Biofuels in India: Potential, Policy and Emerging Paradigms

Energy security has emerged as an important policy issue all over the world. Global energy markets have relied heavily on fossil fuels like coal, crude oil and natural gas, which provide almost 80 per cent of the world’s supply of primary energy. Being non-renewable, they have certain limits of availability due to which they depict global destabilizing price shocks, more so in recent years. The extensive world wide use of fossil fuels has resulted in serious environmental concerns–particularly the climate change. One of the key challenges facing the developing world is how to meet its growing energy needs and sustain economic growth without contributing to climate change. An emphasis on energy security has also led to the quest for alternative sources of energy that could reduce dependence on petroleum. Amongst several alternative renewable sources of energy, biofuels have emerged as a most potent source and several countries and international institutions regard them as ʻfuture fuelsʼ. India is the fifth largest primary energy consumer (as per international energy annual) and the fourth largest petroleum consumer in the world. The growing population, increasing per capita income, infrastructural development and rapid socio-economic development have spurt an increase in energy consumption across all the major sectors of the Indian economy. Given the limited domestic energy resources, escalating crude oil prices, and growth in domestic consumption of petroleum products, India’s oil import bill has inflated considerably. However, biofuels sector is at its nascent stage and is evolving in India. In this context, this policy paper has addressed the evolving biofuels sector of India, and the growth of firstgeneration biofuels as alternatives to fossil-based transportation fuels. The paper has outlined the key issues that confront the future development of this new sector and has identified the production potential and constraints of biofuels development. The present policy paper has discussed a number of issues related to the competitiveness of the emerging biofuels supply chain in India, and has suggested some policy reforms and interventions that are necessary for the sustainability and viability of this sector. I am sure the paper will be useful to a wider section of the society in understanding the issues related to biofuels-their potential, constraints and the emerging paradigms.