Depletion of fossil fuels at an alarming rate coupled with ever growing challenges due to anthropogenic induced climate change stress has attracted increasing attention to blending bio-fuels worldwide. India's primary energy use is projected to expand massively to deliver a sustained GDP growth rate of 9per cent through 2031-32. With self sufficiency levels in crude oil a distant dream, there is a growing interest/need in development and commercialization of a bouquet of alternative fuels. In addition to providing energy security and a decreased dependence on oil imports, bio-fuels offer significant benefits such as reduced emission of pollutants and green-house gases. Climate change is one of the most important problems faced around the world and most importantly in developing countries like India. The National Policy on Biofuels sets an indicative target of 20per cent blending of biofuels by 2017 to tackle the twin problem of energy security and climate change. Although biofuels seem to be the most suitable solution, the perceived competition for land and the risk of displacing production of human and animal food pose substantial risk. The objective of this working paper is to review the sustainability of large scale biofuel projects from the existing literature. The review projects a mixed picture about the economic, environmental and social viability of biofuels. The justification of promoting large scale biofuels also hinges to a large extent on the question of how to avoid negative social impacts and how to obtain positive impacts. Though India has scope for developing biofuels for substitution of conventional fuels, review points out that R&D development, suitable policy support and most importantly global market balances are needed for avoiding negative
externalities.