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Bio-fuels are being viewed from the multi-dimensional prospective of depleting fossil fuels resources and promoting environmental health, energy security, support to agricultural sector and rural employment. Increased attention is being paid for the use of bio fuels production and their utilization in the transport sector. India being a major agricultural based economy with large scale dependence on imported crude oil will certainly benefit through the increased use of agricultural resources for producing bio fuels which could be blended with motor gasoline and diesel fuel. With high volatility in international oil prices, it is important that we must reduce our dependence on imports of oil for energy security of the country. Based on the success of the pilot projects started earlier with 5 % ethanol in gasoline, Government of India has already decided to blend 5 % of ethanol in gasoline on a commercial scale.