Biofuel Industry Opportunities

An Expert's View about Energy in India

Last updated: 23 Feb 2011

Summary


The Indian biofuels industry is seeking inward investment as well as transfer of technology. There is a modest opportunity for U.S. companies in the Indian biofuels market. While India has installed capacity to produce half the quantity (about 1,900 million liters) of ethanol domestically, the balance would have to be imported. On the other hand, the Indian biodiesel industry in India is still in its infancy with no notable achievement.

India is closely following the trend of global investment in biofuels, which rose from $5 billion in 1995 to $38 billion in 2005 and is expected to have topped $100 billion in 2010.


Market Overview

Biofuels is among alternate fuels that have caught the attention of policy makers and entrepreneurs in recent years. India is the world’s sixth largest consumer of energy. Its energy demand is growing at an annual rate of 4.8 percent. The demand for refined products is forecast to rise at a higher rate. The demand for diesel, for instance,
is projected to increase at an annual rate of 5.8 percent by 2030. India imports about 75 percent of its annual crude oil requirement. Dependence on imported fuels leaves India vulnerable to possible disruptions in supplies which may result in physical hardships and economic burdens. The Government of India (GOI) has ambitious
capacity expansion and investment plans to provide a reliable energy supply through a diverse and sustainable fuel mix.

The GOI recently mandated the blending of 10 percent fuel ethanol in 90 percent gasoline. This mandate has generated an approximately 3.6 billion-liter demand for fuel ethanol creating a tremendous opportunity for the fuel ethanol industry seeking to expand its investments globally. The demand for diesel is five times higher than the demand for petrol in India. But while the ethanol industry is somewhat mature, the biodiesel industry is still in its infancy. The government has formulated an ambitious National Biodiesel Mission to meet 20 per cent of the country’s diesel requirements by 2011-2012.

Biofuels are going to play an extremely important role in meeting India’s energy needs. The country's energy demand is expected to grow at an annual rate of 4.8 per cent over the next couple of decades. The Indian biofuel market has been consistently witnessing growth and developments for past few years. The GOI is injecting huge
amounts of resources into the development of this sector in an attempt to reduce dependency on imported oil.  High volatile oil prices and production levels have further highlighted the need for continuous developments of this sector.

A recent economic analysis indicates that ethanol from sugarcane and biodiesel from Jatropha Curcas can be manufactured at under $0.47 per liter. Current production cost of petrol and diesel from crude is $0.46 per liter, and with crude oil prices on an upward swing, the production costs of ethanol and biodiesel compare favorably
with those of petrol and diesel.

 

Read the full market research report  


Posted: 26 January 2011, last updated 23 February 2011

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