US-India talks: Food and fuel could turn into a volatile mix

Should New Delhi shield biofuels and concede space on GM crops?

- ANDY MUKHERJEE

From dismantling its protectionist ‘inspector raj’ to cutting duties on Tesla cars and treating Amazon and Walmart on par with domestic retailers, India is under pressure on many fronts in its trade talks with the U.S. While concessions in several of these areas will be beneficial to Indians, the sticking points will be food and fuel.

Take ethanol blending in petrol. New Delhi has, over the past quarter century, modeled its intercity transport network on America’s by centering it on highways, rather than rail. To manage the pollution from cars and trucks, and to reduce dependence on imported fossil fuels, the government has mandated the addition of 20% bio-ethanol in petrol.

But the programme has a politically important third goal: Enhancing local farm income with the creation of a market in agricultural surplus and byproducts. This is where trade interests will collide. American farmers are allowed to sell corn-based ethanol to India for industrial use, but not for blending in transport fuel. Washington views this as an unfair non-tariff barrier.

Prime Minister Narendra Modi’s administration is reviewing a U.S. request to lift the restrictions, Bloomberg News reported this month.