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G20 Summit | New Economic Corridor and Biofuel Alliance: Show or Substance?

Will they succeed and make a real difference, or go down the paths of ISA and CDRI?

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On the sidelines of the G20 Leaders’ Summit in New Delhi on 9th September, India unveiled two new international initiatives and alliances.

The first, the Global Biofuel Alliance (GBA), seeks ‘to expedite global uptake of biofuels through facilitating technology advancements, intensifying utilization of sustainable biofuels, shaping robust standard setting and certification through the participation of a wide spectrum of stakeholders.

The second, the India-Middle-East-Europe Economic Corridor (IMEC), is for promoting "economic integration between India and Europe."

The GBA will take on OPEC, asserted the Petroleum Minister. IMEC will give the Belt & Road Initiative (BRI) of China a run for its money, chimed in many ministers. Bravo!

India has established two other international alliances during Prime Minister Modi’s tenure - the International Solar Alliance (ISA) and the Coalition for Disaster Resilient Infrastructure (CDRI). Their track record is not quite inspiring.

Will the GBA and IMEC deliver, succeed, and make a real difference, or go down the paths of ISA and CDRI?

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IMEC: Connecting India to Europe

The IMEC was launched in the presence of the leaders of the US, European Union, France, Germany, Italy, Mauritius, UAE, and Saudi Arabia, as well as the World Bank. An MOU on IMEC was also signed by India, the US, Saudi Arabia, UAE, the European Union, Italy, France, and Germany; details not disclosed yet.

The IMEC will connect India with Europe. Curiously, in the press releases, Corridor’s directions are set more in terms of Saudi Arabia and UAE than India. The IMEC will comprise an ‘Eastern Corridor connecting India to the Gulf region’ and a ‘Northern Corridor connecting the Gulf region to Europe’. The Gulf region is west of India and the connecting Corridor is called the Eastern Corridor!

The IMEC will not be an all-land Corridor for obvious reasons. Pakistan sits between India and the Gulf region. Therefore, IMEC will be a mix of railway, ship-rail transit networks, and road transport routes.

These are the only sketchy details shared about IMEC.

Has any feasibility and economic viability study been done? In what way, this Corridor will be more efficient and economically cheaper than the current transportation network through the Suez Canal? In the absence of any rail networks in the Gulf region and unstable territories between the Gulf and Europe, will any rail network be a practical, viable, and doable option?

India had, in 2002, envisaged an International North-South Transport Corridor (INSTC) linking India to Europe via Iran, Central Asia, and Russia. Modi Government has been making a lot of effort to get this Corridor going. However, there is hardly any real progress.

The IMEC has been spoken of as an alternative to the Chinese Belt & Road Initiative (BRI). Considering the enormous challenges it faces and the experience of the INSTC, the IMEC may not really turn out to be an alternative to BRI.

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On the Global Biofuel Alliance

Indian Prime Minister Narendra Modi launched the GBA, in the presence of leaders from Singapore, Bangladesh, Italy, the US, Brazil, Argentina, Mauritius, and UAE, in an impressive show. 19 countries and 12 international organisations were reported to have agreed to join.

Biofuels, that is, ethanol and bio-diesel, substitutes for petrol and diesel, have gained good traction in the world grappling to find answers for high prices and environmental unsuitability of the hydro-carbons. India has primarily focussed on ethanol.

The US is the leader in biofuels with over 50% of global production, followed closely by Brazil with about 30% of global production. India has only 3% of the global biofuel share.

Both the US and Brazil have large and durable surplus grains and other plantation materials to produce biofuels. Both are also self-sufficient in and exporters of hydrocarbons. India, on the contrary, does not have a steady surplus of grains/sugarcane to make ethanol. India is a big importer of crude oil and gas.

The US and Brazil did not take the lead in creating any global biofuel alliance; India has. Consequently, India will provide all the initial capital for setting up GBA. Even with 20% of petrol substitution by ethanol, India can at best reduce 4% of petroleum products demand. What exactly is India trying to gain from setting up the GBA?

The objectives of the GBA are quite unspecific. It is said that the GBA will expedite the global uptake of biofuels by facilitating technology advancements. Will it fund technology development? Brazil has already developed cars that run on 100% ethanol. Technology development is hugely capital-intensive. GBA can never have the resources to fund technology development.

The GBA will shape a robust standard setting and certification is stated as another objective. Setting fuel standards is quite complex and there are highly sophisticated and well-capitalised standard-setting bodies already in place. GBA cannot do any standard setting.

What the GBA will most likely end up doing is stated at the end of the press release- ‘GBA will be offering capacity-building exercises across the value chain, technical support for national programs and promoting policy lessons-sharing’. GBA will become a small ‘capacity building’ and ‘policy lessons-sharing’ Forum.

But the GBA will not make India a global leader in biofuels.

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India’s International Initiatives Have Not Really Taken Off

The vision of ISA, set up in 2015 on the sidelines of the Paris Climate Agreement, is grand Let us make the sun brighter and mission very appealing- Every home, no matter how far away, will have a light at home. It claims to be promoting a Green Grid Initiative on the notion of One Sun One World One Grid.

India has committed to fund 50% of its cost. 90 countries have signed and ratified the ISA framework.

ISA, at one point in time, talked about mobilising $1 trillion in investment support for solar programmes. By now, it has reconciled to a more modest goal of deploying $200 million on programmatic support. In its 8 years of existence, it made less than $10 million in programme support.

ISA hosted its 5th regional meeting in Kigali, Rwanda on 31 August 2023. A total of nine solar power demonstration projects, established through grants given by the ISA, were remotely inaugurated by India’s Power Minister. These nine projects cost less than $1,50,000. The ISA is grandiose in talk but quite small on the ground.

The CDRI, launched by the Prime Minister at the 2019 UN Climate Action Summit, has 30 members. India is almost fully funding CDRI with a grant of about $64 million. CDRI operations have been quite small. It spends about $3 million a year, mostly on management salary and travel.

In the light of their structure and experience of ISA and CDRI, the BFA and IMEC will have many get-togethers and photo-ops. However, nothing concrete and useful is likely to come out of them. Let us hope they meet a fate better than ISA and CDRI.

(The author is former Economic Affairs Secretary and Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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Topics:  G20 summit   G20 

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