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Central Government Policy

Government of India Ministry of New & Renewable Energy

National Policy on Bioenergys

 

Block No. 14, C.G.O. Complex                                                                                               Lodhi Road New Delhi-110003

National Policy on Bioenergys

1.0    PREAMBLE

1.1 India is one of the fastest growing economies in the world.    The Development Objectives focus on economic growth, equity and human well being.   Energy is a critical input for socio-economic development.   The energy strategy of a country aims at efficiency and security and to provide access, which being    environment friendly and   achievement of an optimum mix of primary resources for energy generation.   Fossil fuels will continue to play a dominant role in the energy scenario in our country in the next few decades.   However,  conventional or fossil fuel resources are limited, non-renewable, polluting and,  therefore, need to be used prudently. On the other hand, renewable energy resources are indigenous, non-polluting and virtually inexhaustible.    India is endowed with abundant renewable energy resources.   Therefore, their use should be encouraged in every possible way.

1.2 The crude oil price    has been fluctuating in the world market and has increased significantly in the recent past, reaching a level of more than $ 140 per barrel.  Such unforeseen escalation of crude oil prices is severely straining various economies the world over, particularly those of the developing countries.   Petro-based oil meets about 95% of the requirement for transportation fuels, and the demand has been steadily rising. Provisional estimates have indicated crude oil consumption   in 2007-08 at about 156 million tonnes. The domestic crude oil is able to meet only about 23% of the demand, while the rest is met from imported crude.

1.3 India’s energy security would remain vulnerable until alternative fuels to substitute/supplement petro-based fuels are    developed based on indigenously produced renewable feedstocks.  In Bioenergy, the country has a ray of hope   in   providing energy security.   Bioenergys are    environment friendly fuels and their   utilization      would   address     global concerns about containment of   carbon   emissions.  The transportation sector   has been identified as a major polluting   sector. Uses of Bioenergy have, therefore, become compelling in view of the tightening automotive vehicle emission standards to curb air pollution.

1.4  Bioenergys are derived from renewable bio-mass resources and, therefore,  provide a strategic advantage to promote sustainable development and to supplement conventional energy sources in meeting the rapidly increasing requirements for transportation fuels associated with high economic growth, as well as in meeting the energy needs of India’s vast rural population. Bioenergys can increasingly satisfy these energy needs in an environmentally benign and cost-effective manner while reducing dependence on import of fossil fuels and thereby providing a higher degree of National Energy Security.

1.5 The growth of Bioenergy around the globe is spurred largely by energy security and environmental concerns and a wide range of market mechanisms, incentives and subsidies have been put in place to facilitate their growth. Developing countries, apart from these considerations, also view Bioenergy as a potential means to stimulate rural   development and create employment opportunities.    The Indian approach to Bioenergy, in particular, is somewhat different to the current international approaches, which could lead to conflict with food security.   It is based solely on non-food feed stocks to be raised on degraded Or wastelands that are not suited to agriculture, thus avoiding a possible conflict of fuel vs. food security.

1.6  In the context of the International perspectives and National imperatives, it is the endeavor of this Policy to facilitate and bring about optimal development and utilization of indigenous biomass feed stocks for production of Bioenergy. The Policy also envisages development of the next generation of more efficient bio-fuel conversion technologies based on new feedstocks. The Policy sets out the Vision, medium term Goals, strategy and approach to bio-fuel development, and proposes a framework of technological, financial and institutional interventions and enabling mechanisms.

2.0 THE VISION AND GOALS

2.1 The Policy aims at mainstreaming of Bioenergy and, therefore, envisions a central role for it in the energy    and transportation sectors of the country in coming decades. The Policy will bring about accelerated development and promotion of the cultivation, production and use of Bioenergy to increasingly substitute petrol and diesel for transport and be used in stationary and other applications, while contributing to energy security, climate change mitigation, apart from creating new employment opportunities  and  leading    to environmentally sustainable development.

2.2   The Goal   of the Policy is   to ensure that a minimum level of Bioenergy become readily available in the market to meet the demand at any given time. An indicative target of 20% blending of Bioenergy, both for Bio-Diesel and bio-ethanol, by 2017 is proposed. Blending levels prescribed in regard to Bio-Diesel are intended to be recommendatory in the near term. The blending level of bio-Ethanol has already been made mandatory, effective from October, 2008, and will continue to be mandatory leading up to the indicative target.

3. 0 DEFINITIONS AND SCOPE\

3.1 The following definitions of Bioenergy shall apply for the purpose of this Policy:

  1. ‘Bioenergy’ are liquid or gaseous fuels produced from biomass resources and used in place of, or in addition to, diesel, petrol or other fossil fuels for transport, stationary, portable and other applications;
  2.  ‘Biomass’ resources are the biodegradable fraction of products, wastes and residues from agriculture, forestry and related industries as well as the biodegradable fraction of industrial and municipal wastes.

3.2 The scope of the Policy encompasses bio-ethanol, Bio-Diesel and other   Bioenergy, as listed below: –

  •   ‘Bio-ethanol’: ethanol produced from biomass such as sugar containing materials, like sugar cane, sugar beet, sweet sorghum, etc.; starch containing materials such as corn, cassava, algae etc.; and, cellulosic materials such as bagasse, wood waste, agricultural and forestry residues etc.;
  •  ‘Biodiesel’: a methyl or ethyl ester of fatty acids produced from vegetable oils, both edible and non-edible, or animal fat of diesel quality; and,
  •  Other Bioenergy: bio methanol, biosynthetic fuels etc

4.0  STRATEGY AND APPROACH

4.1 The focus for development of Bioenergy in India will be to utilize waste and degraded forest   and non-forest lands only   for cultivation   of shrubs and trees    bearing non-edible oil seeds for production of Bio-Diesel. In India, bio-ethanol is produced mainly from molasses, a by-product of the sugar industry.   In future too, it would be ensured that the next generation of technologies is based on non-­food feed stocks.  Therefore, the issue of fuel vs. food security is not relevant in the Indian context.

4.2  Cultivators, farmers, landless labourers etc. will be encouraged to undertake plantations that provide the feedstock for Bio-Diesel and bio-ethanol. Corporates    will also be   enabled to   undertake plantations   through contract farming by involving farmers, cooperatives and Self Help Groups etc. in consultation with Panchayats, where necessary. Such cultivation / plantation will be supported through a Minimum Support Price for the non-edible oil seeds used to produce Bio-Diesel.

4.3  In view of the current direct and indirect subsidies to fossil fuels and distortions in energy pricing, a level playing field   is necessary for accelerated development and utilization of Bioenergy to sub serve the Policy objectives. Appropriate financial and fiscal measures will be considered from time to time to support    the development and promotion of Bioenergy and their utilization in different sectors.

4.4 Research, development and demonstration will be supported to cover all aspects from feedstock production and Bioenergy processing for various end-uses applications.   Thrust will also be given to development of second-generation Bioenergy and other new feed stocks for production of Bio-Diesel and bio-ethanol.

5.0 INTERVENTIONS AND ENABLING MECHANISMS


Plantations

5.1 Plantations of trees bearing non-edible oilseeds will be taken up on Government/community wasteland, degraded or fallow land in forest and non-forest areas.    Contract farming   on   private wasteland could also be taken up through the     Minimum Support Price mechanism proposed in the Policy. Plantations on agricultural lands will be discouraged.

5.2 There are over 400 species of trees bearing non-edible oilseeds in the country. The potential of all these species will be exploited, depending on their techno-economic viability for production of Bioenergy. Quality seedlings would be raised in the nurseries of certified institutions / organizations identified by the States for distribution to the growers and cultivators.

5.3  In all cases pertaining to land use for the   plantations, consultations would be undertaken with the local   communities through Gram   Panchayats/ Gram Sabhas, and with Intermediate Panchayats and District Panchayat where plantations   of non-edible oil seed bearing trees and   shrubs    are spread over more than one village or more than one block/ taluk. Further, the provisions of PESA would be respected in the Fifth Schedule Areas.

5.4 A major instrument of this Policy is that a Minimum Support Price  (MSP) for oilseeds should be announced and implemented with a provision for its periodic revision so as to ensure a fair price to the farmers. The details about implementation of the MSP mechanism will be worked out carefully after due Consultations with concerned Government agencies, States and other stakeholders. It will then be considered by the Bio-fuel Steering Committee and decided by the National Bioenergys Co-ordination Committee proposed to be set up under this Policy. The Statutory Minimum Price (SMP) mechanism prevalent for sugarcane procurement will also be examined for extending such a mechanism for oilseeds to be utilized for production of Bio-Diesel by the processing units. Payment of SMP would be the responsibility of the Bio-Diesel processors. Different levels of Minimum Support Price for oilseeds have already been declared by certain States.

5.5 Employment provided in plantations of trees and shrub bearing non-edible oilseeds will be made eligible for coverage under the National Rural Employment Guarantee Programme (NREGP).

Processing

5.6 Ethanol is mainly being produced in the country at present from molasses, which is a by-product of the sugar industry.    5% blending of ethanol with gasoline has already been taken up by the Oil Marketing Companies (OMCs) in 20 States and 4 Union Territories.    10% mandatory blending of ethanol   with gasoline is to become effective from October 2008 in these States. In order to augment availability of ethanol and reduce over supply of sugar, the sugar industry has    been permitted   to produce ethanol directly from sugarcane juice. The sugar and distillery industry will be further encouraged to augment production of ethanol to meet the blending requirements prescribed from time to time, while ensuring that this does not in any way create supply constraints in production of sugar or availability of ethanol for industrial use.

5.7 Setting up of processing units by industry for bio-oil expelling/extraction and trans esterification for production of Bio-Diesel will be encouraged. While it is difficult to exactly specify the percentage of Bio-Diesel to be blended with diesel in view of the uncertainty in the availability of Bio-Diesel at least in the initial stages, blending will be permitted up to   certain prescribed levels, to be recommendatory initially and made mandatory in due course.   Gram/Intermediate Panchayats would also be encouraged to create facilities at the village level for extraction of bio-oil, which could then be sold to Bio-Diesel processing units.

5.8 The prescribed blending levels will be reviewed and    moderated periodically   as per the availability of Bio-Diesel and bio-ethanol.    A National Registry of feedstock availability, processing facilities and off take    will be developed and maintained to provide necessary data for such reviews with a view to avoid mismatch between supply and demand.

5.9 In order to take care of fluctuations in the availability of Bioenergy, OMCs will be permitted to bank the surplus quantities left after blending of Bio-Diesel and bio-ethanol in a particular year, and to carry it forward to the subsequent year when there may be a shortfall in their availability to meet the prescribed levels.

5.10 The blending would have to    follow    a protocol and certification process, and conform to BIS specification and standards, for which the processing industry and OMCs   would need to jointly set up an   appropriate mechanism and the required facilities.   Section 52 of the Motor Vehicles Act already allows conversion of an existing engine of a vehicle to use Bioenergy. Engine manufacturers would need to suitably modify the engines to ensure compatibility with Bioenergy, wherever necessary.

Distribution & Marketing of Bioenergy

5.11 The responsibility of   storage, distribution and marketing of Bioenergy would rest with OMCs. This shall be carried out through their existing storage and distribution infrastructure and marketing networks, which may be suitably modified or upgraded to meet the requirements for Bioenergy.

5.12 In the determination of Bio-Diesel purchase price, the entire value chain   comprising production of oil seeds, extraction of    bio-oil, it’s processing, blending, distribution and marketing   will have to be   taken into account.   The Minimum Purchase Price (MPP) for Bio-Diesel by the OMCs will   be linked to the prevailing retail diesel price. The MPP for bio-ethanol will   be based on the actual cost of production and import price of bio-ethanol. The MPP, both for Bio-Diesel and bio-ethanol   will be   determined   by the   Bio-fuel Steering Committee and decided by the National Bio-fuel Coordination Committee. In the event of diesel or petrol price falling below the MPP for Bio-Diesel and bio- ethanol, OMCs will be duly compensated by the Government.

Financing

5.13  Plantation of non-edible oil bearing plants, the setting up of    oil expelling /extraction and processing    units    for production of Bio-Diesel and creation of   any new     infrastructure for   storage and distribution   would be declared as a priority sector for the purposes of lending by financial institutions and banks.   National Bank of Agriculture and Rural Development (NABARD) would provide re-financing towards loans to farmers for plantations.   Indian Renewable Energy Development Agency (IREDA), Small    Industries Development Bank of India   (SIDBI) and other financing agencies as well as Commercial banks would be actively involved in providing finance for various activities under the entire bio-fuel value chain, at different levels.

5.14 Multi-lateral and bi-lateral funding would be sourced, where possible for bio-fuel development. Carbon financing opportunities would also be explored on account of   avoidance of CO2 emissions through   plantations and use of Bioenergy for various applications.

5.15 Investments and joint ventures   in the bio-fuel sector are proposed to be encouraged.  Bio-fuel technologies and projects would be allowed 100% foreign equity through automatic approval route to attract Foreign Direct Investment (FDI), provided bio-fuel is for domestic use only, and not for export. Plantations would not be open for FDI participation.

Financial and Fiscal Incentives

5.16 Financial incentives, including subsidies and grants, may be considered upon merit for new and second generation feed stocks; advanced technologies and conversion processes; and, production units based on new and second generation feed stocks. If it becomes necessary, a National Bio-fuel Fund could be considered for providing such financial incentives.

5.17 As Bioenergy are derived from renewable biomass resources they will be eligible for various fiscal incentives and concessions available to the New and Renewable Energy Sector from the Central and State Governments.

5.18 Bio-ethanol already enjoys   concessional excise duty of 16% and Bio-Diesel is exempted from excise duty. No other Central taxes and duties   are proposed to be levied on Bio-Diesel and bio-ethanol. Custom and excise duty concessions would   be provided   on plant and machinery for production of Bio-Diesel  or bio-ethanol, as well as for engines run on Bioenergy for transport, stationary and other applications, if these are not manufactured indigenously.

Research Development and   Demonstration

5.19 A major thrust would be   given through this   Policy to Innovation, Research & Development and Demonstration in the field of Bioenergy.   Research and Development will focus on plantations, bio-fuel processing and production technologies, as well as   on maximizing efficiencies   of different end-use applications and utilization of by-products.   High priority will be accorded to indigenous R&D and technology development based on local feed stocks and needs, which would be bench marked with international efforts and patents would be registered, wherever possible.   Multi-institutional, time-bound research programmes with clearly defined goals and milestones would be developed and supported.

5.20  Intensive R&D work would be undertaken in the following areas:

 (a): Bio-fuel feed-stock production based on sustainable biomass with active involvement of local communities through non-edible oilseed bearing plantations on wastelands to include inter-alia production and development of quality planting materials and high sugar containing varieties of sugarcane, sweet sorghum, sugar beet, cassava, etc.

 (b): Advanced conversion technologies for first generation Bioenergy and emerging technologies for second generation Bioenergy including conversion of ligno-cellulosic materials to ethanol such as crop residues, forest wastes and algae, biomass-to-liquid (BTL) fuels, bio-refineries, etc.

  (c): Technologies for end-use applications, including modification and development of engines for the transportation sector based on a large scale centralized approach, and for stationary applications for motive power and electricity production based on a decentralized approach.

 (d): Utilisation of by-products of Bio-Diesel and bio-ethanol production processes such as oil cake, glycerin, bagasse, etc.

5.21 Demonstration Projects will be set up for Bioenergy, both for Bio-Diesel and bio-ethanol   production, conversion and applications based on state-of-the- art technologies through Public Private Partnership (PPP).

5.22  For R&D and demonstration projects, grants would be provided to academic institutions, research organizations, specialized centers    and industry. Strengthening of existing R&D   centers and setting up of specialized centers in high technology areas will also be considered.   Linkages would be established between the organizations / agencies   undertaking technology development and the user organizations. Transfer of know-how would be facilitated to industry. Participation by   industry   in R&D   and technology   development     will be encouraged with increased investment by industry with a view to achieve global competitiveness.

5.23 In regard to Research and Development in the area of Bioenergy, a Sub­ committee under the Bio-fuel   Steering Committee proposed in this Policy comprising Department of Bio-Technology, Ministry of Agriculture, Ministry of New and Renewable Energy and Ministry of Rural Development    would   be constituted, led by Department of Bio-Technology and coordinated by the Ministry of New and Renewable Energy.

6.0  QUALITY STANDARDS

6.1 Development of test methods, procedures and protocols would be taken up on priority along with introduction of standards and certification for different Bioenergy and end use applications.  The Bureau of Indian Standards (BIS) has already evolved a standard   (IS-15607) for Bio-diesel (B 100), which is the Indian adaptation of the American Standard    ASTM D-6751 and European Standard EN-14214.  BIS has also published IS: 2796: 2008 which covers specification for motor gasoline   blended with 5% ethanol and motor gasoline blended with 10% ethanol.

6.2  The Bureau of Indian Standards (BIS) would review and update the existing standards, as well as develop new standards in a time-bound manner for devices and systems for various end-use applications for which standards have not yet been prepared, at par with international standards.   Guidelines for product performance and reliability would also be developed and institutionalized in consultation with all relevant stakeholders. Standards would be strictly enforced and proper checks would be carried out by a designated agency on the quality of the bio-fuel being supplied.

7.0   INTERNATIONAL COOPERATION

7.1  International scientific and technical cooperation in the area of bio-fuel production, conversion and utilization will be established in accordance with national   priorities   and   socio-economic   development   strategies   and goals. Modalities of such cooperation may include joint research and technology development, field studies, pilot scale plants and demonstration projects with active   involvement   of research   institutions   and   industry   on   either   side. Technology induction/ transfer would be facilitated, where necessary, with time-bound goals for indigenisation and local manufacturing. Appropriate bilateral and multi-lateral cooperation programmes for sharing of technologies and funding would be developed, and participation in international partnerships, where necessary, will also be explored.

8.0 IMPORT AND EXPORT OF BioenergyS

8.1 Import of Bioenergy would only be permitted to the extent necessary, and will    be decided by the National Bio-fuel Coordination Committee    proposed under this Policy.  Duties and taxes would be levied on the imports so as to ensure that   indigenously produced Bioenergy are not costlier than the imported Bioenergy.  Import of Free Fatty Acid (FFA) oils   will   not be permitted   for production of Bioenergy.

8.2 Export of Bioenergy would only be permitted after meeting the domestic requirements and would   be decided by the National   Bio-fuel Coordination Committee.

9.0   ROLE OF STATES

9.1 The role and active participation of the States is crucial in the planning and implementation of bio-fuel programmes. The State Governments would be asked to designate an existing agency, or create a new agency suitably empowered and funded to act as nodal agency   for development and promotion of Bioenergy in their States. Certain States have already set up such agencies. Other concerned agencies, panchayati raj   institutions, forestry departments, universities, research institutions etc. would also need to be associated in these efforts.   While a few States have   announced policies for bio-fuel development, other States would also need to announce suitable policies in a time-bound manner in line with the broad contours   and provisions of this National Policy.

9.2  State Governments would also be required to   decide on land use for Plantation of non-edible oilseed bearing plants or other feed stocks of Bioenergy, and on allotment of Government wasteland, degraded land for raising such plantations. Creation of necessary infrastructure would also have to be facilitated to support bio-fuel projects across the entire value chain.

10.0 AWARENESS AND CAPACITY BUILDING

10.1 Support will be provided for creation of awareness about the role and importance of Bioenergy in the domestic    energy sector, as well as for wide dissemination of information about its potential and opportunities in upgrading the transportation infrastructure and supporting the rural economy.

10.2 Significant thrust would be provided to capacity building and training and development of human resources.   Universities, Polytechnics and Industrial Training Institutes will be encouraged to introduce suitable curricula to cater to the demand for trained manpower at all levels in different segments of the bio-fuel sector.  Efforts will also be directed at   enhancing and expanding consultancy capabilities to meet the diverse requirements of this sector.

11.0    INSTITUTIONAL MECHANISMS

11.1 Under the Allocation of Business Rules, the Ministry of   New & Renewable Energy   has been given the responsibility of   Policy and overall Coordination concerning   Bioenergy.  Apart from this, the Ministry has also been given the responsibility to undertake R&D on various applications of Bioenergy. Responsibilities have also been allocated to other Ministries   viz. Ministry of Environment & Forests, Ministry of Petroleum & Natural Gas, Ministry of Rural Development and Ministry of Science & Technology to deal with different aspects of bio-fuel development and promotion in the country.

11.2  In view of a multiplicity of departments and agencies, it is imperative to provide High-level co-ordination and policy guidance / review on different aspects of bio-fuel development, promotion and utilization.   For this purpose, it is proposed to set up a National Bio-fuel  Coordination Committee (NBCC) headed by the Prime Minister. Ministers from   concerned Ministries would be Members of this Committee. The Committee would meet periodically to provide overall coordination, effective end-to-end implementation and monitoring of bio-fuel programmes.

11.3 The National Bio-fuel Coordination Committee will have the following composition:

Chairman:     Prime Minister of India

 Members:

  1. Deputy Chairman, Planning Commission
  2. Minister of New and Renewable Energy
  3. Minister of Rural Development
  4. Minister of Agriculture
  5.  Minister of Environment & Forests
  6. Minister of Petroleum & Natural Gas
  7. Minister of Science & Technology
  8. Secretary, Ministry of New and Renewable Energy – Convener

 Coordinating Ministry: Ministry of New and Renewable Energy

11.4 In order to provide effective guidance and to oversee implementation of the Policy on a regular and continuing basis, it is proposed to set up a Bio-fuel Steering Committee headed by the Cabinet Secretary, and comprising Secretaries of concerned departments.

11.5  The Bio-fuel Steering Committee will have the following composition: –

Chairman:  Cabinet Secretary

Members:

  1. Secretary, Ministry of Finance
  2. Secretary, Ministry of Rural Development, Department of Land Resources
  3. Secretary, Department of Agricultural Research and Education
  4.  Secretary, Ministry of Environment & Forests
  5.  Secretary, Ministry of Petroleum & Natural Gas
  6.  Secretary, Department of Science & Technology
  7.  Secretary, Ministry of Panchayati Raj
  8. Secretary, Department of Biotechnology
  9. Secretary, Planning Commission
  10. Secretary, Department of Scientific & Industrial Research
  11. Secretary, Ministry   of New   & Renewable Energy…. Member Secretary

 Coordinating Ministry:  Ministry of New and Renewable Energy

11.6  In order to enable the Ministry of New & Renewable Energy to effectively carry out its role as the coordinating Ministry for the National Bio-fuel Progamme, it will be necessary for it to be   suitably   strengthened through augmentation of its manpower   with the flexibility of hiring external professional manpower and services.