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Government Initiatives to Promote Biofuels in India

Written by: Team Angel OneUpdated on: Feb 4, 2025, 2:41 PM IST
The Indian government has implemented various measures, including the National Policy on Biofuels and financial incentives, to promote biofuel production and investment.
Government Initiatives to Promote Biofuels in India
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Biofuels are emerging as a sustainable alternative to fossil fuels, offering environmental and economic benefits. Recognising their potential, the Indian government has introduced several policies and incentives to encourage biofuel production, blending, and adoption.

The National Policy on Biofuels (2018) and Its 2022 Amendment

The National Policy on Biofuels, 2018, and its 2022 amendment have played a crucial role in expanding the scope of biofuel production in India. The policy identifies a broad range of feedstocks that can be used for biofuel production, including:

  • Sugar-based sources: C and B-heavy molasses, sugarcane juice, sugar, sugar syrup.
  • Biomass sources: Agricultural residues (rice straw, cotton stalk, corn cobs, sawdust, bagasse, etc.), grasses.
  • Starch-based sources: Corn, cassava, rotten potatoes, agro-food industry waste.
  • Damaged food grains: Broken rice, food grains unfit for human consumption, surplus food grains.
  • Industrial and municipal waste: Plastic waste, municipal solid waste, industrial off-gases.
  • Other sources: Algae, seaweed, used cooking oil, animal tallow, acid oil, non-edible oilseeds.

By expanding the scope of raw materials, the policy has opened new avenues for biofuel production and reduced dependency on conventional sources.

Key Government Measures to Promote Biofuels

To encourage investment and adoption of biofuels, the government has implemented several measures, including:

1. Biodiesel Blending Programme

The government has set indicative blending targets for biodiesel in diesel and facilitated the direct sale of biodiesel under the National Policy on Biofuels. This initiative aims to gradually replace traditional diesel with biodiesel, reducing carbon emissions and dependency on crude oil imports.

2. GST Reduction on Biodiesel Procurement

To incentivise the blending of biodiesel with high-speed diesel for transportation, the Goods and Services Tax (GST) rate was reduced from 12% to 5%. This move makes biodiesel procurement more affordable and promotes large-scale adoption.

3. Guidelines for the Sale of Biodiesel (2019)

In 2019, the government introduced “Guidelines for Sale of Biodiesel for Blending with High-Speed Diesel for Transportation Purposes”. These guidelines provide a structured framework for the sale and distribution of biodiesel, ensuring compliance with safety and quality standards.

4. Financial Assistance under Pradhan Mantri JI-VAN Yojana

The Pradhan Mantri JI-VAN (Jaiv Indhan – Vatavaran Anukool fasal awashesh Nivaran) Yojana, launched in 2019 and amended in August 2024, provides financial assistance for setting up advanced biofuel projects. This scheme focuses on:

  • Encouraging second-generation (2G) ethanol and advanced biofuel production
  • Promoting the use of agricultural waste for fuel generation
  • Supporting private sector investments in bio-refineries

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing

Published on: Feb 4, 2025, 2:41 PM IST

Team Angel One

Team Angel One is a group of experienced financial writers that deliver insightful articles on the stock market, IPO, economy, personal finance, commodities and related categories.

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