National Policy on Biofuels – 2018

The Government has unveiled a new National Biofuel Policy (2018) that incentivises biofuel generation through multiple measures. Following are the main features of the National Policy on Biofuels 2018.

Main features of the Policy

1 . Categorisation of Biofuels: The Policy categorises biofuels as “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.

2 . Expansion of the scope of raw materials for ethanol production: The Policy expands the type of bio-raw materials for ethanol production by including Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes etc. which are unusable for human consumption.

3 . Surplus food grains can be used for ethanol production: During excess production, crop prices fall. Here, the Policy allows use of surplus food grains for production of ethanol with the approval of National Biofuel Coordination Committee.

4 . Viability Gap Funding: For the generation of Advanced Biofuels, the Policy proposes a viability gap funding scheme for 2G ethanol Bio refineries with Rs.5000 crore in 6 years. In addition to this, additional tax incentives, higher purchase price as compared to 1G biofuels will be given for 2G ethanol generation.

5 . Supply chain for biodiesel production: The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, used cooking oil, short gestation crops etc.

6 . For the success of the policy, roles and responsibilities of all the concerned Ministries/ Departments regarding biofuels has been ensured.

The Policy was brought by the Ministry of New and Renewable Energy (MNRE). MNRE previously unveiled a National Biofuel Policy in 2009.

Expected Benefits of National Policy on Biofuels

1 . Reduce Import Dependency:One crore lit of E10 saves Rs.28 crore of forex at current rates.

2 . Cleaner Environment: There will be lesser emissions of CO2 . By reducing crop burning & conversion of agricultural residues/wastes to biofuels there will be further reduction in Green House Gas emissions.

3 . Health benefits: Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.

 4 . Municipal Solid Waste Management: It is estimated that, annually 62 MMT of Municipal Solid Waste gets generated in India. There are technologies available which can convert Municipal Solid waste/plastic, to drop in fuels.

5 . Infrastructural Investment in Rural Areas: At present Oil Marketing Companies are in the process of setting up twelve 2nd Generation bio refineries with an investment of around Rs.10,000 crore. Further addition of 2G bio refineries across the Country will spur infrastructural investment in the rural areas.

6 . Employment Generation: One 100klpd 2G bio refinery can contribute 1200 jobs in Plant Operations, Village Level Entrepreneurs and Supply Chain Management.

7 . Additional Income to Farmers: By adopting 2nd Generation technologies, agricultural residues/waste which otherwise are burnt by the farmers can be converted to ethanol and can fetch a price for these waste.

Factors to be encountered

1 . The production of biofuels from agricultural waste, it is hoped, will also help curb atmospheric pollution by giving farmers an incentive not to burn it, as is happening in large parts of northern India. But policy should not get ahead of technological and financial feasibility and options should be realistically laid out for farmers.

2 . There is also a need for caution in using surplus foodgrain to produce ethanol. Food for fuel has often been a controversial policy matter across the globe as many believe using grains for ethanol raises food inflation risk.

3 . The government should also take steps to remove policy barriers that have discouraged private investment in building supply chains.

4 . Biofuels programme in India has been largely impacted due to the sustained and quantum non-availability of domestic feedstock for biofuel production which needs to be addressed.


When sustainability focused countries like Sweden and a developing country like Brazil have used ethanol in a big way to achieve their environmental and economic objectives, India must make efforts to scale up technology alternatives.

Also biofuels in India are of strategic importance as it matches 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.

Biofuels are promoted as replacements for transport fuels, but biofuel policy is also geared towards socio-economic goals such as agricultural subsidy and strategic goals such as security of energy supply.