Centre clears new biofuel policy, will invest Rs 5,000 crore and offer tax sops

The Union Cabinet chaired by prime minister Narendra Modi has approved the National Policy on Biofuels 2018. The government has identified a viability gap funding scheme for 2G ethanol bio refineries of Rs 5,000 crore in six years in addition to additional tax incentives, higher purchase price as compared to first generation biofuels.

The Indian government had first introduced a National Policy on Biofuels, which was drafted by the Ministry of New and Renewable Energy in 2009. Biofuels in India are of strategic importance but had been largely impacted due to the sustained and quantum non-availability of domestic feedstock for biofuel production which needed to be addressed.

The new policy, according to the press note, will enable extension of appropriate financial and fiscal incentives under three categories:
- First Generation (1G) bioethanol and biodesel and ‘Advanced Biofuels’ 
- Second Generation (2G) ethanol, municipal solid waste (MSW) to drop-in fuels
- Third Generation (3G) biofuels and bi-CNG among others.

The new policy decision will expand the scope of raw material for ethanol production by allowing use of sugarcane juice, sugar containing materials like sugar beet, sweet sorghum, starch containing materials like corn, cassava, damaged food grains like wheat, broken rice and rotten potatoes unfit for human consumption for ethanol production.

According to the government, it aims to address the issues of farmers who are at a risk of not getting appropriate price for their produce during the surplus production phase, and will benefit from the policy which allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee.

The thrust on advanced biofuels will put a thrust towards addressing the viability gap by funding 2G ethanol bio refineries to around Rs 5,000 crore in six years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.

Claimed benefits
Reduce import dependency: One crore litres of E10 saves Rs 28 crore of forex at current rates. In FY2018, a total of around 150 crore litres of ethanol were supplied, resulting in savings of over approximate Rs 4,000 crore in forex.

Cleaner environment: One crore litres of E-10 will save around 20,000 tonnes of CO2 emissions. This is claimed to have resulted in fewer emissions of CO2 to the tune of 30 lakh tonnes. 

Infrastructural investment in rural areas: It is estimated that, one 100 klpd bio refinery will require around Rs 800 crore capital investment. At present, oil marketing companies are in the process of setting up 12 2G bio refineries with an investment of around Rs 10,000 crore. 

Employment generation: One 100klpd 2G bio refinery can contribute 1,200 jobs in plant operations, village level entrepreneurs and supply chain management.

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