A Watershed Year for Indian Biofuels: a Biofuels Digest special report

By Joelle Brink, Biofuels Digest special correspondent

Despite a year of ups and downs, false starts and surprises out of left field, Indian biofuels finally came of age in 2008. The biodiesel R&D team from Perambur Locomotive Works that put Jatropha on the map back in 2003 finally received government funding for their dream of running the world’s largest railroad on weeds and restaurant grease. D1 Williamson Magor sent the first shipment of Jatropha oil to market in Europe, and Tata Chemicals, part of the powerful industrial conglomerate headed by Ratan Tata, built the first of its projected sweet sorghum cellulosic ethanol distilleries in Maharashtra state.

It was a year of profound transition, especially in scale, from the lab and the cottage to major industry. Like most transitions, it was both rocky and painful. The Indian government, which had hoped to meet its ethanol target by turning the nation’s sugar surplus into ethanol, was stymied first by the rise in commodity prices, and then by an abrupt fall in the oil price which made ethanol from sugar unsustainable. And after being urged by the government to turn their sugar into ethanol, the sugar mill owners found themselves with large ethanol stocks on hand and no market.

Meanwhile Bihar state, where most of the sugar mills are located, had obtained private investment in a statewide plan for regional distilleries producing ethanol along with electric power from waste heat and biomass. The plan will ultimately create 50,000 direct jobs and some 400,000 indirect jobs, as well as electrifying rural communities. However, until the new distilleries are up and operating they will not generate income for the former sugar mill owners, their workers, and other Biharis included in the plan. Then there is the problem of the global recession and its impact on fuel prices, including ethanol. Indians have relatively free access to their political leaders, so a revised marketing or compensation scheme will likely to be worked out, but the larger economic issues may remain.

While the price of oil is low, the Indian government is considering complete elimination of transportation fuel subsidies, which would allow prices to rise to a level where biofuels are once again competitive. Aid would then be targeted to families and communities in need, rather than to the oil marketing companies.

Surprisingly, despite all the turmoil the year 2008 has brought, biofuel investment has never been has never been stronger. The national and state governments, the Tatas, D1 Williamson Magor, GM and other foreign investors are putting money on the table, confident in the robust Indian economy and renewed consumer spending once the international meltdown begins to fade. Earlier investors are now beginning to see returns on investments made when oil was cheap. More efficient feedstocks like algae are under study in labs around the country, and biofuels now look very much like a growth industry.

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