On December 15, anxious eyes across the globe were fixed on Barack Obama as he nominated the next US Secretary of Energy.

Their anxiousness was not without base, because Obama's decision would have been an important one, given the backdrop of growing concern over energy security and global warming. Obama finally nominated Steven Chu, a Nobel Laureate, to the key post.

Of late, these issues have been drawing a lot of attention from governments, experts, entrepreneurs, and researches alike. As a result, the alternative energy segment is witnessing a lot of activity, with the list of options expanding rapidly, from solar energy and wind power to biofuels and more.

Biofuels technologies are far more complex, and hence focus on viable and innovative technology becomes imperative for any entrepreneur. The key will lie in the structuring of the business model to integrate the supply chain - right from feedstock to contracts for end-products. -Shashank Inamdar MD & CEO, Praj Industries

Many countries are now focusing on biofuels to counter pollution, address global warming, and reduce their dependence on fossil fuels. In the US itself, experts predict that the year 2009 will witness a lot of interest and investments for efforts to develop next-generation biofuels and expand renewable energy sources. Is there an opportunity for Indian entrepreneurs to enter this sector?

The business potential of biofuels in India is huge, and can be expected to grow at a faster pace in the years to come. According to Dr Alok Adholeya, Director, Biotechnology & Management of Bioresources, TERI, "Currently almost 70% of India's crude oil requirement is imported, which is expected to increase to 90% by 2030." This, coupled with the price volatility of oil, which has been fluctuating from the current $40 a barrel to $147 a barrel in the recent past, may lead to biofuels playing an important role in reducing our dependence on imports in future.

The National Biofuels Policy mandates 20% of all diesel and petrol demand to be met by using plant-based rather than fossil-based diesel by 2017. At present India's biofuel production is not even enough to cater to 5% of the demand. Says Deepak Desai of Business Brains Consultants, "Currently, the government has mandated 5% ethanol-doping in nine states, which has not been met due to supply shortage."

The Bioethanol Industry

Ethanol has been produced in India for ages. Molasses, a by-product in sugar manufacturing, is the major feedstock used as raw material. Possibilities are also being explored to use other feedstocks such as sweet sorghum, sugar beet, and maize.

In 2006, India was the fourth largest producer of ethanol, after the US, Brazil, and China. Though India has been producing bio-ethanol in significant quantities, it is being used for the manufacture of beverage and industrial alcohol because of higher returns. This has been a major roadblock in producing fuel-grade ethanol. However, keeping in mind the government mandate and the demand it will create, there is an opportunity for entrepreneurs in entering this sector.

The cost of production of ethanol from molasses hovers around Rs 17 per liter. According to a report by the United Nations Conference on Trade and Development (UNCTAD), the yield of sugarcane in India varies from an average of 77 tons/ha in tropical states to about 52 tons/ha in subtropical ones. About 40 kg of molasses is produced per ton of cane, from which about 10 liters of ethanol can be obtained. If the sugarcane is directly and fully used in ethanol manufacture, the yield is 70 liters per ton. "For a small-scale industry producing 10,000 liters through the molasses route, investment would be around Rs 3 to 4 crore; for a 30,000 liter plant, it would be around Rs 15 crore," says Desai.

Other possibilities that are emerging include the use of residual biomass for producing ethanol - for example, straws and weeds. However, the technology is still in developmental stages.