Indian cabinet approves new national biofuels policy

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the National Biofuels Policy – 2018, which will reduce fuel import while strengthening the Government's clean fuel initiative

May 16, 2018

Biofuels, derived from biological processes rather than geological, is typically blended with traditional fuels such as petroleum and diesel to reduce engine emission or used in its pure form as clean fuel

A National Policy on Biofuels was released by the Ministry of New and Renewable Energy in 2009; Given India’s fuel consumption, the biofuels industry can attain a valuation of over US$15 billion by 2020

The bioethanol policy comes amid India’s efforts to cut crude import by 10 per cent by 2022; India’s three largest state-controlled oil refiners have planned to invest US$2 billion to increase biofuel capacity

Biofuels in India augurs well with Make in India and Swachh Bharat Abhiyan and offers aid to integrate the targets of doubling of farmers income, import reduction, employment generation, waste to wealth creation

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the National Biofuels Policy – 2018 to promote clean fuel usage in India – the world’s third largest oil consumer. Biofuels, derived from biological processes rather than geological, is typically blended with traditional fuels such as petroleum and diesel to reduce engine emission or used in its pure form as clean fuel. An effective biofuels policy will help in bringing down import as well as consumption of fossil fuels, in turn reducing pollution levels. It will also promote production of clean fuel from natural resources such as agriculture and anaerobic digestion. In order to promote biofuels in the country, a National Policy on Biofuels was released by the Ministry of New and Renewable Energy in 2009. Given India’s massive fuel consumption, the nation’s biofuels industry can attain a valuation of over US$15 billion by 2020.

Salient Features of the biofuels policy:

  1. The Policy categorises biofuels as: 1) Basic Biofuels or First Generation (1G) bioethanol and biodiesel; 2) Advanced Biofuels or Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels; 3) Third Generation (3G) biofuels, bio-CNG, among others. This will enable extension of financial and fiscal incentives under each category.
  2. The Policy expands the scope of raw material for ethanol production by allowing use of sugarcane juice, sugar containing materials such as sugar beet, sweet sorghum, starch containing materials such as corn, cassava, damaged food grains such as wheat, broken rice, rotten potatoes, unfit for human consumption for ethanol production.
  3. Farmers run a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the policy allows use of surplus food grains for production of ethanol for blending with petrol. The Policy encourages biodiesel production from non-edible oilseeds, used cooking oil, short gestation crops.
  4. With a thrust on Advanced Biofuels, the policy provides a viability gap funding scheme for 2G ethanol bio refineries of around US$736.5 million for period of six years in addition to tax incentives, higher purchase price as compared with 1G biofuels. The policy also details responsibilities of all concerned authorities in relation to biofuels.

Expected benefits of the policy:

  1. Reduce Import Dependency: 10 million litres of E10, a fuel mixture, saves US$4.1 million of forex at current rates. The ethanol supply year 2017-18 is likely to see supply of around 1.5 billion litres of ethanol resulting in savings of over US$590 million in forex.
  2. Cleaner Environment: 10 million litres of E-10 saves 20,000 tonnes of CO2 emission. For ethanol supply year 2017-18, CO2 emission will reduce by 3 million tonnes. Converting agricultural wastes to biofuels will further reduce Greenhouse Gas emissions.
  3. Health benefits: Prolonged reuse of cooking oil for making food is a potential health hazard and can lead to many diseases. Used Cooking Oil can be feedstock for biodiesel and its use in biodiesel will prevent diversion of used cooking oil in the food industry.
  4. MSW Management: Annually 62 million tonnes of Municipal Solid Waste is generated in India. There are technologies available that can convert waste, plastic and MSW to drop in fuels. One tonne of such waste can provide around 20 per cent of drop in fuels.
  5. Infrastructural Investment in Rural Areas: One 100,000 litres/day bio refinery need nearly US$118 million of investment. At present oil companies are setting up 12 2G bio refineries with investment of US$1.5 billion. Further addition of 2G bio refineries across the country will spur infrastructural investment, especially in the rural areas.
  6. Employment Generation: One 100,000 liters/day 2G bio refinery can contribute 1,200 jobs in relation to plant operations, local entrepreneurs and supply chain management.
  7. Additional Income to Farmers: By adopting 2G technologies, agricultural residues which are otherwise burnt by farmers can be converted to ethanol to generate income. Conversion of surplus agricultural production to ethanol can help in price stabilization.

The bioethanol policy comes amid India’s efforts to cut crude import by 10 per cent by 2022. As part of this, India’s three largest state-controlled oil refiners – Indian Oil, Hindustan Petroleum and Bharat Petroleum – have planned to invest around US$2 billion to increase their biofuel capacity. Globally, biofuels have caught the attention over the last decade and it is imperative to keep up with the pace of developments in the field of biofuels. Biofuels in India are of strategic importance as it augurs well with the ongoing initiatives of the Government such as Make in India, Swachh Bharat Abhiyan, Skill Development and offers great opportunity to integrate with the ambitious targets of doubling of farmers income, import reduction, employment generation, waste to wealth creation.

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