Diverting food products to make biofuels is foolish: Indian finance chief

Yahoo News 26 Mar 08;

Indian Finance Minister P. Chidambaram on Wednesday criticised countries like the US for diverting farm products to produce biofuels, saying this had led to soaring global food prices.

While growing demand was one reason for skyrocketing food prices, the use of agricultural products to make biofuels was another cause, he told a public lecture organised by the Lee Kuan Yew School Public Policy in Singapore.

"It has been estimated that nearly 20 percent of corn grown in the United States is diverted for producing biofuels," he said in his speech to academics, students and diplomats.

"As citizens of the world, we ought to be concerned about the foolishness of growing food and diverting it into fuel."

Chidambaram slammed the "lopsided priorities of certain countries" that produce fuel at a cheaper cost to meet the transport needs of a certain section of their population even if it leads to higher food prices elsewhere.

The price of many food commodities has soared worldwide to record levels over the last year due to booming demand in fast-growing Asian countries as well as the increased use of biofuels.

Present-generation biofuels are derived from food crops such as corn, sugar cane and soybeans.

Biofuels were initially viewed as an environmentally-friendly alternative with no geopolitical risk compared with dirty fossil fuels, but they are now under attack as some unintended consequences emerge.

Speaking at a forum after his speech, the Indian finance chief said countries producing large quantities of food should sell it to the rest of the world at reasonable prices.

"But a very insular selfish approach encourages them to convert food into fuel. I think it is the most foolish thing that humanity can do," he said.

"There are non-food items that can be produced to make biofuels... To convert corn to fuel... I think it's outrageous and it must be condemned."

Chidambaram, who spoke on the challenge of sustaining economic growth amid global uncertainty, said the relentless rise in food and commodity prices have put an "enormous problem" on developing countries.

The price of oil, for example, has risen from 34 US dollars a barrel in 2004 to more than 110 US dollars a barrel recently, he said.

Urea, a fertilizer, cost only 175 dollars per metric tonne in 2004, rising to 288 dollars in April 2007 and 370 dollars as of January this year, he said, adding that the prices of metals and minerals have also risen sharply.

Palm oil cost 471 dollars per metric tonne in 2004, rising to 1,177 dollars by February 2008, he said.

He said organisations such as the Group of 20 biggest economies and the Group of Seven industrialised countries should get together and agree on a band for oil prices to either rise or fall.

"If we are serious about ending poverty, the place to start is to make food and fuel available at reasonable prices," he said.

Referring to the global financial turmoil, Chidambaram said the crisis in risky US home mortgages that triggered the turbulence was due to poor regulation and lax supervision.

"If this had happened in developing countries, we would have been lectured on the virtues of bankruptcy," he said in an apparent dig at the bailout of US financial institutions hit by the turmoil.

"Since this is happening in developed countries, no one pauses to ask whether all the old arguments are not being made to stand on their head."

US biofuel policies 'outrageous'
Today Online 27 Mar 08;

INDIA'S finance minister said yesterday it was "outrageous" for countries like the United States to be turning food into biofuels at the cost of feeding the world's poor, who are already hit by the current surge in oil and food prices.

Mr P Chidambaram said developing economies were shouldering an "enormous burden" from the relentless rise in prices of food and commodities. Some countries like India subsidise food and fuel.

Speaking at a lecture at the Lee Kuan Yew School of Public Policy in Singapore, Mr Chidambaram said the situation was worsened by the diversion of food to produce biofuels in some countries, citing the US as an example, where he said it was estimated nearly 20 per cent of corn goes to making biofuels.

"It is a sign of the lopsided priorities of certain countries that they will resort to measures that will produce fuel at a cheaper cost … even while a larger proportion of the world's population is deprived of food at reasonable prices or, as in the case of some countries, deprived of food altogether," Mr Chidambaram said. "I think it is outrageous and it must be condemned."

Corn, soybeans, sugar cane and other crops are seen as sources of clean and cheap biofuels. This means less grain is available for human consumption, driving up prices for basic foodstuffs. — AP