Energy Security, Food Security and Economics of Sugarcane Bioethanol in India

Energy security has been an important global policy issue for more than four decades. Transport biofuels like bioethnol have been receiving increased attention in recent years as a solution to heavy dependence of imported petroleum fuels which brings destabilizing price effects on the economy and cause serious environmental problems like climate change. India’s biofuel policy proposes an ambitious 20% bioethanol standard by 2017. This paper examines the economic feasibility of sugarcane bioethanol in India while considering the food security as a competing policy priority. The analyses show that 20% bioethanol standard cannot be achieved without affecting the food production in India. Moreover, cost of sugarcane bioethanol exceeds the social benefits, hence use of sugarcane bioethanol cannot be justified on economic grounds. Molasses - a by product of sugar manufacturing - can be used to produce transport fuel without compromising food production while improving the social welfare. However, use of molasses bioethanol for transport should not displace its current uses as industrial and potable alcohol to ensure positive net returns.