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By Dr. Jagdish Sheth

A recent interview by Nidhi Nath Srinivas with prominent Paris-based broker Jonathan Kingsman for The Economic Times had the following excerpt.

“Bio-fuels are suddenly fashionable. Does ethanol have a future in India?  
I believe more than Brazil, it is India that has a future in ethanol, mainly because it is derived from a by-product, molasses, instead of cane juice. In Brazil, ethanol is part of a debate whether the country should use sucrose, which is in demand, to make food or as a fuel. In India that debate is irrelevant.  
In fact, as India’s sugar production increases, the output of molasses will increase too. Instead of dumping that in the world market, it would be more profitable to make ethanol out of it.  
Has India been wise in instituting an ethanol program?  
You have to look at potential outcomes before you mandate anything. If the price of crude oil drops or there is a drought, ethanol will become an extremely expensive alternative that may need subsidy to survive. That would force India to import ethanol.

Would you say that the risks in being import dependent in bio-fuels is larger than those associated with crude oil?  
Undoubtedly. Oil is fungible. It can come from any origin and the only risk is price. Bio-fuels are agri-produce, dictated by weather and crop cycles. So the risks of short supply and price swings are much higher.  
Yet so many countries are now pushing bio-fuels!  
The problem is that it is hard to find any negatives about bio-fuels. They are Green, farmer-friendly, appeal to every politician’s desire to reduce import dependency, allow governments to give subsidy to growers of oilseeds and sugarcane, and generate industrial investment. All this makes bio-fuels very palatable to everyone across the political and economic spectrum.”

While the debate goes on about the India-US nonproliferation nuclear treaty, the fact remains that today with the current administration’s plummeting popularity, any initiative presented by them is not going to have a smooth sailing.

Meanwhile India’s energy needs are sky rocketing because of having moved to the manufacturing side. It needs more energy sources to sustain its economic growth.  Economic growth is vital for India to be integrated into global economy. Therefore, India will not rely on any one dominant energy service but will be agnostic whether it is coal, LNG oil, nuclear, wind or agro-fuel.

In my view, the more the delay in the US-India nuclear deal, the more India will focus on other energy sources.

The most likely alternatives to traditional energy sources such as oil and coal, is likely to be agro fuel (ethanol).  India has an abundance of agricultural byproducts; technology is relatively inexpensive to invest; distribution is easier because all four oil retailers in India are public sector units (PSUs), and it fits with India’s renewal focus on the agriculture sector.

I think India will emerge among the leaders in the world as far as innovations in agro-fuel, in the next ten years.

Vinod Khosla, who created the IT revolution and made BPO a household name, is now creating a new wave of opportunity. He has now invested in bio refineries, using sustainable crops or agricultural waste to produce fuel. In India a lot of VC funding is being invested in alternative energy like agro-fuel and windmills. So agro-fuel is indeed going to be a key player in India’s economic growth and of the world.

DR. JAG SHETH is a renowned scholar and world authority in the field of marketing. His insights on global competition, strategic thinking and customer relationship management are considered revolutionary.

Dr. Sheth is the Charles H. Kellstadt Chair of Marketing in the Goizueta Business School at Emory University. Prior to this, he was a distinguished faculty member at the University of Southern California, the University of Illinois, Columbia University and the Massachusetts Institute of Technology.

Professor Sheth has published more than 200 books and research papers in different areas of marketing and business strategy. Many of these are considered classic references.

Disclaimer: The views and opinions expressed in these columns are solely those of the writers and do not necessarily represent those of the editor/publisher.


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