tonnes of annual chemical fertiliser consumption, 330 million active domestic LPG connections, almost 60 per cent of India’s textile production based on manmade fibres, and polymers becoming ubiquitous in everything from plastic bags, bottles and buckets to pipes and cables. It is not surprising that the current US-Israel-versus-Iran war is having a far more widespread impact on India’s economy. Everyone — consumers, manufacturers, eatery operators, farmers and airline companies — is feeling the heat.

This war could be to India what the 1970s energy crises were to the Western economies. That decade of high inflation and low growth (“stagflation”) upended the prevailing Keynesian economic model of fiscal policy-led demand management, paving the way for Reaganomics in the US and Thatcherism in the UK. A similar wake-up call awaits India, at least with regard to dependence on imported energy, especially fossil fuels. Indian farmers are unlikely to go back to ploughing their fields with bullocks or replace factory-made chemical fertilisers with composted cow manure. Nor is it desirable to return to the era of smoky kitchens and cooking with dried dung, tree branches or coal. But it certainly cannot be business as usual. The 1970s shock impelled Brazil to launch an ambitious ethanol-based transport fuels programme. Efficient use of resources that India lacks, along with paying their full scarcity value and searching for viable alternatives, has to be mainstreamed into government policy and consumer behaviour. It means not subsidising fertilisers or limiting it to a certain number of bags per farmer, à la LPG cylinders.

Efficient imported energy use apart, India must step on the gas with ethanol-blending in petrol and incentivising the production of electrified flex fuel vehicles. This should be accompanied by a scaling-up of initiatives such as bio-additives in chemical fertilisers (to enhance nutrient uptake and improve soil health), dimethyl ether from biomass-derived methanol (as a substitute for LPG), bio-CNG from sugarcane pressmud and other agricultural as well as municipal organic waste, and potash from distillery spent wash. The chances of success are higher when the opportunity cost of imported fuels — that extends to national security and strategic vulnerabilities — becomes obvious. For India, this is an unprecedented crisis and a moment of opportunity.