National Policy

Government of India
Ministry of New & Renewable Energy

National Policy on Biofuels

 

Block No. 14, C.G.O. Complex
Lodhi Road
New Delhi- 110003

National Policy on Biofuels

 

1.0       PREAMBLE

1.1 India  is  one  of  the  fastest  growing  economies  in  the  world.    The Development  Objectives  focus  on  economic  growth,  equity  and  human  well being.  Energy is a  critical input for socio-economic development.   The energy strategy of a country aims at efficiency and security and to provide  access which being    environment friendly and  achievement of an optimum mix of primary resources for energy generation.   Fossil fuels will continue to play a dominant role in the energy scenario in our country in the next few decades.  However, conventional or fossil fuel resources are limited, non-renewable, polluting and, therefore,  need  to  be  used  prudently.  On  the  other  hand,  renewable  energy resources are indigenous, non-polluting and virtually inexhaustible.   India is endowed with abundant renewable energy resources.   Therefore, their use should be encouraged in every possible way.

1.2 The crude oil price    has been fluctuating in the world market and has increased significantly in the recent past, reaching a level of more than $ 140 per barrel. Such unforeseen  escalation  of crude  oil prices is severely  straining various  economies  the  world  over,  particularly  those       of  the  developing countries.   Petro-based oil meets about 95% of the requirement for transportation fuels, and the demand     has been steadily rising.     Provisional  estimates have indicated crude oil consumption    in 2007-08 at about 156 million tonnes.    The domestic crude oil is able to meet only about 23% of the demand, while the rest is met from imported crude.

1.3 India’s energy security  would remain vulnerable  until alternative fuels to substitute/supplement  petro-based fuels  are    developed   based on indigenously produced  renewable feedstocks.  In biofuels,  the country has a ray of hope   in providing energy security.  Biofuels are   environment friendly fuels and  their utilization      would  address    global concerns about containment of  carbon emissions.  The transportation sector   has been identified  as  a  major polluting sector.     Use of biofuels have, therefore, become compelling in view of the tightening automotive vehicle emission standards to curb air pollution.

1.4 Biofuels are derived from renewable bio-mass resources and, therefore, provide  a  strategic  advantage   to  promote  sustainable   development   and  to supplement conventional energy sources in meeting the rapidly increasing requirements for transportation  fuels associated with high economic growth, as well as in meeting the energy needs of India’s vast rural population.  Biofuels can increasingly satisfy these energy needs in an environmentally benign and cost- effective  manner  while  reducing  dependence  on  import  of  fossil  fuels  and thereby providing a higher degree of National Energy Security.

1.5 The growth of biofuels around the globe is spurred largely by energy security and environmental concerns and a  wide range of market mechanisms, incentives  and  subsidies  have  been  put  in  place  to  facilitate  their  growth. Developing countries, apart from these considerations, also view  biofuels as a potential means to stimulate rural development and   create employment opportunities.    The  Indian  approach  to biofuels,    in particular,    is somewhat different to the current international approaches which could lead to conflict with food security.   It is based solely on non-food feedstocks to be raised on degraded or wastelands that are not suited to agriculture, thus avoiding a possible conflict of fuel vs. food security.

1.6 In the context of   the International perspectives and National imperatives, it  is  the  endeavour   of  this  Policy  to  facilitate   and  bring  about   optimal development and utilization of indigenous biomass feedstocks for production of biofuels.  The Policy also envisages development of the next generation of more efficient biofuel conversion technologies based on new feedstocks.   The Policy sets out the Vision,  medium term Goals,  strategy and    approach to biofuel development,  and proposes a framework  of technological,  financial and institutional interventions and enabling mechanisms.

2.0 THE VISION AND GOALS

2.1 The Policy aims at mainstreaming of biofuels and, therefore, envisions a central  role for it in the  energy   and transportation  sectors  of the  country  in coming decades.     The Policy will bring about accelerated development and promotion of the cultivation, production and use of biofuels to increasingly substitute petrol and diesel for transport and be used in  stationary and other applications,  while contributing  to energy  security,  climate  change  mitigation, apart  from  creating  new  employment  opportunities  and  leading  to environmentally sustainable development.

2.2 The Goal   of the Policy is   to ensure that a minimum level of biofuels become readily available in the market to meet the demand at any given time. An indicative target of 20% blending of biofuels, both for bio-diesel and bio-ethanol, by  2017  is  proposed.  Blending  levels  prescribed  in  regard  to  bio-diesel  are intended  to be recommendatory  in the near term.   The blending  level of bio-ethanol has already been made mandatory, effective from October, 2008, and will continue to be mandatory leading upto the indicative  target.

3.0 DEFINITIONS AND SCOPE

3.1 The following definitions of biofuels shall apply for the purpose of this

Policy:

  1. ‘biofuels’ are   liquid or gaseous fuels produced from biomass resources and used in place of,  or in addition to,  diesel, petrol or other fossil fuels for transport, stationary, portable and other applications;
  2. ‘biomass’ resources are   the biodegradable  fraction of products, wastes and residues from agriculture, forestry and related industries   as well as the biodegradable fraction of industrial and municipal wastes.

3.2 The scope of the Policy encompasses  bio-ethanol,  bio-diesel  and other biofuels, as listed below:-

  1. ‘bio-ethanol’: ethanol produced from biomass  such as sugar containing materials,  like  sugar  cane,  sugar  beet,  sweet  sorghum,     etc.;  starch containing materials such as corn, cassava, algae etc.; and,  cellulosic materials such as bagasse, wood waste, agricultural and forestry residues etc. ;
  2. ‘biodiesel’: a methyl or ethyl ester of fatty acids produced from vegetable oils, both edible and non-edible, or animal fat of diesel quality; and , iii.     other biofuels: biomethanol, biosynthetic fuels etc.

4.0   STRATEGY AND APPROACH

4.1 The focus for development of biofuels in India will be to utilize waste and degraded forest   and non-forest lands only   for cultivation   of shrubs and trees bearing non-edible oil seeds for production of bio-diesel.  In India, bio-ethanol is produced mainly from molasses, a by-product of the sugar industry.   In future too, it would be ensured that the next generation of technologies is based on non- food feedstocks.   Therefore, the issue of fuel vs. food security is not relevant in the Indian context.

4.2 Cultivators,  farmers,  landless  labourers  etc.    will  be  encouraged  to undertake plantations that provide the feedstock for bio-diesel and bio-ethanol. Corporates     will also be   enabled to   undertake   plantations   through contract farming by involving farmers, cooperatives and Self Help Groups etc. in consultation  with Panchayats,  where necessary.     Such cultivation  / plantation will  be supported through a Minimum Support Price for the non-edible oil seeds used to produce bio-diesel.

4.3 In view of the current direct and indirect subsidies to fossil fuels and distortions in energy pricing, a level playing field  is necessary for accelerated development and utilization of biofuels to subserve the Policy objectives. Appropriate financial and fiscal measures  will  be considered from time to time to support    the development and promotion of biofuels and their utilization in different sectors.

4.4 Research, development and demonstration will be supported to cover all aspects from feedstock production and biofuels processing for various end-use applications.    Thrust  will  also  be given  to development  of second  generation biofuels  and other new feedstocks  for  production of  bio-diesel and bio-ethanol.

5.0 INTERVENTIONS AND ENABLING MECHANISMS Plantations

5.1 Plantations of trees bearing non-edible oilseeds will be taken up on Government/community  wasteland, degraded   or fallow land  in forest and non- forest areas.    Contract farming   on   private wasteland could also be taken up through  the     Minimum  Support  Price  mechanism  proposed  in  the  Policy. Plantations on agricultural  lands  will  be discouraged.

5.2 There are over   400 species of trees bearing   non-edible oilseeds in the country. The potential of all these species will be exploited,  depending on their techno-economic viability for production of biofuels. Quality seedlings would be raised   in the nurseries of  certified institutions / organizations identified by the States for distribution to the growers and cultivators.

5.3 In all cases pertaining to land use for the   plantations,   consultations would be undertaken  with the local   communities  through Gram   Panchayats/ Gram Sabhas, and with Intermediate Panchayats and District Panchayat where plantations   of non-edible oil seed bearing trees and   shrubs     are spread over more than one village  or  more  than  one block/ taluk. Further, the provisions of PESA would be respected in the Fifth Schedule Areas.

5.4 A  major  instrument  of  this  Policy  is  that  a  Minimum  Support  Price (MSP) for oilseeds should be announced and implemented with a provision for its periodic revision so as to ensure a fair price to the farmers.    The details about implementation  of the MSP mechanism will be worked out carefully after due consultations  with  concerned  Government  agencies,  States  and  other stakeholders.   It will then be considered by the   Biofuel Steering Committee and decided by the National Biofuels Co-ordination Committee proposed to be set up under this Policy.  The Statutory Minimum Price (SMP) mechanism prevalent for sugarcane procurement will also be examined for extending such a mechanism for oilseeds to be utilized for production of bio-diesel by the processing units. Payment  of  SMP  would  be  the  responsibility  of  the  bio-diesel  processors. Different levels of Minimum Support Price for oilseeds has already been declared by certain States.

5.5 Employment provided in plantations of  trees and shrub  bearing non- edible oilseeds  will  be made eligible for coverage under the National Rural Employment Guarantee Programme (NREGP).

Processing

5.6 Ethanol is mainly being produced in the country at present from molasses, which  is  a  by-product  of  the  sugar  industry.    5%  blending  of  ethanol  with gasoline  has already been taken up  by the Oil Marketing Companies (OMCs)  in 20 States and 4 Union Territories.   10% mandatory blending of ethanol  with gasoline   is to become effective from October, 2008 in these States. In order to augment  availability  of  ethanol  and  reduce  over  supply  of  sugar,    the  sugar industry has   been permitted    to produce ethanol directly from sugarcane juice. The  sugar  and  distillery   industry   will  be  further  encouraged   to  augment production of ethanol to meet the  blending requirements  prescribed from time to time,   while ensuring that this does not in any way create supply constraints in production of sugar or availability of ethanol for industrial use.
5.7 Setting up of  processing units by industry  for  bio-oil expelling/extraction and transesterification for production of bio-diesel will be encouraged. While it is difficult to exactly specify the percentage of bio-diesel to be blended with diesel in view of the uncertainty in the availability of bio-diesel at least in the initial stages, blending will be permitted upto   certain prescribed levels,   to be recommendatory initially and made mandatory in due course.  Gram/Intermediate Panchayats would also be encouraged to create facilities at the village  level for extraction of bio-oil, which could then be  sold to bio-diesel processing units.

5.8 The  prescribed  blending  levels  will  be  reviewed  and    moderated periodically  as per the availability of bio-diesel  and bio-ethanol.    A National Registry of feedstock availability, processing facilities and offtake   will be developed and maintained to provide necessary data for such reviews with a view to avoid mismatch  between supply and demand.

5.9 In order to take care of fluctuations in the availability of biofuels,  OMCs will  be permitted to bank the surplus  quantities left after  blending of bio-diesel and bio-ethanol  in a particular year,    and  to carry it forward to the subsequent year when there may be a shortfall in their availability to meet the prescribed levels.

5.10 The  blending  would  have  to    follow    a  protocol  and  certification process,  and  conform  to  BIS  specification  and  standards,  for  which     the processing industry and OMCs  would need to  jointly set up an  appropriate mechanism  and the required facilities.   Section 52 of the Motor Vehicles  Act already  allows  conversion  of an existing  engine  of a vehicle  to use  biofuels. Engine manufacturers would need to suitably modify the engines to ensure compatibility with biofuels, wherever necessary.

Distribution & Marketing of Biofuels

5.11 The responsibility of    storage, distribution and marketing   of biofuels would  rest with OMCs.  This shall be carried out  through their existing  storage and distribution infrastructure and marketing networks, which may be suitably modified or upgraded  to meet  the requirements  for biofuels.

5.12 In  the  determination of bio-diesel purchase price, the entire value chain comprising  production  of  oil  seeds,  extraction  of     bio-oil,  its  processing, blending, distribution and marketing  will have to be  taken into account.  The Minimum Purchase Price (MPP)  for  bio-diesel by the OMCs will   be linked to the prevailing retail  diesel price. The MPP for  bio-ethanol,  will   be  based on the actual cost of production and import price of bio-ethanol. The MPP, both for bio-diesel and bio-ethanol   will be  determined   by the  Biofuel Steering Committee and decided by the National Biofuel  Coordination Committee. In the event of diesel or petrol price falling below the MPP for bio-diesel and bio- ethanol,  OMCs will  be duly  compensated  by the Government.

Financing

5.13 Plantation of non-edible oil bearing plants,   the setting up of   oil expelling/extraction  and  processing    units    for  production  of  bio-diesel  and creation  of   any new     infrastructure  for   storage  and distribution    would  be declared as a priority sector for the purposes of lending by financial institutions and banks.   National Bank of  Agriculture  and Rural Development (NABARD) would provide re-financing towards  loans to farmers for plantations.        Indian Renewable  Energy  Development  Agency     (IREDA),  Small  Industries Development  Bank of India   (SIDBI) and other financing agencies  as well as commercial banks  would  be actively involved in providing finance for various activities under the entire biofuel value chain, at different levels.

5.14 Multi-lateral and bi-lateral funding  would be  sourced, where possible for biofuel development. Carbon financing opportunities  would also be explored on  account  of   avoidance  of CO2  emissions  through    plantations  and use  of biofuels for various applications.

5.15 Investments and joint ventures   in the biofuel sector are proposed to be encouraged.   Biofuel technologies  and projects would be allowed 100% foreign equity  through  automatic  approval  route  to  attract  Foreign Direct Investment (FDI),  provided biofuel is for domestic use only, and not  for export. Plantations would  not be open for FDI participation.

Financial and Fiscal Incentives

5.16 Financial incentives,  including subsidies and grants,   may be considered upon merit for   new and second generation feedstocks;   advanced technologies and conversion processes; and,   production units based on new and second generation feedstocks. If it becomes necessary, a National Biofuel Fund could be considered for providing such financial incentives.

5.17 As biofuels  are  derived from renewable biomass resources they  will be eligible for various fiscal incentives  and concessions  available to  the New  and Renewable Energy Sector from the Central and State Governments.

5.18 Bio-ethanol already enjoys   concessional excise duty of 16% and bio- diesel  is exempted  from excise  duty.   No other Central  taxes and duties   are proposed to be levied on bio-diesel and bio-ethanol. Custom and excise duty concessions would   be provided   on   plant and machinery   for     production of bio-diesel  or bio-ethanol, as well as for  engines run on biofuels for transport, stationary and other applications, if these are not manufactured indigenously.

Research & Development and Demonstration

5.19 A major thrust   would   be   given through this   Policy to Innovation, Research & Development and Demonstration in the field of biofuels. Research and Development will focus on  plantations,   biofuel processing and production technologies,   as  well   as  on  maximizing   efficiencies   of   different   end-use applications and utilization of by-products.   High priority will be accorded to indigenous  R&D  and  technology  development  based  on  local  feedstocks  and needs, which  would be benchmarked with international efforts and patents would be   registered, wherever possible. Multi-institutional, time-bound research programmes with clearly defined goals and milestones would  be developed and supported.

5.20 Intensive R&D work  would be undertaken  in the following areas:

(a) : Biofuel feed-stock production based on sustainable biomass with active involvement  of  local  communities  through  non-edible     oilseed  bearing plantations on wastelands to include   inter-alia production and development   of quality  planting  materials  and  high  sugar  containing  varieties  of    sugarcane, sweet sorghum, sugar beet, cassava, etc.

(b) : Advanced  conversion  technologies  for   first  generation    biofuels  and emerging technologies for  second generation   biofuels  including conversion of ligno-cellulosic  materials to ethanol   such as   crop residues, forest wastes and algae, biomass-to-liquid (BTL) fuels, bio-refineries, etc.

(c) : Technologies for   end-use applications, including modification   and development of engines  for the  transportation   sector based on a large scale centralized approach,   and for stationary applications   for motive power and electricity production based on a  decentralized approach.

(d) : Utilisation    of  by-products  of  bio-diesel  and  bio-ethanol    production processes such as oil cake, glycerin,  bagasse,  etc.

5.21 Demonstration Projects will be set up  for biofuels,  both for  bio-diesel and bio-ethanol    production, conversion and applications based on  state-of-the- art technologies through Public Private Partnership (PPP).

5.22 For R&D and demonstration projects,   grants would be provided to academic institutions, research organizations,  specialized centers    and industry. Strengthening of existing R&D   centers and setting up of specialized centers in high technology areas will also be considered.  Linkages would be established between the organizations / agencies   undertaking technology development and the user organizations. Transfer of know-how would be facilitated to industry. Participation   by  industry   in  R&D  and  technology   development will  be encouraged with  increased investment  by industry with a view to achieve global competitiveness.

5.23 In regard to Research and Development in the area of biofuels, a Sub- committee   under  the  Biofuel  Steering  Committee   proposed  in  this  Policy comprising Department of Bio-Technology, Ministry of Agriculture, Ministry of New and Renewable Energy and Ministry of Rural Development    would  be constituted,  led  by  Department  of  Bio-Technology  and  coordinated  by  the Ministry of New and Renewable Energy.

6.0 QUALITY STANDARDS

6.1 Development of test methods, procedures and protocols would be taken up on priority alongwith introduction of standards and certification for different biofuels and end use applications.     The Bureau of Indian Standards (BIS) has already  evolved  a  standard    (IS-15607)  for  Bio-diesel  (B  100),  which  is  the Indian  adaptation  of  the  American  Standard    ASTM  D-6751  and  European Standard EN-14214.     BIS has also published IS: 2796: 2008 which covers specification for motor gasoline  blended with 5% ethanol and motor gasoline blended with 10% ethanol.

6.2 The Bureau of Indian Standards  (BIS) would review and update the existing standards, as well as develop new standards in a time-bound manner for devices and systems for various end-use applications for which standards have not yet been prepared, at par with international standards.   Guidelines for product performance and reliability would also be developed and institutionalized in consultation with all relevant stakeholders. Standards would be strictly enforced and proper checks would be  carried out  by a designated  agency  on the quality of the biofuel being supplied.

7.0 INTERNATIONAL COOPERATION

7.1      International scientific and technical cooperation in the area of biofuel production, conversion and utilization will be established in accordance with national priorities and socio-economic  development  strategies and goals. Modalities of such cooperation may include joint research and technology development,  field  studies,  pilot  scale  plants  and  demonstration  projects  with active   involvement   of   research   institutions   and   industry   on   either   side. Technology induction/transfer would be facilitated, where necessary, with time- bound goals for indigenisation    and local   manufacturing.  Appropriate bilateral and  multi-lateral   cooperation   programmes   for  sharing  of  technologies   and funding  would  be  developed,  and  participation  in  international  partnerships, where necessary, will also be  explored.

8.0 IMPORT AND  EXPORT  OF BIOFUELS

8.1 Import of  biofuels would only be permitted to the extent necessary, and will    be decided   by  the National Biofuel Coordination Committee    proposed under this Policy.      Duties and taxes would be levied on the imports so as to ensure that  indigenously produced biofuels are not costlier than the imported biofuels.    Import of Free Fatty Acid (FFA) oils  will  not be permitted  for production of biofuels.

8.2 Export of biofuels  would only be permitted  after meeting  the domestic requirements and   would   be decided by the National   Biofuel Coordination Committee.

9.0 ROLE OF STATES

9.1 The role and active participation   of the States is crucial in the planning and implementation of  biofuel  programmes.  The State Governments would  be asked     to  designate  an  existing  agency,  or  create  a  new  agency  suitably empowered and funded to act as nodal agency    for development and promotion of biofuels in their States.     Certain  States  have already  set up such agencies. Other concerned agencies, panchayati raj institutions, forestry departments, universities, research institutions etc.  would  also need  to be associated in these efforts.   While a few States have announced policies for biofuel development, other States would   also need to   announce   suitable policies in a time-bound manner  in line with the broad contours   and provisions  of this National Policy.

9.2 State Governments would also be required to   decide on land use for plantation of non-edible oilseed bearing plants or   other feedstocks of biofuels, and on allotment of  Government   wasteland, degraded  land for raising such plantations. Creation of necessary  infrastructure would also have to be facilitated to support biofuel projects  across the entire value chain.

10.0 AWARENESS AND CAPACITY BUILDING

10.1 Support will be provided for creation of awareness about the role and importance of biofuels in the domestic   energy sector, as well as for wide dissemination  of information about its potential and opportunities  in upgrading the transportation infrastructure and  supporting  the rural economy.

10.2 Significant thrust would be provided to capacity building and training and development of human resources.  Universities, Polytechnics  and Industrial Training Institutes  will be encouraged to  introduce  suitable curricula to cater to the demand for trained manpower at all levels in different segments of the biofuel sector.  Efforts will also be directed at    enhancing  and expanding  consultancy capabilities to meet the diverse requirements of this sector.

11.0 INSTITUTIONAL MECHANISMS

11.1 Under  the  Allocation  of  Business  Rules,  the  Ministry  of   New  & Renewable Energy   has been given the responsibility of  Policy and overall Coordination concerning    biofuels.  Apart from this,  the Ministry has also been given the responsibility to undertake   R&D on  various applications of biofuels. Responsibilities have also been allocated   to  other  Ministries   viz. Ministry of Environment & Forests, Ministry of Petroleum & Natural Gas, Ministry of Rural Development and   Ministry of   Science & Technology    to deal with   different aspects of  biofuel development and promotion in the country.

11.2 In view of a multiplicity of departments and agencies, it is imperative to provide High-level co-ordination and policy guidance / review on different aspects of biofuel development,    promotion and utilization.  For this purpose, it is  proposed  to  set  up    a  National  Biofuel  Coordination  Committee  (NBCC) headed by the Prime Minister. Ministers from  concerned Ministries would be Members of this Committee. The Committee would meet periodically to  provide overall  coordination,  effective  end-to-end  implementation  and  monitoring  of biofuel programmes.

11.3 The National Biofuel Coordination Committee will have the following composition:

Chairman: Prime Minister of India
Members:

  1. Deputy Chairman, Planning Commission
  2. Minister of New and Renewable Energy
  3. Minister of Rural Development
  4. Minister of Agriculture
  5. Minister of Environment & Forests
  6. Minister of Petroleum & Natural Gas
  7. Minister of Science & Technology
  8. Secretary, Ministry of New and Renewable Energy –Convener

Coordinating Ministry: Ministry of New and Renewable Energy

11.4 In order to provide effective guidance and to oversee implementation of the Policy on a regular and continuing basis,   it is proposed to set up a Biofuel Steering  Committee  headed  by     the  Cabinet  Secretary,     and     comprising Secretaries  of concerned departments.

11.5 The Biofuel Steering Committee will have the following composition:

Chairman: Cabinet Secretary
Members:

  1. Secretary, Ministry of Finance
  2. Secretary, Ministry  of Rural Development,  Department  of Land Resources
  3. Secretary, Department of Agricultural Research and Education
  4. Secretary, Ministry of Environment & Forests
  5. Secretary, Ministry of Petroleum & Natural Gas
  6. Secretary, Department  of Science & Technology
  7. Secretary, Ministry of Panchayati Raj
  8. Secretary, Department of Biotechnology
  9. Secretary, Planning Commission
  10. Secretary, Department of Scientific & Industrial Research
  11. Secretary,  Ministry of New & Renewable Energy.…Member Secretary

Coordinating Ministry: Ministry of New and Renewable Energy

11.6 In order to enable the Ministry of New & Renewable Energy to effectively carry out its role as the coordinating Ministry for the National Biofuel Progamme, it will be necessary for it to be   suitably   strengthened through augmentation of its manpower    with the flexibility of hiring external professional manpower and services.