This is classical import substitution (as opposed to export...

This is classical import substitution (as opposed to export promotion) practiced by many developing countries. Normally it is restricted to domestic entreprises as it essentially involve distorting pricing mechanisms to bolster profits of firms in the targeted sector tp encourage rapid output expansion. In this case, the 20% mandatory target is GREAT news as, given supply is likely to be short, blending companies will be required to pay whatever is necessary. Te poor Indian consumer will pick up the bill (but will probably compensated via some other mechanism). While you can debate the economic merits of such strategies, I think it is safe to say they generally benefit the capitalists in the chosen sector. The talk of direct subsidies is even more reason to be hopeful.

I wouldn't assume that Valero doesn't understand the Indian political economy very well. They have a track record of investing early in new technologies and would have employed staff to do the ground work and understand the local context before making investments. Somehow I think the idea of shipping Jatropha half-way around the world sounds less attractive than receiving a high guaranteed price locally. The profits, once earned, can always be repatriated. Valero may well be trying to get on the gravy train in what could be a booming market for them. I don't know. this for sure, but I think we should operate under the assumption that they are a little be more informed than us.