National Biofuel Policy and Ethanol Blending Programme in India
India imports more than 85% of its crude oil requirements to meet domestic energy demand. To strengthen energy self-reliance, reduce tailpipe emissions, and create additional revenue streams for farmers, the Government of India notified the biofuels/">National Policy on Biofuels in 2018 and amended it in June 2022. The policy establishes an institutional framework to promote biofuels across the transport and industrial sectors. Working alongside the Ethanol Blended Petrol (EBP) Programme, the policy advanced the target of achieving 20% ethanol blending in petrol from 2030 to Ethanol Supply Year (ESY) 2025-26. This framework drives the conversion of agricultural surplus, damaged food grains, and organic waste into clean transportation fuels.
Institutional Framework and Classification of Biofuels
The Ministry of Petroleum and Natural Gas (MoPNG) serves as the nodal ministry for implementing biofuel policy initiatives in India. Overall coordination, monitoring, and policy adjustments are managed by the National Biofuel Coordination Committee (NBCC). The NBCC is chaired by the Union Minister of Petroleum and Natural Gas and includes representatives from 14 ministries. The policy categorizes biofuels into four distinct generations based on the feedstock and technology used in production.
Generations of Biofuels
- First Generation (1G): Bioethanol and biodiesel produced from food crops containing sugar and starch, such as sugarcane juice, B-heavy molasses, C-heavy molasses, damaged food grains, broken rice, and maize.
- Second Generation (2G): Advanced biofuels produced from non-food biomass, agricultural residues like rice straw and bagasse, corn stover, bamboo, and municipal solid waste.
- Third Generation (3G): Biofuels derived from microalgae and aquatic organisms grown on non-arable land or wastewater, avoiding competition with food crops.
- Fourth Generation (4G): Biofuels synthesized through genetically engineered microorganisms combined with carbon capture and storage technologies to capture carbon dioxide during production.
Key Amendments in the National Policy on Biofuels (2022)
The 2022 amendments updated the original 2018 policy to accelerate blending timelines and broaden feedstock availability.
- Advanced Target Date: The deadline for achieving 20% ethanol blending in petrol (E20) was brought forward from 2030 to ESY 2025-26.
- Expanded Feedstock Scope: The amendment allowed the use of additional raw materials including corn stover, bagasse, bamboo, sweet sorghum, and sugar beet for ethanol production.
- Expansion of NBCC: New departmental members were added to the National Biofuel Coordination Committee to improve inter-ministerial coordination.
- Special Economic Zone Production: Biofuel production units established in Special Economic Zones (SEZs) and Export Oriented Units (EOUs) were permitted to supply biofuels for domestic blending and export in specific cases.
- Focus on Advanced Fuels: The policy increased emphasis on Sustainable Aviation Fuel (SAF), drop-in fuels, and second-generation bio-refineries.
Ethanol Blended Petrol Programme and Pricing Structure
Public sector Oil Marketing Companies (OMCs) run the Ethanol Blended Petrol (EBP) Programme by purchasing ethanol from registered distilleries and blending it with petrol. The government uses an Administered Price Mechanism (APM) to fix prices for ethanol based on the feedstock source. Higher purchase prices are offered for ethanol derived from sugarcane juice and B-heavy molasses to encourage diversion away from sugar production.
Feedstock Categories Permitted for Ethanol Production
| Feedstock Category | Primary Examples | Policy Mandate and Usage |
| Sugar-Based | Direct Sugarcane Juice, Sugar Syrup, B-Heavy Molasses, C-Heavy Molasses | Primary source for 1G ethanol; price structured by government to balance sugar market supply. |
| Grain-Based | Damaged food grains unfit for human consumption, Surplus FCI Rice, Maize | Supplemental feedstocks allowed with NBCC approval to avoid sole dependence on sugarcane. |
| Cellulosic & Waste-Based | Rice straw, wheat straw, bagasse, cotton stalks, Municipal Solid Waste | Dedicated to 2G ethanol production to reduce crop residue burning and utilize urban waste. |
Financial Incentives and Allied Biofuel Initiatives
To support infrastructure development and address financial requirements, the government provides fiscal concessions and operates several targeted schemes.
GST Concessions and Interest Subvention
The Goods and Services Tax (GST) rate on ethanol supplied for the EBP Programme stands at a concessional 5%. To build distillation capacity, the government introduced Ethanol Interest Subvention Schemes that provide interest subsidies on bank loans taken by sugar mills and grain distilleries.
Pradhan Mantri JI-VAN Yojana
Launched in 2019 under MoPNG, the Pradhan Mantri Jaiv Indhan-Vatavaran Anukool fasal awashesh Nivaran (JI-VAN) Yojana provides financial support to integrated 2G bioethanol projects. The scheme offers Viability Gap Funding (VGF) to de-risk commercial and demonstration-scale 2G ethanol projects using lignocellulosic biomass.
SATAT Initiative
The Sustainable Alternative Towards Affordable Transportation (SATAT) initiative promotes Compressed Bio-Gas (CBG) produced from agricultural residues, cattle dung, and municipal solid waste. The program aims to set up 5,000 CBG plants across the country to supply green gas for automotive fuel networks and industrial users.
GOBARdhan Scheme
The Galvanizing Organic Bio-Agro Resources Dhan (GOBARdhan) scheme, managed under the Ministry of Jal Shakti, focuses on converting cattle dung and organic farm waste into biogas, bio-CNG, and organic manure to improve sanitation and rural incomes.
Key Facts and Data Points
- Nodal Ministry: Ministry of Petroleum and Natural Gas (MoPNG).
- Supervisory Body: National Biofuel Coordination Committee (NBCC), chaired by the Union Minister of Petroleum and Natural Gas.
- Policy Evolution: Originally notified in 2018 and amended in June 2022.
- E20 Target Year: Advanced to Ethanol Supply Year (ESY) 2025-26 from the earlier target of 2030.
- Blending Progress: Ethanol blending levels increased from 1.5% in 2013-14 to nearly 20% in 2025-26.
- Taxation: Concessional 5% GST rate applies to ethanol supplied under the EBP Programme.
- 2G VGF Scheme: Pradhan Mantri JI-VAN Yojana provides Viability Gap Funding for 2G ethanol refineries.
- CBG Target: SATAT initiative aims to establish 5,000 Compressed Bio-Gas plants across India.
- Rural Bioenergy Scheme: GOBARdhan converts farm cattle dung and organic waste into bio-CNG and compost.
- 2G Commercial Refinery: Bharat Petroleum Corporation Limited (BPCL) established a commercial 2G ethanol plant using rice straw at Bargarh, Odisha.
