INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

A CASE STUDY ON INDIA’S DEPENDENCY ON CRUDE OIL AND ANALYSIS OF ALTERNATIVE

SOLUTIONS

S. NARAYANAN

C1113FIIPMPGPC20001

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Acknowledgements

I would like to thank M/s Precision Infomatic Pvt Limited for giving me an opportunity for carrying out this case study and sponsoring the same.

Special thanks to Mr. R. Subramanian, Vice- President and Mr. S. Suresh Kumar, Project Engineer R&D, for their valuable guidance in making the findings and analyses of this report valuable and accurate.

Special thanks to my college for all the support in making this internship a successful one.

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CONTENT:

S. No Topic Page No

1 Summary 4

2 Introduction 5

3 History 6

3.1 Formation of Earth and Ocean 6

3.2 Presence and Mining of Crude Oil from Oceans 7

3.3 Oil Industry in India 7

4 Crude Oil 8

4.1 Production v/s Consumption 8

4.2 Crude Oil Percentage Composition 11

4.3 Crude Oil Indian Scenario 11

5 Alternative for Fossil Crude Oil 12

5.1 Bio Fuel 13

5.1.1 Bio Alcohols 13

5.1.1.1`

Bio Ethanol 13

5.1.1.2 Bio Butanol 16

5.1.2 Algae Based Bio Fuel 18

5.1.3 Bio Diesel 20

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5.2 Alcohol Fuels 22

5.2.1 Methanol & Ethanol 22

5.2.2 Propanol& Butanol 22

5.3 Ammonia as Fuel 24

5.4 Hydrogen Fuel 26

5.5 HCNG 28

5.6 Electric Vehicles 29

6 Bibliography 30

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Summary:

Globally, there are a lot of uncertainties surrounding the crude oil such as how much time crude oil will be around and what would the alternate mode of energy / transportation when it gets fully exhausted.

Previous energy transitions ie from wood to coal and then from coal to oil were gradual and evolutionary. But the transition from oil is filled with a lot of uncertainties and looking to be abrupt and revolutionary.

This study indents to explore to bringing in some predictability on these uncertainties and a comprehensive view of the various alternate solutions.

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Introduction:

India is the 5th highest crude oil consumer in the World (1), but 70% of our consumption is imported (2). Additionally, the automobile industry in India grows at the rate of 12.32% (3) last year and so does the rate of crude oil production. India ranks 24th in the crude oil production and it contributes just 1.04% to the world share (4). Hence we import crude oil from other countries.

Average worldwide per-capita oil consumption is 14 barrels ( per person per year ) while in India it is just1.2 barrels per person per year.

Even at this level of reduced consumption it is a great burden to the exchequer with an oil bill of 26 Billion $ every year. This is so large that even a small change in the oil price in the global market can upset the economy and the lifestyles by a great degree.

As it is a fossil fuel, it is a limited resource. It is getting depleted day by day without any significant replenishment. But the consumption is going up day by day and therefore an avalanche inevitable. However, when it would happen, what would be the social and geopolitical impact of the same and the various solutions to handle the situations are analyzed in

detail in this study.

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HISTORY:

Formation of the Earth and Ocean:

The earth was formed around 4.54 billion years back. Initially the earth was in molten state due to extreme volcanism and frequent collision with other bodies. There was sudden large collision that tilted the earth to an angle and this led to the formation of moon. As time went by many other collisions occurred and this allowing the Earth to cool and form a solid crust. The comets and asteroids brought water to the earth which condensed as clouds and oceans. This made the life possible on earth.

Oceans are almost 4billion years old and they were formed by out gassing of the earth’s deep interior. Scientifically they were formed by the let off water vapors from the melted rocks of the earth. These vapors formed clouds and surrounded the earth. After the fall in temperature of the earth below the boiling point of water rain occurred and which fell for millions of years and the accumulated on a cracked surface of the earth and thus the oceans had formed. It was the force of gravity that helped to hold this water on its surface.

After the formation of oceans life began in the form algae and zooplanktons. Then slowly fishes and other creatures evolved in the ocean. These algae, zooplanktons and fishes after their life span, they decay and form fossils beneath the ocean. The fossils undergo immense heat and pressure, which melted and formed the crude oil.

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Formation of the Earth and Ocean:

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Presence and Mining of Crude Oil from the Oceans:

Beneath the oceans we can find large amount of dead and decay matter known as the fossils. These fossils under intense pressure melt under the sea and from which crude oil is drilled. The crude oil is mined by oil drilling which is then separated based on various boiling points into different consumer products.

The first oil drilling happened in the 1800’s in California where large amount of oil and natural gas was present in their landscape. But they found that more oil was present near the oceans. They built a wharf for erecting the oil rig. An oil rig is a large structure with facilities to drill oil wells from the sea. New technologies are developed by the Americans to drill oil and people started using gasoline as the main fuel for their internal combustion engine. After few years they started exploring the offshore and more oil was drilled and this became the main revenue. Recently as technology has developed and drilling of oil was found to be easy.

Oil Industry in India:

The first oil deposits in India were found in Digboi, Assam in the year 1889. The first well was completed in 1890 and was established in 1899 for production. During the British rule there was not much progress in the oil drilling. Post independence, the foreign countries played the key role in the oil industry and Oil India was still a joint venture along with the British Company. In 1959 ONGC was formed to plan, organize and implement programs for the development of oil resources and petroleum products.

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CRUDE OIL:

Crude oil is naturally occurring flammable liquid consisting of complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds which are found in geological formations beneath the Earth’s surface. Fossil fuels formed by the dead organisms, zooplankton and algae buried underneath as sedimentary rocks in the sea underwent intense heat and pressure and got melted from which crude oil was drilled. Crude oil drilled was sent to refineries and where separated into various fractions based on their boiling point.

Production vs. Consumption:

In the Initial years production, crude was available very close to the surface of the earth. Only half a barrel was required to pump out 5 barrels. But over a period of time, it has gone deeper and deeper that currently 3 barrels have to be expended to pump out 5 barrels of crude.

The total crude available, the cumulative production so far, the balance left out and the yearly production are in the graphs below.

Renowned Geologist Dr King Hubbert’s peak oil theory , proposed in 1956 has been proved to be accurate for the more than 50 years. The theory states that for a given geographical area the rate of petroleum production tends to follow a bell- shaped curve. At first the rate of production increases because of the discovery rate of oil well. Then slowly it declines due to the depletion of resources. Below is a graphical the representation of the production rate described in the theory.

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We notice that the year 2013 is well past the peak. That means that the production should only decline from now onwards.

But the number of vehicles increase day year by year. This creates a double whammy situation that the consumption is raising while the supply is falling.

This will steeply widen the gap between the supply and demand, which will create steep increases in the oil prices year on year, the signs of which is already evident.

However, the chart below indicates that the production has not been reduced as proposed by Hubbert till now. In fact it has been increased marginally. This means that the problem has been pushed in to the future. That indicates that the issue would surface out late, but abrupt.

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World crude oil consumption grew on an average of 1.76% per year from 1994 to 2006, with a high of 3.4% in 2003- 2004. After reaching a high of 85.6m barrels per day in 2007, the consumption decreased in the next two years by 1.8% due to raise in fuel costs. Despite the increase in fuel cost the world crude oil consumption will increase to 21% by 2030 with a base year as 2007.

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Crude Oil Percentage Composition:

Crude Oil in Indian Scenario:

India is one of the growing economies and an increasing consumer of energy. The price of crude oil is shooting up. India mostly relies on the imports as the production in India is very less as well as the production rate decreases year by year. The reason for decrease in production is due to lack of technology and depleting energy assets, due to this India exports crude oil from other countries. The rate of import is almost 85% in the current year.

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Alternative for Crude Oil

• Bio Fuel

o Bio alcohols

o Algae based fuels

o Biodiesel

• Alcohol Fuels

• Ammonia

• Hydrogen

• HCNG

• Electric Vehicles

Bio Fuel:

Bio fuel is a type of fuel whose energy is derived from biological carbon fixation. Bio fuel includes fuels derived from bio mass conversion as well as solid bio mass, liquid fuel and various bio gases. Due to increase in price of oil bio fuel is considered one of the alternative resources for petrol.

Bio Alcohols:

Bio Ethanol:

Bio alcohols are produced by the action of microorganisms and enzyme through the fermentation of sugar, starches or cellulose etc. Bio butanol is considered to be direct replacement for gasoline as no modification is to be made to the engine.

Ethanol fuel is one of the most common bio fuels. Ethanol fuel can be used is petrol engine as a replacement for gasoline by mixing it

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with gasoline to any percentage. Generally a blend of 15% ethanol to gasoline is preferred. Since the energy density if ethanol is less than that of gasoline more fuel is consumed for the same amount of gasoline hence this decreases the engine efficiency. The main advantage is that ethanol has a higher octane rating.

Production of bio ethanol:

The basic steps involved in the production of bio ethanol are fermentation of sugar, distillation and dehydration. Starch and cellulose are converted into sugar for undergoing microbial fermentation. The cellulose part is where the ethanol is present which is broken down into sugar and converted into ethanol.

For ethanol to be used as a fuel, water from ethanol is to be removed by distillation. When water is removed from ethanol we get hydrous ethanol which can be used as a fuel, whereas anhydrous ethanol can be used in any blend along with gasoline as a fuel. Hydrous ethanol when treated further and the water is fully removed can be used as a fuel with gasoline.

Dehydration is where the hydrous ethanol is treated further to remove the water completely and burnt in different combinations with gasoline to use as a fuel.

Indian Scenario:

In India the price of ethanol is Rs.31 and price of petrol is Rs. 70 hence the government can have a tie up with the oil industries and make sure that the fuel bill can be reduced. The blend of ethanol can be up to 20%. Ethanol can also be mixed with diesel as well with a blend of 5% ethanol. In some states like Karnataka ethanol is blended at 5% with diesel in state transport vehicles.

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Pros:

• Ethanol is a renewable source of energy where it uses sunlight or solar energy to get raw materials which can be used for making ethanol.

• As an additive with gasoline can reduce emissions from vehicles.

• The production of sugar is more and hence producing ethanol from it will be easier.

• The cost of oil can be reduced hence we can save money of our imports and use ethanol fuel.

Cons:

• Other source such as corn has to be imported to India in order to produce ethanol from other sources than sugar.

• Lack of technology to produce ethanol based fuel.

• Ethanol based fuel can reduce the efficiency of the vehicle and hence can damage the engine permanently.

• The higher ratios of ethanol can cause more emissions; already India is a country where pollution is high.

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Bio Butanol:

Butanol can be used as a fuel for internal combustion engines. Since butanol consist of a longer carbon chain its similar to gasoline compared to that of ethanol. The importance of number of carbon atoms in any molecule is directly related to energy. Butanol can be used as a fuel without any modification of the engine. It can be produced from biomass and also from fossil fuels where both bio butanol and petro butanol have the same chemical properties.

Bio butanol now days are produced by genetically modified micro organisms, which set the stage to surpass ethanol as a fuel in vehicles. Bio butanol has high energy density and this makes butanol a more economy based fuel and a superior motor fuel compared to ethanol.

Production of bio butanol:

Bio butanol is obtained from fermentation of sugars in bio mass. Initially butanol was fermented from simple sugars in a process that produced acetone and ethanol along with butanol. The process is called ABE and has used unsophisticated microbes where the concentration of butanol was very less.

Since the old method of fermenting the sugar produced less concentration of butanol hence researchers created designer microbes which can tolerate high concentration of petrol.

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Pros:

• Bio butanol has higher energy content compared to ethanol hence lower loss of fuel economy.

• Bio butanol can be easily blended with gasoline at higher concentrations for use in unmodified engines.

• Butanol is less susceptible to separation in the presence of water it can be easily distributed via conventional infrastructure.

• It is less corrosive in nature as well as less explosive.

• EPA tests have showed that bio butanol reduces emissions of toxic gases in the atmosphere.

• The retrofitting of ethanol plants to bio butanol plants is feasible and when more micro organisms are produced converting ethanol to bio butanol plants will be much easy.

• Bio butanol long chain of hydro carbon can be a stepping stone for hydrogen fuel vehicles to the main stream.

Cons:

• The main disadvantage is that there are many ethanol refineries compared to butanol hence production of butanol is very less.

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Algae based Fuel:

Algae based bio fuel is an alternative to fossil fuel that uses algae as its source of natural deposits. Harvested algae like fossil fuel release CO2

when burnt but unlike fossil fuel the CO2 let into the atmosphere is taken out by the algae. The main advantage of algae is that it yields more oil compared to other second- generation fuel crops.

The growth rate of algae is much faster compared to terrestrial crops. They are easily accessible to water, CO2 and dissolved nutrients as they grow in aqueous state. Microalgae are capable of producing large amount of biomass and useable oil in either high rate algal ponds or photo bioreactors.

Fuels produced using Algae:

• Bio diesel

• Bio butanol

• Bio gasoline

• Methane

• Ethanol

• Straight Vegetable Oil

• Jet Fuel

Indian Scenario:

As algae is a third generation bio fuel can be an ideal solution for the fuel crisis. India’s has a vast coastline and tropical climate can facilitate the cultivation of algae in India in mass scale. Many advantages are present in India for the production of algae. The following are the advantages

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• The diversity is vast in the country hence production can be easy.

• There is a vast coast line available of 7517Km.

• Sufficient solar energy.

• Growing of algae will not compete with other crops for land availability.

• Can grow in places away from forests thus minimising eco and food damage.

• Algae can yield 100 to 200 tonnes of oil per acre per year (5).

Pros:

• It is a renewable source of energy.

• Absorbs CO2 as it grows.

• High energy per acre of than other bio fuels.

• Both CO2 and waste water can be used as nutrient.

• Can be grown in land unsuitable for other types of agriculture.

Cons:

• Need to be grown under controlled temperature conditions.

• Requires a large amount of land and water.

• Requires phosphorus as a fertilizer which is becoming scarce.

• Capital cost is high.

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Bio Diesel:

Bio diesel refers to vegetable oil or animal fat based diesel fuel consisting of long chain alkyl esters. Biodiesel is typically made by chemically reacting lipids with an alcohol producing fatty acid esters. Bio diesel is mainly used in standard diesel engines. It can be used directly or by blending with petro diesel. It can also be used as a low carbon alternative to heating oil.

Bio diesel is produced by transesterification of vegetable oil or animal feedstock. There are several methods available for transesterification reaction such as the batch process, super critical pressure, ultrasonic methods and microwave methods.

Indian Scenario:

Bio diesel in India is produced by the cultivation and processing of Jatropha plants seeds which are very rich in oil. Jatropha oil has been used in India for several decades as bio diesel for the diesel fuel requirements of remote and rural communities. It can be used directly after extraction in engines. The rate of bio diesel in India is Rs. 26.5 which much less than the petro diesel. Jatropha oil has more pros than cons hence it can be used as a fuel in India. One hectare can yield around 2.2- 2.7 tonnes of oil (6).

Pros:

• Emission of toxic gases is less when bio diesel is used as a fuel.

• Better lubricant compared with petro diesel hence increases the life of engines.

• When burnt gives few particulates which does not harm people.

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• Easier to ignite for complete and efficient combustion.

Cons:

• Production of bio diesel is very expensive.

• For increasing the production more crops are to be grown which might reduce the production of food crops.

• Bio diesel gels at higher temperature hence separate heating is required during cooler climates.

• Degrades rubber hoses used in older engines.

Alcohol Fuel:

Although fossil fuels have become a dominant energy resource, alcohols can also be used as fuel. The first four aliphatic alcohols are of interest as fuels because they can be synthesised chemically or biologically and have the characteristics to be used in modern day engines. The main advantage of these alcohols is that they have a high octane rating. This high octane rating helps to increase the fuel efficiency and hence the fuel economy is high compared to gasoline.

Methanol & Ethanol:

There are many methods from which both ethanol and methanol can be derived. Enzymes can be used instead of fermentation. Methanol is a simpler molecule and ethanol can be produced from ethanol.

Both methanol and ethanol have advantages and disadvantage as a fuel. Methanol fuel is proposed as a future bio fuel often as an alternative to the hydrogen economy. Ethanol is been used as an additive to gasoline.

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Propanol & Butanol:

Both propanol and butanol are less toxic and less volatile than methanol. Butanol has a flash point which has a benefit of fire safety, but during cold season it will be difficult to start the engine. Both propanol and butanol are produced by fermentation of cellulose, which is a tricky process. Unlike the other three alcohols propanol cannot be used as a fuel directly to engines but can be used as a solvent. It is used as a source of hydrogen in some types of fuel cell.

Indian Scenario:

In India except ethanol no other alcohol has been tried as a replacement for gasoline. Even though all the alcohols are cheap the Indian government has not spoken to the oil industries for the blending of alcohols with gasoline. This can be very cheap and can be economically feasible. Proponal cannot be used as a fuel for automobiles but can be used for hydrogen cell.

Pros:

• All three alcohols methanol, ethanol and butanol have high octane rating and Anti- Knock index.

• In spark ignition engines alcohols can run at higher exhaust gas recirculation rate and with higher compression ratios.

• Butanol long carbon chain makes it a better fuel than other alcohols, the energy density is high.

Cons:

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• Methanol and ethanol contain soluble and insoluble contaminants; the soluble contaminants increase the corrosion as well and can clog the fuel system.

• Methanol and ethanol are incompatible with some of the polymers, causing swelling and reduce the tensile strength.

• Propanol’s 3 carbon chain cannot be used as a fuel.

• Propanol is difficult to produce compared to butanol.

Ammonia as Fuel:

Anhydrous ammonia can be a substitute for petroleum as a transport fuel. Production of ammonia can be made from its primary sources as well as from the cheapest, cleanest and greenest sources. Ammonia can be used in internal combustion engines with minor modifications. Ammonia has high octane rating compared with gasoline and can be used in high compression engines. However the energy density is less compared to that of gasoline, fuel mileage also is less.

Ammonia is a gas at low pressure but at high pressure it can be stored as liquid. Transportation and storage is of liquid ammonia is easy. Ammonia does not contribute to carbon emission as it does not contain carbon. It may contribute a small amount of nitrous oxide emission which can be controlled. Ammonia can also be used in diesel engines. But the problem is it ignites only at high pressures, so small amount of high cetane fuel is added. A blend with bio diesel can be used as a fuel for farm machinery.

Indian Scenario:

India is one of the major countries in producing ammonia. They rank 2nd in the world. The cost of ammonia is also cheap. It should be

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blended with gasoline in order to run the vehicles. Free from carbon emissions hence can also reduce pollution. There are no talks about using ammonia as a fuel in India, whereas in some countries it has been tried. Modification of the engine is to be done which is also not expensive.

Pros:

• Ammonia as a fuel produces much cleanser emissions than fossil fuel burning vehicle.

• Cut the CO2 emissions drastically.

• Cost of engine modification will be less.

• Cost efficient when ammonia is blended with gasoline.

Cons:

• Commercial ammonia need to be manufactured.

• Low energy density compared with hydrocarbons.

• Its toxic in nature due to the emission of other nitrogen components.

• Since it has less energy density the vehicle efficiency will be low.

Hydrogen Fuel:

Hydrogen fuel is a zero emission fuel which used electrochemical cells or combustion in internal engines to power vehicles and electric devices. It is also used in the propulsion of spacecrafts and can be produced in mass which can serve as a fuel for passenger vehicles and

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aircrafts. It is environmentally friendly fuel which can help to reduce our dependency over crude oil but certain measures are to be taken in order to use it as a fuel.

Hydrogen has high energy content by weight but in terms of volume its low. The storage of hydrogen is a big challenge which requires high pressure, low temperature or chemical processes for storage. Hydrogen can be produced from different methods

• Steam reforming

• CO2 Sequestration

• Partial Oxidation

• Plasma reforming

• Coal

• Electrolysis of water

Indian Scenario:

In India BHU Varanasi, MCRC group Chennai, IIT Kharagpur are among the leading research groups working on biological, bio mass and other renewable energy routes to produce hydrogen. The MCRC and MNES have demonstrated hydrogen production in batch- scale from distillery waste. The pilot plant is able to produce 18000 litres of hydrogen per hour.

The BHU, IIT Chennai and the National Physical Laboratory are working on different methods for the storage of hydrogen. The BHU has developed various types of metal hydrides with storage capacity up to 2.4% by weight. The storage of 1.6% by weight has been demonstrated in pilot scale in BHU.

Hydrogen fuel operated vehicles have been developed and demonstrated on 2 wheelers as well as on three wheelers with slight

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modification by BHU Varanasi. Hydrogen fuel can also save 100% of the diesel and petrol used up today.

Pros:

• Hydrogen powered vehicles will only produce water and therefore it is pollution free.

• It is efficient and 90% of the energy produced by the fuel cell can be converted into electrical energy.

• Since hydrogen is found in abundance there are no chances of exhaustance.

• No engine modification is required and can be used in any installed engine.

Cons:

• Due to its highly flammable nature it will be hard to store in tanks since a slight bump might lead to explosion.

• The fuel cells used in cars require the use of platinum in order to make it work but platinum is costly and found rarely.

Hydrogen-Enriched Compressed Natural Gas:

HCNG is a mixture of compressed natural gas and 4-9 percent hydrogen by energy. It can be used as a fuel in ICE and home appliances. Normal CNG has been used in vehicles but it was found that the emissions from them where high and caused pollution. Hence when hydrogen is blended with CNG the emissions can be reduced and this can be used as a fuel and can meet the Euro norms.

Indian Scenario:

In India companies like GAIL and IOC have taken the steps to used HCNG as a fuel in vehicles. The ARAI has already developed a

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four- cylinder engine with a blend of 18% hydrogen with CNG. Eden Energy of Australia has made a joint venture with GAIL and IOC for using HCNG in transport. The ARAI is developing a six-cylinder engine for transportation of the urban buses.

Electric Vehicles:

An electric vehicle is one which uses electric motors for propulsion. Three main types of vehicles occur those that are directly powered from external power station second from stored electricity from external power source and powered by an on- board electric generator. Electric vehicles first came into existence in the mid 19th century where electricity was considered as major source of propulsion. Electricity can be generated from various sources and hence they are different from fossil fuel vehicles. The battery is charged and the vehicles run on the battery.

Indian Scenario:

The first electric car was introduced by the Reva Car Company which was founded in the year 1994. Many companies tried to launch electric vehicle but no one was successful and Reva was launched in 2001. But electric cars are not so found off in India. Even electric bikes are available but they are also not so popular in India. As we all know that the availability of electricity in India is less and people would not prefer for electric vehicles.

Pros:

• All electric cars are zero emission vehicles as there is no use of fossil fuel in it.

• The acceleration is fast and smooth.

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• They do not cause noise pollution.

Cons:

• Electric vehicles cannot be used for long distances.

• The charging of vehicle is a big challenge and cannot be charged if the vehicle stops in the middle of the drive.

Bibliography :

1. https://www.cia.gov/library/publications/the-world- factbook/rankorder/2174rank.html.

2. http://escapefromindia.wordpress.com/2008/01/01/india-imports- about-70-percent-of-its-oil/

3. http://www.siamindia.com/scripts/industrystatistics.aspx

4. https://www.cia.gov/library/publications/the-world- factbook/rankorder/2241rank.html

5. http://www.bionavitas.com/faqs.html

6. http://www.nuglobalnrg.com/jatropha_facts_and_figures.html

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