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India sets new biofuel target

BIOFUELS must account for at least 20% of Indian diesel and gasoline by 2017, according to a new government target. Given the country's high dependence on energy imports – imports meet 80% of its crude oil requirement – this makes compelling economic sense.

However, achieving it will be difficult because of the country's feedstock shortage – the reason why it fell short of the government's previous target, a 5% biofuels mix in transportation fuels by 2007. Although nine states and union territories made efforts to meet the target, its was eventually dropped.

To tackle the feedstock deficit, the new policy calls for the plantation of non-edible oilseeds, such as jatropha, on over 11.2m hectares of land – increasing the area dedicated to biofuels by 30%. To avoid conflict with the food industry, biofuels developers will continue to use non-food feedstocks in areas unsuited to agriculture.

India's largest oil-marketing company, state-owned Indian Oil Corporation (IOC), is considering acquiring 50,000 hectares of wasteland in Uttar Pradesh for the plantation of biofuels crops, which would be cultivated under contract-farming arrangements. The company has already acquired 30,000 hectares in Chattisgarh and 2,000 hectares in the Madhya Pradesh, and is producing small volumes of biodiesel in Chattisgarh.

More intense use of jatropha should reduce carbon emissions, says Anand Kumar, director of research and development of IOC. According to research carried out by the company in conjunction with the US' New and Renewable Energy Laboratory, using jatropha biodiesel for railway engines results in a 4% drop in carbon emissions, compared with fossil-fuel diesel.

However, the government will have to be careful to ensure it is economically attractive to invest in the sector. At present, for example, it is more profitable for the South Indian state of Tamil Nadu to sell sugarcane molasses to distilleries. Outgoing petroleum secretary, RS Pandey, says the government is "optimistic" that these issues will be addressed soon.

To this end, the new policy, introduced at the end of 2009, includes various subsidies and grants. A National Biofuel Fund has been proposed and the government is likely to set a minimum price for oil seeds. A National Biofuel Coordination Committee, headed by the prime minister, will monitor the policy's implementation. There is also a proposal to define biofuels as declared goods to ensure their unrestricted movement around the country. In addition, biodiesel is exempt from excise duty and ethanol has concessional excise duty. No other taxes would be levied on them.

The government is also hopeful that biofuels volumes can be increased and carbon output reduced through the widespread introduction of second-generation biofuels. It has signed a memorandum of understanding with the US government to carry out joint research and development, focusing on cellulosic ethanol and algal biodiesel. But this is a long-term endeavour. Says Kumar: "Second generation biofuels will be ready in the next five years and commercially viable only in the next 10 years."

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