SNAPSHOT BIOFUELS AND BIO-ENERGY IN INDIA

This report is derived from an extensive secondary literature survey of the bio-energy
and biofuels sectors in India. The primary aim of the report is to set the context for
understanding the current state and future evolution of the sector in the country. Briefly the
policy framework and institutional structure as well as the challenges and opportunities
within the sectors are delineated.

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BIOFUELS AND BIO-ENERGY IN INDIA
Benefits of Biomass power
Distributed generation.
Base load power.
Suited for rural areas.
Ability to have small, kW scale
power production.
Rural economic upliftment.
Carbon neutral.
Efficient utilization of renewable
biological sources.
Reduces methane, a major GHG gas.
Low Cost Resource.
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Background
Although the energy scenario in India today indicates a growing
dependence on conventional forms of energy, about 32% of the total
primary energy use is still using biomass, and more than 70% of the
countrys population depends upon it for its energy needs, making it
a key player in energy generation.
It is estimated that from 1999 to 2000, more than 85% of Indias
rural population was dependent on traditional fuels (biomass and cow
dung-cake) for their basic energy needs. The use of these fuels in
inefficient cooking stoves led to high levels of indoor air pollution,
causing wide-spread respiratory and eye diseases, particularly among
women. Indias goal is to provide cleaner fuels or other means of
cooking to the entire population by 2012.
Biomass based power production is still relevant today especially in
the Indian context. This is mainly because of its potential to provide
distributed power at the rural level, especially for small remote villages
that have good access to biomass but no access to grid power, and
which require only small scale power production. Biomass based
power is also relevant in the context of climate change and global
warming as biomass based power production is net carbon neutral.
The total installed capacity of biomass based power (cumulative of grid
connected and off grid in India, is estimated to be about 2600 MW. Out
of the total, bagasse based power generation has the lions share (about
1400 MW), followed by combustion-based biomass power production
(about 875 MW) and then by biogasification (about 140 MW).
Market Assessment
India is rich in biomass, with the country ranking second in the world
for biogas production. Projects involving biomass gasification in silk
and other textile production and processing have been demonstrated
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on a commercial basis, involving local entrepreneurs and economic

payback periods as short as one year. By 2006, India had achieved
70 MW of small-scale biomass gasification systems for rural (off-grid)
powergeneration. As of March 2008, some 605.80 MW of power from
biomass was achieved. 55 MW of biogasifiers have also been installed.

The theoretical potential is 16,881 MW for the entire country. A

capacity of approximately 302 MW has been commissioned through
54 projects, and 39 new projects are being commissioned, which
will deliver an additional 270 MW. In this context, the market for bio-
energy is vast (in billions of Euros).

Further, Indias total biodiesel requirement is projected to grow to 3.6

million metric tons in 2011-12, with the positive performance of the
domestic automobile industry.

Policy and Regulatory Framework

India has a long history of bio-energy planning and programme
interventions. The national biomass policy originated during the
1970s as a component of rural and renewable energy policies.
The biomass policy followed a multi-pronged strategy: i) improving
efficiency of the traditional biomass use (e.g. improved cook-stove
programme), ii) improving the supply of biomass (e.g. social forestry,
wasteland development), iii) technologies for improving the quality
of biomass use (e.g. biogas, improved cook-stoves), iv) introduction
of biomass based technologies (e.g. wood gasifiers for irrigation
and biomass electricity generation) to deliver services provided by
conventional energy sources, and v) establishing institutional support
for programme formulation and implementation.

The Ministry of New and Renewable Energy (MNRE) has been

supporting the promotion of bio-energy programme since the mid
1990s, and the current bio-energy programs and policies in India with
respect to modern usage of bio-energy are:

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Direct combustion and cogeneration to promote technologies

for optimum use of the countrys biomass resources for power
generation.

Deploy biomass gasifier systems for meeting unmet demand

of electricity in villages.

Biogas based distributed/grid power with a view to promote

biogas based power generation, especially in the small capacity
range, based on the availability of large quantities of animal
waste,plant residue, and food waste.

The National Programme for Improved Cook stoves (NPIC)

was launched in 1983 with the aim to disseminate mud based
improved cook stoves, equipped with chimneys, and portable
metallic stoves to increase the fuel use efficiency and to reduce
indoor air pollution.

The National Project on Biogas Development (NPBD), which

mainly caters to setting up family type biogas plants, has been
under implementation since 1981-82.

The Village Energy Security Programme (VESP) was started

by the MNRE in the 10th five-year plan with an objective
beyond electrification to provide total energy requirement of
villages including lighting, cooking, and motive power with the
involvement of local community.

Legislation
Biomass based power systems come under the purview of the
Electricity Act. Further, the Rural Electrification Policy (2006), National
Electricity Policy (2005) and the Integrated Energy Policy (2005)
provided the required enabling environment for the promotion of
electrification to the entire country. The Rural Electrification Policy
envisaged the provision of access to electricity to all households by
20091 and a minimum lifeline consumption of one unit kilo watt hour
(kwh) per household per day by 2012.

The National Electricity Policy and the Integrated Energy Policy

support decentralized distributed generation (DDG) facilities (either
conventional or non-conventional methods of electricity generation,
whichever is more suitable and economical) together with a local
distribution network, wherever grid-based electrification is not feasible.

The National Policy on Biofuels was approved by the Government of

India (GOI) on December 24, 2009. The biofuels policy promotes an
increased use of renewable energy resources as alternate fuels for
1
Not successful

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transport fuels supplementation (diesel and gasoline for vehicles). It

also suggests a target of 20% biofuels blending (bio-ethanol and bio-
diesel) by the year 2017.

At present, the government is finding it hard to implement the

compulsory blending of 5% ethanol in petrol (gasoline) due to the
need for sugarcane crop in India. India practices commercial bio-
diesel production on a very small scale while its utilisation is also
primarily restricted to the unorganised sector. The ambitious plans
of the Indian government to produce plenty of bio-diesel by the year
2011/12 for meeting its mandate of 20% diesel blending has not quite
worked out due to the limited supply of Jatropha seeds for producing
bio-diesel. In India, advanced biofuels are still under research stage
and it will take time to make the commercial production of biofuels
economically viable.

In addition, the Indian approach to biofuels is based solely on non-

food feedstock to be raised on degraded/waste lands that are not
suitable for agriculture, thus avoiding a possible conflict of fuel versus
food security (MNRE, 2009). The new biofuels policy will incentivize
plantation of non-edible oilseeds, such as jatropha and karanjia over
about 11.2 million hectares of land, which is 30 times of present
cultivation, resulting in 13.38 million tons of bio-fuel to meet its policy
target of 20% blending of biofuels in transportation fuel by 2020. The
new policy offers financial incentives such as subsidies and grants
for biofuels production apart from declaring minimum support price
(MSP) for non-edible oil seeds. The policy also envisages setting up a
National Biofuel Fund.

The Key Drivers for Sector Growth

Increased dependence as a nation on imported fossil fuels vis-
-vis the abundant availability of biomass in India.

Improved technologies for biomass based energy systems

including the use of biofuels as an alternative or additive
(displacing) fuel.

Government has formulated and implemented a number of

innovative policies and programmes to promote Bio-energy
technologies through fiscal incentives and regulatory initiatives
such as renewable purchase standards (RPS).

Government has also set targets, for instance, in the current

Five Year Plan period (2007 to 2012), the governments target
for biomass power capacity is 1200 MW.

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Fiscal Incentives: Biofuels and

Bio-energy Sectors
1. Accelerated Depreciation

According to IREDA

100% depreciation in the first year can be claimed for the

following power generation equipment:
a. Fluidized bed boilers.
b. Back pressure, pass-out, controlled extraction, extraction
and condensing turbine for Power generation with boilers.
c. High efficiency boilers.
d. Waste heat recovery equipment.

According to MNRE:

80% depreciation in the first year can be claimed for the

Barriers for Biomass/Bio-energy
following equipment required
Biomass produces greenhouse
a. Back pressure, pass-out, controlled extraction, extraction
emissions.
cum-condensing turbine for co-generation with pressure
It takes considerable energy to boilers.
produce biofuels from certain b. Vapour absorption refrigeration systems.
feedstock, resulting in less than c. Organic rankine cycle power systems.
desirable energy returns on energy d. Low inlet pressures small steam turbines.
invested (EROEI).
2. Income tax holiday: 10 years tax holidays.
Biomass collection is difficult.
3. Customs and Excise Duty: concessional customs and excise
Biomass crops not available all year.
duty exemption for machinery and components for initial setting
Still an expensive source, both in
up of projects.
terms of producing the biomass and
4. General sales tax: exemption is available in certain States.
converting it to alcohols
On a small scale there is most likely 5. Loans availability: soft loans are provided through:

a net loss of energy--energy must be IREDA, a public sector company of the Ministry.
put in to grow the plant mass Nationalised banks and other financial institutions for
identified technologies / systems.

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Government Incentives for Biomass Sources:

Power Projects 1. Overview Of Indian Biotech Market Associated
with Climate Change, EBTC 2011.
Biomass power projects can avail some incentives provided by
the governments at both central and state levels. The table below 2. Market opportunities in environmental goods
and services, renewable energy, carbon finance
summarizes the various incentives provided by the government for
and CATs Country report India, UK Trade &
the biomass gasification projects. Investment, October 2008.

3. Energy Alternatives India http://www.eai.in/ref/

Capital Subsidy
ae/bio/bio.html
Special Category States
Capital subsidy
(NE Region, Sikkim, J&K, 4. MNRE website (www.mnre.gov.in)
Project Type HP & Uttaranchal) For other states
5. Bio-energy in India, International Institute for
Biomass Power 25 lakh X (C 20 lakh X (C
Environment and Development (IIED), Prepared
projects MW)^0.646 MW)^0.646
by The Energy and Resources Institute (TERI),
Bagasse Co-generation 18 lakh X (C 15 lakh X (C 2010
by private sugar mills MW)^0.646 MW)^0.646
6. Biomass Energy in India: Transition From
Bagasse - Co-generation projects by cooperative/ public sector sugar mills
Traditional to Modern, P.R. Shukla, The Social
40 bar & above 40 lakh * 40 lakh * Engineer, Vol. 6, No. 2.

60 bar & above 50 lakh* 50 lakh * 7. India: Biomass for Sustainable Development
80 bar & above 60 lakh * 60 lakh * - Lessons for Decentralized Energy Delivery
Village Energy Security Programme, The World
Per MW of surplus Per MW of surplus
Bank, July 2011.
power ** power **

(maximum support `8.0 (maximum support `8.0

crore per project) crore per project)

* For new sugar mills, which are yet to start production and existing sugar mills employing
backpressure route/seasonal/incidental cogeneration, which exports surplus power to
the grid, subsidies shall be one-half of the level mentioned above.
** Power generated in a sugar mill (-) power used for captive purpose i.e. net power
fed to the grid during season by a sugar mill.

Disclaimer

All information provided in this publication has been compiled from reliable sources. Although reasonable care has been taken to ensure that the
information in this publication is true and accurate, such information is provided as is, without any warranty, express or implied as to the accuracy or
completeness of any such information. EBTC shall not be liable for any losses incurred by any person from any use of this publication. Readers should
consult their legal, tax and other advisors before making any investment or other decision with regard to any business in India.

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