Biodiesel and India's Rural Economy

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Case Study #7-8 of the Program: ''Food Policy For Developing Countries: The Role Of Government In The Global Food System''


With annual economic growth rates of more than 7 percent and a population of well over a billion, India has a huge amount of global clout, both economically and environmentally. Although this recent economic growth has lifted millions out of dire poverty, millions more remain marginalized from the booming economy, and India will require massive amounts of resources to achieve its goal of reaching the status of a “developed” nation. Moreover, this growth must be achieved sustainably to prevent the short-term impacts from being overshadowed by long-term environmental degradation. Alternative energy sources will play a role in maintaining economic growth while also addressing the growing concerns about sustainability. Biodiesel, a plant-based substitute for fossil diesel, reduces the carbon dioxide, carbon monoxide, and particulates emitted from internal combustion engines. It is a technology that can reduce dependence on oil imports and the negative environmental impacts of burning fossil fuels, while at the same time offering potential growth in the rural economy. The government of India argues that biodiesel production, especially from the planting of Jatropha curcas on degraded or marginal lands, could play a significant role in addressing these economic and environmental concerns while also creating a vibrant new rural industry. A major initiative is currently underway to simultaneously develop the production capacity of inedible oilseeds from Jatropha curcas and the infrastructure required to process the seed oil into biodiesel for use as transportation fuel. Thousands of jobs could be created, and millions of dollars could go to the struggling rural economy. There is little reason to question the continued growth of the oil market, and capturing a share of that market could offer enormous economic benefits to the rural sector. This case presents some of the difficulties and potential pitfalls of achieving those goals. These difficulties include technological and structural issues of production, such as developing the appropriate equipment and infrastructure for oilseed production and expelling, converting the oil to biodiesel, and developing end-user equipment. Ecological issues concern the lack of scientific information on the chosen species, including longterm research on agronomic issues relating to pests and disease, production techniques, and breeding of productive genotypes. Finally, social issues concern the development and implementation of appropriate policies and incentives that protect vulnerable populations from potential harm, in the form of lost labor opportunities, unfamiliar new markets for seed crop sales, and the potential for changing food prices due to displacement of less profitable food crop production. In conclusion, oilseed development policy must take into consideration the production limitations of individual small farmers, while still encouraging the sector to grow large enough to allow for economic production of biodiesel and to make a real environmental impact. Your assignment is to recommend to the government a policy to guide the development of biodiesel that takes into account the interests of the various stakeholder groups.

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11 pp.

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Cornell University Division of Nutritional Sciences

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James Rhoads (2007). Case Study #7-8, ''Biodiesel and India's Rural Economy''. In: Per Pinstrup-Andersen and Fuzhi Cheng (editors), ''Food Policy for Developing Countries: Case Studies.''11 pp.

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