A CII-Rabobank report on biodiesel development says biodiesel as an alternative source of energy holds a significant potential for India in the agriculture sector.

The report biodiesel also will ensure energy security in the country.

"A target to meet 5 per cent of energy needs through biodiesel could generate 2.4 million jobs besides ensuring cultivation of 2.8 million hectares of waste land and an additional combined yearly farm income of $42 billion (Rs 172,000 crore) from the fourth year onwards," the report pointed out.

It said biodiesel initiatives can lead to considerable improvements for the rural population. "Deploying wasteland for biodiesel production in the country thus seems like a win-win situation for both the government and farmers," the report said.

It pointed out that with 7 million hectares, a potential biodiesel production of 7 million tonne could be realised, equal to more than 10 per cent India's projected diesel consumption in 2011-12.

The US Agricultural Department has put India's 2006-07 oilseed production at 29.5 million tonne, which includes rapeseed, soybeans and sunflower seed. India is among the largest soybean producers in the world at 7.3 million tonne.

The report, released on Wednesday in Mumbai, said there is need for a national policy on bio-diesel as current policies are neither long-term nor well defined. Global experience has shown that most successful bio-diesel policies include mandatory blending and tax credits. Since the bio-diesel industry in India is new, there is a need to create a large infrastructure and supply chain, which can cater to the growing demand.

The sector needs more research and development, so as to define benchmarks and best practices. More research needs to be undertaken to define these practices.

There is no established world commodity market for jatropha so a new supply chain from farmer to consumer should be set up. Guaranteed off-take is needed if farmers are to be convinced to grow the plant. Educating farmers on this matter is a must for the growth of the sector. The bio-diesel industry is still in its infancy and will take at least 10 years to mature, the report added.