Indian Biofuel Industry

Bharatbook.com added a new report on "Indian Biofuel Industry" ("http://www.bharatbook.com/detail.asp?id=81514)

The report lays out the possible opportunities and challenges for the biofuel industry. While growth of biofuels is expected to be beneficial for the Indian sugarcane industry and power mobile networks in electricity-starved rural areas, it might also create problems related to allocation of land and water resources. Moreover, fluctuations in the cost of molasses and ensuring proper pricing and supply of ethanol would have to be addressed.

The report further enumerates various corporate initiatives in the sector and describes the regulatory issues in key global markets such as the US, China and Brazil. The final section dwells on the future prospects of the biofuel industry.

Executive Summary

Demand for alternative energy sources is rising rapidly all over the world. Government across the world have been focusing on the development of biofuels such as ethanol and biodiesel to mitigate vehicular pollution, address global warming and reduce dependence on hydrocarbons as the primary source of energy. In India, the output of ethanol, the chief biofuel, logged an impressive growth rate of 200% in 2005 (F.O. Licht, May 2006). India produces ethanol from molasses and biodiesel is produced from jatropha. In addition, possibilities are being explored to manufacture ethanol from sweet sorghum and maize. The government has also sought to frame enabling legislation to ramp up biofuel production. For instance, one policy decision that has been discussed in official circles has been to permit the usage low-grade sugar for ethanol production. Blending of 10% ethanol with petrol —as against optional 5% for individual states—is slated to be made mandatory from October 2008 to curb vehicular emissions. Various companies in the private corporate sector have embarked on a coordinated plan to expand production capacities. The state oil marketing companies have been looking to collaborate with Brazil, one of the largest producers and the largest exporter of ethanol in the world. The terms of collaboration include ownership or leasing of land acreages, production units and technological know-how.

However, the Indian biofuel industry continues to face several challenges. Fast population growth, rising income levels, increasing demand for agricultural products and flawed government policies have been putting the country’s land and water resources under enormous strain. The growing emphasis on expanding biofuel production capacity, primarily through the augmentation of ethanol output based on irrigated sugarcane, is

expected to put further pressure on water resources. It might also lead to the diversion of land from food crops to sugarcane. An additional concern is the fluctuation in the cost and supply of molasses, the primary raw material for ethanol and itself dependent on the price of sugarcane. This leads to the issue of rationalization of ethanol pricing and supply and the need to stabilize the 5% ethanol blending programme to ensure the smooth transition to the 10% programme.

Overall, the biofuel industry is expected to grow at a strong rate in the medium-term with the help of proactive government initiatives and mechanisms to expand production capacity and minimize price fluctuations of key raw materials. Moreover, the generation of biodiesel from jatropha is expected to increase and its usage in diesel cars leading to a reduction in emissions.

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