Previous policy stint was great but biofuels industry has new expectations from Modi 3.0

A new government has come to the center with Narendra Modi heading for a straight third term as Prime Minister. A net result of the new government – with some change and more continuity – has sent reassuring signals that the policies supporting the bioenergy sector will persist with the same vigour.

Compressed biogas (CBG) and ethanol are the key drivers of the bioenergy trajectory of the country. Schemes like SATAT, Viability Gap Funding of ethanol production, grants for R&D, budgetary support for feedstock collection machineries etc. have helped the growth of the biofuels segment. As Modi 3.0 has begun to unfold, the biofuels industry has renewed hopes and policy demands which may be necessary to give the fillip to the biofuels industry.

Sustainable or ecologically responsible growth is not possible without decarbonisation of the energy sector. Biofuels not just reduce the carbon footprints of our economic activities but also have the ability to revolutionize the sequestration of carbon accelerating our collective march to net zero ambitions. To realize the same, the industry is eager to see new policies from the new government to give speed to the biofuels development in India in letter & spirit.

Sanjay Ganjoo, Director General of Indian Federation of Green Energy (IFGE) has quite a few expectations from the new government: maintaining clear & consistent renewable fuel standards and blending mandates; subsidies, tax credits, and grants to lower production costs; substantial funding for R&D to drive technological advancements; Training programs to develop skilled workforce.

He says that collaboration between government, industry stakeholders and academia is key to address challenges and leverage opportunities, while international partnerships can help share knowledge, technology, and best practices to further industry’s growth.

“To strengthen the supply chain and raw material supply segment, one crucial initiative could be providing direct subsidies and financial incentives to farmers for cultivating energy crops, along with minimum support prices to ensure fair compensation and encourage production. Additionally, funding for research into high-yield, drought-resistant, and low-input biofuel crops can enhance the efficiency and sustainability of feedstock production,” added Ganjoo.

He says that focus should also be on the investment of the development of transportation networks and storage facilities. Public-private partnerships can be encouraged to develop integrated supply chains to ensure a reliable and cost-effective supply of feedstocks.

To reduce the cost of production in the CBG segment, the IFGE DG believes that investment in R&D can lead to innovations in anaerobic digestion and feedstock pre-treatment technologies. “Collaboration between domestic and foreign research institutions, universities, and industry players should be encouraged to accelerate technology commercialization. Moreover, simplifying regulatory approval processes and promoting long-term contracts between CBG producers and large consumers, such as government departments and public transportation fleets, can provide financial stability and ensure consistent demand for CBG.”

He holds that Modi 3.0 should provide comprehensive financial incentives for setting up CBG plants and infrastructure. Subsidies for feedstock materials like agricultural residue, municipal solid waste, and animal manure can significantly lower raw material costs.

He mentions that fostering a supportive ecosystem for innovation and entrepreneurship in the biofuels sector is crucial. “The government should encourage start-ups and small enterprises through incubation programs, mentorship, and access to testing facilities. These initiatives can spur technological breakthroughs and drive down production costs by promoting competition and innovation within the industry.”

Suhas Baxi, CEO & Co-Founder, BiofuelCircle, says that a ‘robust policy framework’ would involve several elements, like enhancement of regulatory support to ensure consistency and predictability in the market, implementation of policies that encourage investment in biofuel production and infrastructure, and promotion of R&D.

Suhas says that compliance with global benchmarks enhances export possibilities and competitiveness on a worldwide scale. He believes that India is full of biomass and harnessing, and channelizing the biomass to local production is something which is going to be solving a major bottleneck and a problem. He emphasizes on efficient implementation of policies.

“Some of the incentives such as subsidized balers have recently been introduced. These incentives, if implemented properly and are made available to the supply chain as well as the producers, will go a long way in creating a stable and growing scenario. Creating awareness about these policies is key to success,” he adds.

Talking about the biogas industry specifically, Suhas opines that to improve profitability, addressing supply chains concerns, utilizing CBG locally and incorporating by-products into the agricultural economy is critical. “To lower production costs for the CBG sector, the government could explore options such as offering capital grants or low-interest loans for plants’ construction, thereby easing the financial strain on producers at the outset.”

The BiofuelCircle CEO also adds, “Additionally, establishing a beneficial tariff system for CBG to improve its competitiveness with traditional fuels and provide support and knowledge transfer to enhance production processes and efficiency. Moreover, it’s vital for the new government to foster collaboration among industry stakeholders, academia, and research institutions. Through the establishment of forums for exchanging information and collaborating on projects, we can work together to spur innovation and address the obstacles facing the biofuel industry.”

Shashi Hegde, Director at Bengaluru-based Hycons, says that Hycons has been on the forefront of policy suggestions to the government with regards to CBG and overall biofuels development since 2019. “Whatever good suggestions we placed before the government, most of them were accepted and found place in notifications. This kind of support has not even come for wind & solar segments.”

Hegde says that on the biomass aggregation side, the local entrepreneurs who have touch of the village can well establish CBG projects. “Urban entrepreneurs find it difficult. Hence, the CBG revolution will be driven by the Tier-II and Tier-III cities but the entrepreneurs there don’t have cash flow. The government should use the PM Rural Employment Guarantee Scheme to fund these rural entrepreneurs to help them become biomass aggregators & generate employment.

The Hycons Director also suggests the strengthening of the Farmer Producer Organisations of the country (FPOs) as many farmers are either not aware of it or not taking advantage of FPOs. “The FPO movement has to be pushed through just like the cooperative movement has happened in India. This will not just benefit the biofuels industry but farmers will also have good income.”

He also pins hope on good renewed focus on financing by the banks & other sources with regards to biofuels projects. “The failed projects speak louder. The successful projects should also promote themselves so that banks & financial institutions have proper awareness about good projects. If we go with the given speed, we will take another 600 years to achieve 5000 CBG plants in the country. So the approach has to be different for sure,” concludes Shashi Hedge.