Biofuel Promotion in India for Transport: Exploring the Grey Areas

India happens to be the world's fourth largest energy consumer and a consumer of crude and petroleum products after the United States,China, and Japan. The net oil import dependency of India rose from 43 per cent in 1990 to 71 per cent in 2012 that resulted in a huge strain on the current account as well as the government exchequer. Transport sector accounts for the largest share (around 51 per cent) in terms of consumption of petroleum products in India. Nearly 70 per cent of diesel and 99.6 per cent petroleum are consumed by the transport sector and the demand is expected to grow at 6-8 per cent over the coming years in tandem with the rapidly expanding vehicle ownership. Evidently, India's energy security would remain vulnerable until alternative fuels based on indigenously produced renewable feedstock are developed to substitute or supplement petro-based fuels (Government of India, 2008). A number of alternative energy options coupled with various initiatives towards energy efficiency improvement and energy conservation are being promoted in India to deal with an impending crisis. Among the portfolio of renewable energy alternatives that are available, biofuels, especially ethanol and biodiesel (refer to Box 1 for taxonomy), have emerged as a preferred option, especially for the transport sector in India. The objective is to reduce dependence on imported crude oil in order to enhance the country's energy security. The other reasons behind promotion of biofuels in India include climate change mitigation through reduced greenhouse gas (GHG) emission, environmentally sustainable development, and generation of new employment opportunities (Government of India, 2008).