Cabinet Approves National Policy on Biofuels

The Union Cabinet, chaired by the Prime Minister has approved the ‘National Policy on Biofuels – 2018.’

● The policy categorises biofuels into two categories to enable extension of appropriate financial and fiscal incentives under each category: Basic Biofuels, viz. first generation (1G) bioethanol & biodiesel; and

● Advanced Biofuels, viz. second generation (2G) ethanol, municipal solid waste (MSW) to drop-in fuels, third generation (3G) biofuels, bio-CNG etc.

The policy expands the scope of raw materials for ethanol production by allowing use of sugarcane juice; sugar-containing materials like sugar beet and sweet sorghum; starch-containing materials like corn and cassava; and damaged food grains like wheat, broken rice, rotten potatoes, unfit for human consumption, for ethanol production. The policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.

With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding (VGF) scheme for 2G ethanol bio-refineries of Rs. 5,000-crore in six years, in addition to additional tax incentives and higher purchase price as compared to 1G biofuels. The policy also encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, used cooking oil, and short gestation crops.

Lowering oil import dependency

The policy aims at reducing import dependency on crude oil, estimating that the use of one crore litres of ethanol as a blend in petrol at 10% level (E10) saves Rs. 28-crore of forex at current rates. In addition, the use of ethanol contributes to a cleaner environment, with use of one crore litres of E-10 saving around 20,000-tonnes by way of carbon dioxide (CO2) emissions. For the ethanol supply year 2017-18, the policy estimates that there will be lesser emissions of CO2 to the tune of 3-mt. “By reducing crop burning & conversion of agricultural residues/wastes to biofuels there will be further reduction in greenhouse gas emissions,” a press statement issued by the government said.

The use of used cooking oil as a potential feedstock for biodiesel will prevent diversion into the food industry.

In so far as MSW management is concerned, the policy notes that annually about 62-mt of MSW gets generated in India, which can be converted to drop-in fuels, with one tonne of such waste having the potential to provide around 20% of drop in fuels.

With one 100-klpd biorefinery requiring a capital investment of around Rs. 800-crore, the policy envisages a considerable investment in rural areas. At present, Oil Marketing Companies (OMCs) are in the process of setting up twelve 2G biorefineries with an investment of around Rs. 10,000-crore. Each 100-klpd 2G biorefinery, according to the policy, can contribute 1,200 jobs in plant operations, village level entrepreneurs and supply chain management.

“By adopting 2G technologies, agricultural residues/waste, which otherwise are burnt by the farmers, can be converted to ethanol and can fetch a price for the waste if a market is developed for the same. Also, farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Thus, conversion of surplus grains and agricultural biomass can help in price stabilisation,” the policy added.

Private sector boost

Mr. Atul Mulay, President, Bioenergy, Praj Industries, a leading domestic player in biofuels and 2G ethanol manufacture, said the policy gives a much needed fillip to the industry. The investment potential is multiple times that envisaged as of now and opens out this opportunity to the private sector. The plan to give a higher, differential pricing to 2G ethanol and viability gap funding for projects will drive private sector investments, he said.

As an indication of the potential, he pointed out that the Centre hopes to bring in 20% ethanol-blended petrol by 2020. At the targeted 5% blending now, about 50 plants of one-crore litre a day, the standardised capacity, will be needed. This alone will involve investment of over Rs. 35,000-crore. In India, traditionally, ethanol is produced by distilleries linked to sugar mills. They use molasses generated as a by-product of sugar production, as a raw material. A major benefit of using agro waste for ethanol production is that it will address the problem of air pollution caused by burning of agriculture waste. The dozen units planned by OMCs alone will use about 18-20 lakh tonnes of agro waste annually.