India Solar, Wind, Biomass, Biofuels – EAI

Policies in India

Latest News for Energy Efficiency, Solar, Wind, Biomass Power, Biofuels, Waste to Energy

Biomass to power and heat:

India has a potential to generate an additional 20 GW of electricity from biomass residues. In order to realize the potential effectively, various fiscal incentives are being provided by the Government. Below is the description of key incentives like capital subsidy, renewable energy certificates and Clean Development Mechanism (CDM) which can be utilized effectively to make the project economically attractive.

The government provides a one time capital subsidy based on the installed capacity of the project. The entire capital subsidy amount is released directly to the lead bank / lending financial institution for the purpose of offsetting the loan amount after successful commissioning of project. In case the project is set up by the promoters through their own resources, the CFA would be released directly to promoters after successful commissioning of the project.

Government Incentives for Biomass Power Projects in General (National Level and State Level)

Project Type

Capital Subsidy -Special Category States (NE Region, Sikkim, J&K, HP & Uttaranchal)

Capital subsidy-For other states

Biomass Power projects

  25 lakh X (C MW)^0.646

20 lakh X (C MW)^0.646

Bagasse Co-generation by private sugar mills

  18 lakh X (C MW)^0.646

15 lakh X (C MW)^0.646

Bagasse - Co-generation projects by cooperative/ public sector sugar mills

40 bar & above

40 lakh *

40 lakh *

60 bar & above

50 lakh *

50 lakh *

80 bar & above

60 lakh *

60 lakh *


Per MW of surplus power **

Per MW of surplus power **

(maximum support `8.0 crore per project)

(maximum support `8.0 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.


Depreciation Benefits for Biomass power, biomass heat and co-generation



Accelerated Depreciation

IREDA says

100 % depreciation in the first year can be claimed for the following power generation equipment

1. Fluidized Bed Boilers
2. Back pressure, pass-out, controlled extraction, extraction and condensing turbine for Power generation with boilers
3. High efficiency boilers
4. Waste heat recovery equipment

MNRE says

80% depreciation in the first year can be claimed for the following  equipment required

1. Back pressure, pass-out, controlled extraction, extraction–cum-condensing turbine for co-generation with pressure boilers

2. Vapor absorption refrigeration systems

3. Organic rankine cycle power systems
4. Low inlet pressures small steam turbines

Income Tax Holiday

Ten years tax holidays.

Customs and Excise Duty

Concessional customs and excise duty exemption for machinery and components for initial setting up of projects.

General Sales Tax

Exemption is available in certain States


Renewable energy certificates or preferential tariffs

State Electricity Regulatory Commissions have determined preferential tariffs and Renewable Purchase Standards (RPS) at the state levels. Various states have undertaken the Renewable Purchase Obligations in the range of 0.8% – 13% of the total electricity supplied in the State. State regulatory commissions have also announced the preferential tariffs for purchasing power from biomass/cogen sources. The power producers are also eligible to get Renewable Energy Certificates (RECs) in case they choose to opt for the base tariff announced by states. RECs can be traded and can generate revenues anywhere in between 1.5-4.5 `/kWh depending on the market conditions

Clean Development Mechanism (CDM)

CDM process is complex, but has achieved success in the past by improving the financial viability of the projects. 167 biomass based projects are registered from India under CDM as on 31st December 2010. Various projects eligible for carbon credits include biomass power generation, heat generation; biomass/bagasse based cogeneration, efficient cookstoves in households and replacement of non-renewable biomass by renewable biomass.

At the moment, markets for CERs post 2012 are uncertain and it is crucial to get the projects registered with UNFCCC by 31st December 2012, in order to be eligible to participate in the EU emission trading scheme. Newer mechanisms under the CDM, like Program of Activity (PoA) have also achieved success and a PoA for biomass based projects from India has already been registered under CDM, “Promotion of Biomass Based Heat Generation Systems in India”

Biomass to fuels

Bio fuels

The national biofuel policy of India adopted in December 2009 aims at facilitating development of indigenous biomass feedstock for production of biofuels. 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 biofuel 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 of a National Biofuel Fund. 

Features of India’s Biofuel policy

  • Strengthening India’s energy security through a supplemental blending of 20% transport fuel (Bio-ethanol and biodiesel) with conventional fuel. 
  • Meeting the energy needs of a vast rural population in India to stimulate rural development and create employment opportunities. 
  • Addressing global concerns about containment of carbon emissions through the use of environment friendly bio-fuels. 
  • Optimization in development and utilization of indigenous biomass feedstock for the production of bio-fuels. 
  • Promotion of highly efficient, new generation bio-fuel conversion technologies based on new feed stocks. 
  • Proposal from oil marketing companies to procure bio-ethanol and bio-diesel at the Minimum Purchase Price (MPP)  
  • Consideration by GOI to initiate National Bio fuel Fund to provide financial incentives, subsidies and grants for new and second generation feed stocks, advanced technologies, conversion processes, and production units.
  • Declaration of bio-fuels under the ambit of “Declared Goods” so as to ensure its unrestricted movement within and outside the States.
  • Except for a concessional excise duty of 16 percent on bioethanol, no other central taxes and duties are proposed to be levied on bio-diesel and bio-ethanol.
  • Thrust for innovation, (multi-institutional, indigenous and time bound) research and development on bio-fuel feedstock production including second generation biofuels.
  • 100 percent allowance in bio-fuel technologies and projects (E.g. FDI participation in Plantations of non-edible oil bearing plants) for foreign direct investments (FDI) through automatic approval route.

 The table below indicates the current status of financial support from the GOI to bio-fuel projects

Financing Schemes

Interest rate (%)

Maximum repayment period (Years)

Maximum Moratorium (Years)

Minimum Promoters Contribution (%)

Term loan from IREDA


a) Ethanol production through Biomass/ Sugar juice/ Molasses





Upto 70% of project cost

IREDA loan is available only for plants of oil extraction & trans-esterification process.

b) Bio-Diesel Production





Upto 70% of project cost

IREDA loan is available only for plants of oil extraction & trans-esterification process.

Source: IREDALtd

Note: No duty exemption & subsidy are available at present.


National Biodiesel Mission (NBM):

In 2003, the Planning Commission of India brought out an extensive report on the development of biofuels (Planning Commission, 2003).

The National Biodiesel Commission was set up to look exclusively into issues pertaining to biodiesel and the development of Jatropha curcas as the feedstock for biodiesel production (Planning commission, 2003). The blending targets for ethanol and biodiesel were proposed to be set at 10% and 20% respectively by 2011/12.

Developments in NBM



April 2003

Demonstration phase 2003 to 2007: The Ministry of Rural Development appointed as nodal ministry to cover 400,000 hectares under jatropha cultivation. This phase also proposed nursery development, establishment of seed procurement and establishment centres, installation of a trans-esterification plant, blending and marketing of bio-diesel

October 2005

MoPNG announced a bio-diesel purchase policy in which OMC‟s would purchase bio-diesel across 20 procurement centres across the country to blend with high speed diesel w.e.f January 2006. Purchase price set at Rs 26.5 per litre


Self Sustaining Execution phase 2008 to 2012: Targeted to produce sufficient biodiesel for 20 percent blending by the end of the XIth (2008-12) five year plan


An estimated 0.5 million hectares has been covered under jatropha cultivation of which two-thirds is estimated to be new plantation, requiring two to three years to mature


Ambitious plans to ensure sufficient feedstock by 2011/12 for 20% mandate fuel blends

 Bio ethanol

Ethanol Blending Program (EBP)

EBP is an ambitious plan from GOT involving a mandatory 5% blend of ethanol derived from sugar molasses with petrol.

Developments in EBP



January 2003

Ministry of Petroleum and Natural Gas (MoPNG) made 5 percent ethanol blending (Gazette on EBP ) in petrol (gasoline) mandatory across 9 States and 5 Union Territories

September 2006

Resurgence in sugarcane production in 2005/06 and 2006/07 led the GOI to mandate 5 percent ethanol blending in gasoline across 20 states and 8 Union Territories subject to commercial viability

September 2008

The Union Cabinet approved the National Biofuel Policy. Five percent blending became mandatory across all states in the country.

The third phase of implementing EBP envisaged the blending ratio to be increased to 10 percent, with a targeted 20 percent blending by 2017.

July 2010

Establishment of an expert committee by GOI to

recommend a long term formula for fixing the price of ethanol.


  India Biomass Energy