India, Oct. 28 -- On Monday, the Centre announced amendments to India's motor vehicle rules for the rollout of E100 cars which run entirely on ethanol. To be sure, there is nothing really drastic about the new rules as even the earlier rules allowed for E85 vehicles which use fuel with 85% ethanol blending. The announcement seeks to fill a gap in automobile market amid concerns about the compatibility of cars with blended fuel. The government has denied that such a problem exists. The new "flexi-fuel" vehicle category will give customers an option to consume blended fuel. So far, so good. What our policy makers seem to be missing is the other side of the picture. It is not enough to tweak automobile norms to ensure that cars generating demand for ethanol-based fuel will now be produced in India. What is also needed is careful thought on whether India has the wherewithal to scale up its supply of ethanol for fuel use. Doing so will require diverting crops such as sugarcane, corn, or rice toward ethanol production for fuel blending. This entails diverting production currently used for food (sugarcane or rice) or feed (corn) within the country. The experience so far suggests that the diversion can potentially trigger a supply squeeze on food and feed use if demand for fuel use starts rising. The choice, whether or not we have thought about it carefully, can be between tolerating food inflation and saving foreign exchange spent on procuring imported crude oil. To be sure, there is nothing fundamentally wrong with promoting the idea of fuel blending. But doing this well requires acing both the demand (cars) and supply (agricultural production) side issues....