Biofuels are going to play an extremely important role in meeting India’s energy needs.  The country\'s energy demand is expected to grow at an annual rate of 4.8 per cent over the next couple of decades.  Most of the energy requirements are currently satisfied by fossil fuels – coal, petroleum-based products and natural gas.  Domestic production of crude oil can only fulfill 25-30 per cent of national consumption.  In fact, the crude oil imports are expected to total 147 million tons (Mt) in 2006-2007.

 With the ever-escalating crude oil prices, if one assumes a price of $57/barrel  ($420/ton), the estimated crude oil import bill for 2006-2007 would be $61.74 billion, about 10 per cent of the country\'s Gross Domestic Product. Ethanol, currently produced in India by the fermentation of sugarcane molasses, is an excellent biofuel and can be  blended with petrol.  Likewise, biodiesel which can be manufactured by the transesterification of vegetable oil can be blended with diesel to reduce the consumption of diesel from petroleum. Ethanol and biodiesel  are gaining acceptance worldwide as good substitutes for oil in the transportation sector.  Brazil uses pure ethanol in about 20 per cent of their vehicles and a 22 to 26 per cent ethanol-petrol blend in the rest of their vehicles.  The United States and Australia use a 10 per cent ethanol blend.  With a normal production rate of 1,900 million litres a year, India is  the world’s fourth largest producer of ethanol after Brazil, the United States and China.  Beginning 1 January 2003, the Government of India mandated the use of a 5 per cent ethanol blend in petrol sold in nine sugarcane producing states.  The Government will expand the 5 per cent ethanol mandate to the rest of country in a phased manner. Biodiesel production is rapidly growing in Europe and the United States.  Current estimates show production of 2.2 Mt/year in Europe, with Germany (1.1Mt/year), France (0.5Mt/year) and Italy (0.4Mt/year) being the leading producers.   The European Union mandated that its members derive at least 2 per cent of their fuel consumption from biofuels by 2005 and 5.75 per cent by 2010.  Biodiesel production is about 245,000 t/year in the United States.   The Government of India has developed an ambitious National Biodiesel Mission to meet 20per cent of the country’s diesel requirements by 2011-2012.  Since the demand for edible vegetable oil exceeds supply, the Government  decided to use non-edible oil from Jatropha Curcas oilseeds as biodiesel feedstock.  Extensive research has shown that Jatropha Curcas offers the following advantages: it requires low water and fertilizer for cultivation, not browsed by cattle or sheep, pest resistant, easy propagation,  high seed yield and ability to produce high protein manure.  The National Biodiesel Mission will be implemented in two stages: 1) a demonstration project carried out between 2003-2007, which will cultivate 400,000 hectares of land and yield about 3.75  tons oilseed per hectare annually.  The expected annual biodiesel production from the project is 1.2 t/ha/year for a total of 480,000 tons per annum.  The Government will build  a transesterification plant with a biodiesel production capacity of 80,000 t/year as part of the demonstration project; and 2) a commercialization period from 2007-2012 will continue Jatropha cultivation and install more transesterification plants which will position  India to meet 20 per cent of its diesel needs through biodiesel. 

An economic analysis indicates that ethanol  from sugarcane and biodiesel from Jatropha Curcas can be manufactured at under Rs. 21/litre ($0.47/litre at an exchange rate of Rs 45/$). Current production cost of petrol and diesel from crude is $0.46/litre, and with crude oil prices on an upward swing, the production costs of ethanol and biodiesel compare favourably with those of petrol and diesel. The following table shows the projected demand  for petrol and diesel and the amount of ethanol and biodiesel required for 5, 10, and 20 per cent blending.

Biofuels offer a number of environmental, social, and economic advantages, including lower emissions of harmful pollutants; decreased greenhouse gas emissions; increased employment; increased energy security, especially in rural areas; decreased dependence on oil imports; and good fuel properties for vehicles. Our analysis indicates that while India has an ethanol distillation capacity of 2,900 million litres/year, sufficient to meet 5 per cent ethanol blending requirements, domestic sugarcane molasses might not represent a reliable feedstock, given the vagaries of the sugar industry and the dependence of sugarcane cultivation on monsoons. For instance in 2003-2004, the sugar output dropped to 15 Mt, molasses production sunk to 6.75 Mt, and the ethanol manufacturing level decreased to 1,518 million litres.

 This caused India to import ethanol and molasses in 2003-2004.  In addition to more efficient agricultural practices for improved sugarcane yield, crops like sweet sorghum and tropical sugar  beet represent attractive alternate feedstock for ethanol.  New exciting technologies like enzymatic fermentation of cellulose will, in the near future, enable ethanol to be manufactured at competitive prices from cheap, easily available material like wood and crop residue.  In the meantime, ethanol imports can be used to satisfy some of India’s ethanol demand, especially for 10 and 20 per cent ethanol blending.  Brazil exported about 2  billion litres in  2004-2005, and other countries like Thailand, Mexico and Cuba are increasing production. Molasses imports from agro-industries in Asia can also augment India’s ethanol production.