Chanakya IAS Academy Blog



The Union Cabinet has approved the “National Policy on Biofuels-2018”, with the aim to help farmers dispose of their surplus stock in an economic manner and to reduce India’s oil-import dependence.


  • Different category: The National Policy categorizesBiofuels as- Basic Biofuels and Advanced Biofuels to enable the extension of appropriate financial and fiscal incentives under each category:
    • Basic Biofuels: First Generation (1G) bioethanol & biodiesel.
    • Advanced Biofuels: Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) Biofuels, bio-CNG etc.
  • The expanded scope of raw material: The Policy expands the scope of raw material for ethanol production by allowing the use of Sugarcane Juice, Sugar-containing materials like Sugar Beet, Sweet Sorghum, Starch-containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.
  • Use of surplus produces: The Policy allows the use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuels Coordination Committee, to save farmers who are at risk of not getting appropriate price for their produce in the surplus production phase.
  • Supply chain: The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, used cooking oil, short crops.
  • Predefined roles and responsibilities: There are fixed roles and responsibilities allotted to all the concerned Ministries/Departments with respect to Biofuels to synergize efforts.
  • Financial incentive: With a thrust on Advanced Biofuels, the policy indicates viability gap funding scheme for 2G ethanol Biorefineries of Rs. 5000 crore in six years in addition to additional tax incentives, higher purchase price as compared to 1G Biofuels.


  • Biofuels are combustible fuels created from biomass or in other word Biofuels are fuels created from recently living plant matter.
  • Generally, Biofuels are referred to as liquid fuels, such as ethanol and biodiesel that are used as replacements for transportation fuels like petroleum, diesel and jet fuels.
  • Moreover, Biofuels can also include solid fuels like wood pellets and biogas or syngas.
  • Biofuels are classified into three categories based on the type of feedstock used to produce them:
    • First Generation: They are produced from food crops.
    • Second Generation: They are produced from cellulosic materials like wood, grasses and inedible parts of plants.
    • Third Generation:They are produced using the lipid production from algae.


  • The term 'Advanced Biofuels' is used to describe the relatively new technological field of Biofuels production that uses waste such a garbage, animal fats, and spent cooking oil to produce liquid fuels.


  • In 2009, the Ministry of New and Renewable Energy had formulated a National Policy on Biofuels to promote Biofuels in the country.
  • In India, Biofuels are of strategic importance as it augers well with the ongoing initiatives like Make in India, Swachh Bharat Abhiyan, Skill Development and offers a great opportunity to integrate with the ambitious target of doubling Farmers Income, Import Reduction, Employment Generation and Waste to Wealth Creation.
  • Biofuels programme has been largely impacted due to the sustained and quantum non-availability of domestic feedstock for Biofuels production which needs to be addressed.
  • At the global level, Biofuels have caught the attention in last decade and it is imperative to keep up with the pace of developments in the field of Biofuels.


  • Economic Benefits:
    • Reduce Import Dependency: One crore lit of E10 saves Rs.28 crore of FOREX at current rates. The ethanol supply year 2017-18 is likely to see a supply of around 150 crore liters of ethanol which will result in savings of over Rs.4000 crore of FOREX.
    • Infrastructural Investment in Rural Areas: It is estimated that, one 100klpd biorefinery will require around Rs.800 crore capital investment. At present Oil Marketing Companies are in the process of setting up twelve 2G biorefineries with an investment of around Rs.10,000 crore. Further addition of 2G biorefineries across the Country will spur infrastructural investment in the rural areas.
    • Employment Generation: One 100klpd 2G biorefinery can contribute 1200 jobs in Plant Operations, Village Level Entrepreneurs and Supply Chain Management.
    • Additional Income to Farmers: By adopting 2G technologies, agricultural residues/waste which otherwise are burnt by the farmers can be converted to ethanol and can fetch a price for these waste if a market is developed for the same. Also, farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Thus conversion of surplus grains and agricultural biomass can help in price stabilization.
  • Social Benefits:
    • Health benefits: Prolonged reuse of Cooking Oil for preparing food, particularly in deep-frying is a potential health hazard and can lead to many diseases. Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.
  • Environmental Benefits:
    • Cleaner Environment: One crore lit of E-10 saves around 20,000 ton of CO2 emissions. For the ethanol supply year 2017-18, there will be lesser emissions of CO2 to the tune of 30 lakh ton. By reducing crop burning & conversion of agricultural residues/wastes to Biofuels there will be a further reduction in Green House Gas emissions.
    • MSW Management: It is estimated that annually 62 MMT of Municipal Solid Waste gets generated in India. There are technologies available which can convert waste/plastic, MSW to drop in fuels. One ton of such waste has the potential to provide around 20% of drop-in fuels.


The National Biofuels Policy 2018 has the potential to attract huge investment in rural areas. Accordingly, Biofuels Policy India will enable adoption of the second generation advanced Biofuels like ethanol in future. This will not only help the farmers by using agricultural waste to add to their income but also help in cleaning the environment and further, it will reduce India’s dependency on oil-export,thus enhancingthe overall growth of the economy.

Read 2013 times Last modified on Thursday, 17 May 2018 19:37

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