Biofuel Policy of India

The national government released its first ever national biofuel policy which was most notable for its mandate that 20% of all diesel demand should be met using plant based rather than fossil based diesel by 2017. The policy also stipulated that 10% of all gasoline demand should be met using ethanol compared with current mandate of 5%.
The policy also suggested removing all central taxes on biodiesel and according declared goods status to biofuels that would ensure a uniform 4% sales tax on the product across states.
With the mounting inflation it seems that root cause of it is use of food stocks in creation of biofuels. But when we analyze costs and benefits of creation biofuels, the picture turns out to be different.
The assumption that biofuel production will lead to crowding out of food production is also misleading. Jatropha plant which is the main source of production of biodiesel in India is a hardy plant which can grow on land on which traditional food crops cannot grow, which means that arable land need not to be sacrificed for fuel production. In addition to this jatropha production is estimated to utilize less than 1% of water required for traditional food crops. Similar to this other crops which are used in production of biodiesel have low inputs, meaning that even large-scale production of biodiesel will not result in a significant diversion of scare water resources from food production.


The Jatropha advantage
Jatropha is an eternal hardy shrub which can survive in arid and semi arid tropics. It grows wild in many areas of India and even thrives on infertile soil. This makes it an ideal feedstock for, biodiesel as India has more than 170 million hectares of wasteland which need revegetation. Since jatraopha is water efficient and widely adaptable, large scale jatropha plantations require for the biodiesel industry could lead to generation of these wastelands.
The yield of Jatropha oil is quite high, ranging from 1 to 5 tonnes/ ha depending upon the soil conditions and rain fall, and oil can be extracted from seeds starting from the second year. Jatropha biodiesel projects can also help in rural developments by introducing new employment opportunities in agricultural and small and medium industrial sectors. Assimilation of atmospheric carbon, to the extent of approximately 10 tonnes CO2 per hectare, can be realized by Jatropha plantations! Since India is a developing country, this can be traded under the Clean Development Mechanism (CDM). Article 12 of Kyoto protocol specifies that developing countries can benefit from CDM projects resulting in "certified emission reductions" (CERs) and that industrialized countries may use CERs to comply with their quantified emission reduction commitments. This is an additional economic advantage favoring Jatropha biodiesel projects in India.

Encouragement by government
The government is making efforts not to encourage biofuels at the cost of food grain production. The government has decided that no food grain or oilseed should be used for producing biofuels. The The idea is to prevent a repeat of the American experience where diversion of corn for ethanol production is being blamed for foodgrain price spurt across the globe. Therefore, use of even coarse grains for biofuel production would not be allowed. In the case of sugarcane too, there are concerns that focus on ethanol would lead to lower production of sugar.
Only wasteland is to be used for growing biofuel producing plants such as jathropa. While biofuel production is yet to catch up, there is growing concern over diversion of farm land pushing up price of foodgrains. The risk cannot be afforded at a time when Indian entities are looking at purchasing farmland in south America, Africa and Canada to grow pulses and oilseeds. Land has become a scare resource and disputes are raging in various parts of the country over use of farmland for other purposes, including industrial development.
Recently, some companies have started cultivation of biofuel crop on wasteland and degraded forest land. BP, IOC, BPCL, Reliance and IKF Technologies have already rolled out plantations in about 3 lakh hectares of wasteland spread across the country. The National Policy on Biofuels has set an indicative target of 20% blending of biofuel in both petrol and diesel across the country by 2017.