Experts say ethanol blending may lead to food, water shortages

India's decision to go for 10 per cent ethanol content in petrol has come a month after China banned further expansion of its corn-based ethanol industry because of a radical 43 per cent increase in pork prices over the past year.

The about-turn came in the wake of rising food prices, with prices of corn, China's staple food grain, rising by 30 per cent. The rise has been a side effect of massive diversion of the foodgrain to produce ethanol for blending with petrol.

Experts in India have warned that while ethanol is likely to slightly reduce the CO2 content in air and bring down the fuel import bill, analysts say this may mean less water and more expensive food as large amounts of foodgrain is diverted to produce fuel for cars.

Besides, production of more ethanol means increased demand for sugarcane and hence a huge jump in the consumption of water, besides shifting of focus from foodgrain to sugarcane, experts say.

"It will mean production of a scare resource like oil by using another scarce resource (water)," says Subrato Mandal, senior economist at the National Institute of Public Finance and Policy.