Vaibhav Dange, Public Policy Expert – Infra-Sustainable Mobility Bio Energy & Founder Director, Indian Federation of Green Energy (IFGE)

India’s biofuel sector is experiencing rapid growth, driven by government initiatives and increasing demand for clean energy. Ethanol, Compressed Biogas (CBG), and biomass-based fuels are emerging as vital components of India’s energy mix.

The growth of biofuels in India is marked by significant expansion and government-driven initiatives aimed at reducing dependence on fossil fuels and promoting clean energy. By 2025, India’s ethanol production is projected to reach about 10.5 billion litres, a 46 per cent increase over 2024, with ethanol blending in petrol nearing 20 per cent, ahead of the original 2030 target. Biodiesel production is also increasing, with a forecast of 718 million litres in 2025, although the overall blend rate remains low due to feedstock constraints. India produces large volumes of biogas and CBG, with efforts to increase this substantially by 2025. India has achieved 10 per cent ethanol blending in petrol and aims to reach 20 per cent by 2025-26. The government has launched initiatives to promote CBG production from waste biomass and agricultural residues. Biomass-based pellets and briquettes are gaining traction as a sustainable alternative to fossil fuels.

To further accelerate the growth of the biofuel sector, policy interventions are necessary:

l Stable policy framework: A consistent and supportive policy environment will attract investments and promote innovation.

l Incentives for farmers: Encouraging farmers to adopt sustainable agricultural practices and produce biomass feedstocks.

l Infrastructure development: Investing in infrastructure for biofuel production, storage, and distribution.

Financial Subsidies and Capital Support:

Central government programs such as the National Bioenergy Programme (NBP)and Pradhan Mantri JI-VAN Yojana provide capital subsidies for biofuel production plants (including advanced bioethanol), biogas projects, biomass briquette/pellet manufacturing, and biomass cogeneration units. Subsidies can range from up to Rs 45 lakhs per MW for biomass projects to interest subvention schemes for ethanol production.

Reduced Taxation and Duty Exemptions:

GST on ethanol and biomass equipment is lowered (e.g., 5 per cent -12 per cent), alongside 100 per cent exemption from electricity duty and stamp duty for bioenergy projects, which reduce operational costs.

l Research and Innovation Funding: Support for R&D and demonstration projects in emerging bioenergy technologies, including integrated biorefineries and second-generation biofuels.

l Long-Term Offtake Agreements: Oil Marketing Companies sign longterm agreements with biofuel producers, providing assured markets and revenue stability.

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