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National Policy on Biofuels

National Policy on Biofuels

National Policy on Biofuels

To improve the efficiency of producing energy, the Government of India (GoI) has introduced the National Policy on Biofuels. The policy was aimed to enhance the socio-economic development and well being of the humans. The policy was released to tackle the fluctuating and increasing cost of crude oil. The importance of biofuels was focused by the GoI, to increase the use of renewable energy to reduce as they are indigenous, pollution-less and inexhaustible.

The National Policy on Biofuels focuses on promoting alternative fuels substituting petro-based fuels. The biofuel is treated as a friendly fuel for the environment as it reduces the carbon emissions. Hence the GoI promotes the biofuel for sustainable development and to replace the conventional energy sources. The biofuel shall be procured from the waste of degraded forests and non-forest lands. It can also be used from molasses from the sugar industry. The policy shall be monitored by the Ministry of New and Renewable Energy.

Vision of the Policy

To mainstream the use of biofuels and promote biofuels to the transportation department.

Goal of the Policy

To provide a source to ensure that the availability of biofuels meets the market demand.

Objectives of the Policy

  • To focus on economic growth, equity and well being of humans
  • Focus on efficiency and security to provide an environment-friendly resource
  • Promote to increase the use of biofuels as a renewable energy
  • Reduce the carbon emission by using biofuels as an alternative source of fuel for petro-based fuels
  • Reduce the importing of fossil fuels and increase the National Energy Security
  • Create better and efficient biofuel feedstocks through next-generation technologies

Strategies for the Development of Biofuels

  • Make use of degraded forest and non-forest lands for cultivation of shrubs and trees that produce non-edible oil seeds for producing bio-diesel.
  • Prioritise the use of molasses, non-food feedstocks and next-generation technologies to increase the production of fuel. Through which the food security shall not be disturbed.
  • Encourage cultivators, farmers and landless labourers to cultivate plantations that provide support to the production of biofuels. The cultivation of plantations shall be provided through contract farming that includes farmers, cooperatives and Self Help Groups (SHGs).
  • Create necessary and appropriate financial measures to support the promotion of biofuels
  • A platform for research and development will be created to analyse the feedstock production and biofuels processing.

Distribution and Marketing of Biofuels

  • Storage, distribution and marketing of biofuels shall be carried out by OMCs
  • The bio-diesel purchase price, value chain comprising the production of oilseeds and extraction of bio-oil shall be linked with Minimum Purchase Price (MPP) and prevailing retail diesel price.
  • The MPP for bio-ethanol will be based on the actual cost of production and import price of bio-ethanol
  • MPP shall be determined by the Biofuel Steering Committee and the National Biofuel Coordination Committee
  • In the case prices dropping below the MPP, the GoI shall compensate to OMCs

Financing for Biofuels

The following shall be declared as a priority sector that can be used for lending from financial institutions and banks:

  • Plantation of non-edible oil-bearing plants
  • Setting up of oil expelling or extraction
  • Processing units for production of bio-diesel and
  • Developing infrastructure for storage and distribution

National Bank of Agriculture and Rural Development (NABARD) shall provide re-financing for loans to farmers for plantations. Other banks that provide finance for biofuel value chain are:

The GoI encourages investments and joint ventures in the biofuel sector and has allowed 100% foreign equity. The foreign equity shall be applied to the biofuel projects to attract Foreign Direct Investment (FDI). However, the FDI can be applied for biofuels when it is used for domestic purposes only.

Financial Incentives for Biofuels

  • GoI shall approve subsidies, grants and financial incentives might be considered on merit for new and second-generation feedstocks
  • Subsidies, grants and financial incentives might be considered on merit for advanced technologies and conversion processes and production units for new and second-generation feedstocks
  • As biofuels are renewable biomass resources, they shall be eligible for various incentives and concessions by the New and Renewable Energy Sector from the Central and State Governments
  • Bio-ethanol shall be provided at a concessional excise duty of 16%, and biodiesel shall be exempted from excise duty. Central taxes and duties will not be levied on bio-diesel and bio-ethanol.
  • Custom and excise duty concessions shall be provided on plant and machinery for the production of biodiesel or bio-ethanol. It will also be applicable for engines running on biofuels for transport, stationery and other applications, if not manufactured indigenously.

Import and Export of Biofuels

  • The import and export of biofuels shall be decided by the National Biofuel Coordination Committee. The committee shall frame prices for imported biofuels. It shall structuralise that the domestic is not expensive than the imported.
  • The policy shall not approve the import of Fatty Free Acid (FFA) oils for the production of biofuels.
  • The export of the biofuels shall be permitted only after meeting the requirement of the norms as stipulated by the National Biofuel Coordination Committee.