In a bid to substitute use of greenhouse gas-emitting fossil fuels, biofuels or fuel processed from plants is catching attention of producers as well as investors. There are two kinds of biofuel – ethanol, processed from sugarcane or corn, and biodiesel, made from biomass.

India’s leading investors Rakesh Jhunjhunwala, C Sivasankaran, Vinod Khosla are betting on bio-fuel as it may become a viable substitute to use of natural fuel.

India’s Warrant Buffet, Rakesh Jhunjhunwala has a 10% stake in bio-fuel technology provider and equipment maker, Praj Industries and recently invested in Hyderabad-based bio-fuel firm Nandan Biometrics.

Sun Microsystem’s founder, Vinod Khosla, is a leading bio-fuel investor and is scouting for investments in India and Brazil. India’s biggest deal man, C. Sivasankaran has set up an ethanol producing company in North Carolina.

Apart from these leading research analysts and PE investors have invested in listed and unlisted biofuel companies in India.

Meanwhile, Tata Chemicals has expressed its interest to foray into bio-diesel production through cultivation of jatropha, which is a non-edible tree crop grown on wasteland. It also plans to cultivate shorgam for making ethanol.

The availability of natural resources, cost-effective engineering and high cost of importing fuels are an added advantage for growth of bio-fuel in India. About 14% of India’s land is wasteland which is enough to meet the requirements of bio-diesel for mixing up to 15% in diesel.

Mobile operator Idea Cellular has also powered its four mobile base stations locally produced biofuels. This could also be replicated elsewhere as it is a cost-effective way of extending mobile coverage in rural India.

But biofuels cannot substitute fossil fuels; but they can make a difference as can be seen in Europe where it is mandatory to use 6% of fuel in vehicles as biodiesel by 2010 and 10% by 2020. But for Indian specific case, use of bio-fuel should be encouraged more as an energy alternative though providing electricity to homes, fuel for cooking and to run vehicles. It would then bring out the real economic and social benefits of biofuels.