Industry body Assocham on Friday asked the government to make a policy, which encourages the use of alternative fuels such as cellulosic ethanol and set targets for blending it with petrol in order to reduce dependence on oil imports.
Cellulosic ethanol is a biofuel produced from wood, grasses or the non-edible parts of plants.
As one of the fastest growing economies in the world, India's demand for fuel is rising by five per cent per year and the country imports nearly 70 per cent of its crude oil requirements, putting a huge burden on foreign exchange reserves, it said.
"India can learn from experiences of other countries to boost its ethanol production and cut the high oil imports bill," the chamber said.
India produces only 91.7 million gallons of ethanol in a year using sugarcane.
The US produces 10,600 million gallons of ethanol using corn and has over 53 per cent share in global ethanol production, while Brazil makes 6,578
Assocham said farmers should be encouraged to increase production of sugarcane, sweet sorghum and sugar beet to boost ethanol production in the country.
The government should look at setting up processing plants for biofuel, designing cars suitable for ethanol fuel and levying taxes on gasoline, it added.
It also said efforts should be made for collaborative research with countries like Canada which have made substantial advances in cellulosic technology.
