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Biofuels

Government has emphasized on achieving energy security of the country with a target of reducing import dependence i.e. usage of fossil fuels. The growing concern about the import dependence for fuel requirement in tandem with environmental pollution issues have driven the need for alternative fuels that have superior environment benefits and are economically competitive with fossil fuel. This envisages a strategic role for biofuels in the Indian Energy basket. These resources include agriculture and forest residue, Municipal Solid Waste (MSW), cow dung etc. which can be used to convert into biofuels. The Government is committed to utilize these with the aim to reduce our dependence on import of crude oil, achieve foreign exchange savings, provide better remuneration for the farmers with a view to double their income, address growing environment issues owing to use of fossil fuels and burning of biomass/ waste, address challenges of waste management/ agri-residues management in line with Swachh Bharat Abhiyan and promote “Make in India” campaign.

    Major Streams of Biofuel Production and Support programmes in India focus on:

  • Ethanol (1G & 2G)
  • Compressed Biogas – CBG
  • Bio coal – Biomass Pallets & Briquettes
  • Biodiesel

SAF & Marine Fuel is under active consideration for policy support. In addition to these many other pathways & derivatives are also under different stages of research, observation and discussion and these include Green Ammonia, Green Methanol, Bio Hydrogen, Bio char, Bio bitumen, Bio plastics, Bio materials etc.

Over the past decade, India’s ethanol blending programme has evolved into one of the most successful biofuel initiatives globally. Ethanol supplies to oil marketing companies have increased from around 38 crore litres in 2013–14 to more than 700 crore litres in 2023–24. Today, India has nearly 600 operational distilleries with a production capacity exceeding 1,800 crore litres annually.

This transformation has generated significant economic benefits. India achieved nearly 20% ethanol blending in Ethanol Supply Year (ESY) 2025, resulting in foreign exchange savings of approximately ₹1.44 lakh crore in foreign exchange and direct payments exceeding ₹1.25 lakh crore to farmers, by substituting nearly 245 lakh metric tonnes of crude oil. By replacing imported petrol with domestically produced ethanol, India has taken a major step towards reducing its vulnerability to global oil market disruptions.

With an objective to augment ethanol supplies, the Government allowed procurement of ethanol produced from other non-food feedstock besides molasses, like cellulosic and lignocellulosic materials including petrochemical route. Oil PSUs have planned to establish 2G ethanol bio-refineries in various parts of the country. Indian Oil and Numaligarh Refienary have already set up their commercial scale pilot plants in Panipat on Rice Straw and Assam on Bamboo respectively. More plants are expected to come up through other PSU Oil Companies.

Further, Government has launched “Pradhan Mantri JI-VAN (Jaiv Indhan- Vatavaran Anukool fasal awashesh Nivaran) Yojana” for providing viability gap funding to provide initial thrust to create 2G ethanol capacity in the country and attract investment in this sector. In this scheme, financial support to twelve Integrated Bio- ethanol Projects using lignocellulosic biomass & other renewable feedstock with total financial outlay of Rs 1969.50 crore for the period 2018-19 to 2023-24.

To promote this sector, the Government of India launched the Sustainable Alternative towards Affordable Transportation (SATAT) initiative with the ambitious goal of establishing 5,000 CBG plants capable of producing 15 million metric tonnes (MMT) annually. To date, 1645 CBG plants are registered, 201 CBG Plants are commissioned, 319 CBG Plants under construction, 1125 CBG Plants are yet to start Construction.

The industry is in a phase of stabilisation of technology, processes, off take, management practices, feedstock management due to which the sector is witnessing a gradual but positive traction. In addition to this Government of India has also brought in policy interventions that are enabling the viability of the projects. These interventions include revision of pricing, MDA scheme for FoM, BAM scheme for procurement of Biomass Aggregation Machines, DPI scheme for subsidy in pipeline laying and connectivity etc. More positive measures are expected to be taken by Government in due course of time.

With these positive steps more and more investors are exploring possibilities of setting up new plants. Major Industrial houses including Reliance & Adani have rolled out their plants and are in a process of scaling up their investments in the sector. State Governments are also offering attractive incentives to attract investments.

The sector holds a lot of potential in terms of investments, business transactions, technology, equipment and raw material supplies.

Another promising development is the use of densified biomass in boilers, particularly in the power sector. The Ministry of Power set a target of blending 5% biomass with coal in thermal power plants. In order to facilitate that Sustainable Agrarian Mission on use of Agri-Residue in Thermal Power Plants - SAMARTH mission was set up for creating a ecosystem which can help in offtake. Price Benchmarking was also introduced and this helped in bringing necessary positive movement in the sector.

The Consumption of Coal in India for is about 894.95 Million Tonnes. Consumption of Coal in Rest of the Industries is about 372.63 Million Tonnes. Assuming a blending of biomass upto 5 % in Power Plants and about 25% in other hard to abate sectors the consumption of Biomass is estimated to be 44.75 Million Tonnes in Power and about 93.16 Million Tonnes. Total market scope thus provides for about 150 Million Tonnes of Biomass.

As per SAMARTH date cumulative Biomass Co-Fired by NTPC till 30 November 2025 was 3.72 Million Tonnes and for year 2024-2025 the consumption was 1.58 Million Tonnes.

The sector therefore offers immense opportunities for investment, technology transfer, business transactions etc.

MoP&NG announced a Biodiesel Purchase Policy which became effective 1st January 2006. On 10.08.2015, Government allowed direct sale of Biodiesel (B100) for blending with diesel to Bulk Consumers such as Railways, State Road Transport Corporations. On 29.06.2017 Government allowed sale of biodiesel to all consumers for blending with diesel.

Government has notified Guidelines for sale of biodiesel for blending with High Speed Diesel for transportation purposes on 30.4.2019. Through this Notification Government has granted permission exclusively for sale of biodiesel (B-100) only and not for any mixture thereof of whatever percentage.

The Biodiesel procurement by OMCs increased from 1.1 crore litres during 2015-16 to 10.56 crore litres during 2019-20.

Presently, bio-diesel is being produced in the country primarily from imported palm stearin oil. In order to phase-out palm stearin, and as a measure towards import substitution, it has been decided to promote domestically available used cooking oil (UCO) as the feedstock.

UCO has been identified as a potential raw material for biodiesel production in National Policy on Biofuels-2018. UCO can be collected from Bulk Consumers such as hotels, restaurants, canteens, etc. for conversion.

Oil Marketing Companies (OMCs) are periodically floating Expression of Interest (EoI) for procurement of Biodiesel produced from UCO.

India generates about 62 million tonnes of municipal solid waste (MSW) annually, with a potential to generate over 1,500 MW of power. Currently, there are 21 operational WtE plants with a capacity of 248.8 MW, mostly utilizing incineration, refuse-derived fuel (RDF), and biomethanation. The sector is growing, supported by government incentives (MNRE) to tackle urban waste.

Solid Waste Management Rules (2016): Mandates the use of non-recyclable, high- calorific waste (1500 kcal/kg or more) for energy generation, specifically aiming for RDF or co-processing in cement plants. SATAT Initiative led by MoPNG promotes BioCBG projects using organic waste.

Many projects have been set up in India using different technology pathways including Incineration (combustion), Refuse-Derived Fuel (RDF) plants, Biomethanation (biogas), and Torrefaction.

The sector hold immense opportunities for investments and business.

The Indian transport sector is a major consumer of petroleum, accounting for approximately 94 Mtoe, or 18% of total energy consumption, with road transport responsible for roughly 70% of diesel and 99.6% of petrol retail sales. Road transport relies on fossil fuels for 95% of its energy, with freight trucks (38%) and passenger cars (25%) leading consumption.

Biomobility in India refers to the use of bio-based, renewable feedstock to produce low-carbon transportation fuels for various modes of transport, serving as a key component of India’s strategy to achieve a circular bio-economy. It is considered essential for India's sustainable future, aimed at reducing the country's high dependence on imported fossil fuels and mitigating environmental pollution.

Scope and Key Areas in India include Ethanol Blending Program (EBP), Compressed Bio-Gas (CBG/Bio-CNG), Sustainable Aviation Fuel (SAF): India has set indicative blending targets of 1% SAF by 2027 and 2% by 2028 for international flights departing from the country. Advanced Biofuels (2G & 3G): Focus is shifting to 2nd Generation (2G) ethanol made from non-food biomass like rice/wheat straw, bamboo, and industrial waste to avoid competition with food crops. Bio-bitumen and Marine Fuels: Innovative use of agricultural waste for bio-bitumen in road The sector therefore will provide many opportunities for businesses in future.