Can India Meet Biofuel Policy Targets? Implications for Food and Fuel Prices

This paper analyzes the cost-effective mix of feedstocks to meet the 20% blend mandate in 2017 and its implications for food prices in India given alternative uses for sugarcane and molasses to produce sugar and alcohol, respectively. Meeting the blend mandate entirely using molasses would require increasing production more than 180% by 2017 compared to the observed level in 2008 and diverting all of it to ethanol production while meeting it entirely using sugarcane would require using 26% of the sugarcane produced in 2008 for ethanol production. We analyze the implications of biofuel production for the allocation of land for food and fuel production, the trade-offs posed with food and alcohol production and the effects of ethanol production on prices of key food crops and alcohol. The cost-effective mix of these feedstocks will depend on several factors, including the demand for sugar, alcohol and other crops, the value of molasses and sugarcane in alternative uses, the ease with which land can be converted across uses and the costs and efficiency of converting molasses and sugarcane to ethanol. Reprinted by permission of the American Agricultural Economics Association