India’s energy policy is up a gum tree (as the Australians would say) and it is climbing higher up it all the time. Bereft of ideas or technological expertise of their own, the government’s planners are being led by industrialists into making policies that may enrich some of them individually, but will fail to make any dent on the coming oil and global warming crunch, and leave this country worse off than before. 
An obvious example is its determination to  progressively replace gasoline with ethanol. In 2002, the government introduced a policy to replace five per cent of gasoline with ethanol in nine states. Two years ago, it extended the policy to the entire country. To encourage this, seven states reduced their hefty inter-state “import” duties by a third to a 100 per cent (significantly these did not include Gujarat, Maharashtra, Tamil Nadu, West Bengal or Punjab).
The results of this exercise have so far been laughable. In November 2006, the three State Owned Oil Marketing companies had contracted to buy 1176 million litres of methanol over the next three years. But in the first nine and a half months, by August 15, they were able to buy only 86 million litres. At this rate they may not be able to procure even half the targeted amount.
But Delhi’s bureaucracy remains undaunted by this initial failure, and is considering raising the ethanol ratio to ten per cent in October 2008. In theory it should be possible to accommodate the extra demand. The country has about 300 distilleries producing around 2,900 million litres of ethanol. Of this about 1500 million litres are needed by industry and the beverages industry, leaving just about enough for 10 per cent doping of Gasoline with ethanol in 2008-9.  But if that is so then why is even 5 per cent proving so difficult to achieve.
What I would like to know is why are we harping on ethanol at all. What will doping gasoline by 10 per cent of ethanol achieve for the nation? By 2030, the demand for diesel will have risen from 40 to about 130 million tonnes and for gasoline from 8.65 to about 35 million tonnes. By 2030 the demand for gasoline  will have risen from 8.65 to about 35 million tonne. Even if ethanol meets a tenth of this demand India’s demand for gasoline will still almost quadruple.  And by 2030 there will not be much oil left in the world.
So why is Delhi persisting with ethanol? The answer may lie in the experience of Brazil. Brazil produces about the same amount of sugarcane as India but devotes 55 per cent of the crop to producing ethanol. This gives the sugar manufacturers a god-given opportunity to stabilise and assure a high level of profit by shifting production from sugar to ethanol and back according to shifts in world demand and prices. Indian manufacturers have also been victims of cyclical shortages and gluts, so ethanol could give them a similar reprieve. What is more, stable profits for manufacturers could translate into stable prices for farmers.
The only catch is that once sugarcane becomes a key raw material for the transport industry the area under it will expand and expand. Not only will this drive other crops out of the fields, and replace a four month sowing and harvesting cycle with a 12 to 16 month cycle ( thereby reducing the demand for agricultural labour by at least half)  but it is also the most water hungry crop in the world.
While Delhi plunges ahead on this futile but also somewhat suicidal path, an alternative way to replace oil-based fuel with renewable transport fuel which has none of these drawbacks, is not even being talked about let alone explored. This is to forget ethanol and opt for methanol as the replacement for gasoline.
Let us look at a few facts: Unlike ethanol, methanol can be made from agri-resides and waste, so it requires no diversion of land from its present uses and no decline in demand for labour. Two in particular stand out. These are Black Liquor, a particularly noxious waste product of the paper industry which is poisoning our rivers, and bagasse, currently burnt  as an inefficient fuel in the boilers of sugar mills, for want of a more remunerative end-use.
India produces 6.3 million tonnes of paper. At a rough estimate this requires about 15 million tonnes of pulp, of which about a third comes from recycled paper. The remaining two thirds generates about 18 million tonnes of dried 'black liquor' Firms in both Sweden and Germany have developed tried and tested semi-commercial scale technologies that can  convert this into about 12 million tonnes of methanol. That is in energy terms about 10 per cent more than the entire current consumption of gasoline. Both projects have produced methanol at 35 to 39 US cents for the  equivalent of a litre of gasoline. This is below the current ex-refinery cost of gasoline.
With a few modifications the same technology can produce diesel. The estimated payback period for a medium sized commercial plant is 3.1 years when used to produce methanol and 4.1 years when producing diesel. But by far the best raw material is bagasse. India's 322 million tonne sugarcane crop leaves a residue of more than 200 million tonnes of bagasse. This is capable of yielding 500 million tonnes of methanol, even if it is first used for making paper pulp.
There are about active paper mills and around 450 sugar mills that could modify their technologies  to produce  methanol from bagasse instead of ethanol from molasses as they are being urged to do. There are also 132 small paper mills that pour their black liquor straight into the rivers. Between these India's entire transport fuel need for the next 15 years could easily be met by the currently available agro-resides.