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Gunatilake , Herath
Abeygunawardena, Piya
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ADB Economics Working Paper Series 255
Energy security has been an important global policy issue for more than 4 decades. Transport biofuels like bioethnol have been receiving increased attention in recent years as a solution to heavy dependence on imported petroleum fuels, which brings destabilizing price effects on the economy and causes serious environmental problems like climate change. India's biofuel policy proposes an ambitious target of replacing 20% of petrol by blending bioethanol by 2017. This paper examines the economic feasibility of sugarcane bioethanol in India while considering food security as a competing policy priority. The analyses show that 20% blending of bioethanol cannot be achieved without affecting food production in India at the current level of productivity. Moreover, the cost of sugarcane bioethanol production exceeds the social benefits, hence use of sugarcane bioethanol cannot be justified on economic grounds. Molasses, a byproducts of sugar manufacturing, can support up to 5% blending on bioethanol without compromising food production while improving social welfare. Given that first-generation bioethanol has limited scope in the country, India's ambitions to enhance energy security should rely on second-generation bioethanol technologies, which require improvements to become commercially viable.
sugarcane bioethanol
cost-benefit analysis
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Working Paper

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