Biofuel has huge potential to stimulate rural development and to generate employment. Benefits to the environment as well as energy security are key factors working in favour of biofuels.
There has been a very positive shift towards the growth of biofuel as an energy source due to subsidies and incentives offered by the Indian government. Bio-ethanol has been allotted a concessional excise duty of 16 percent and is also exempted from excise duty. Currently, there are no other central tax and duties which are being proposed or planned to be levied on biofuels.
The Indian approach towards the biofuel energy sector has been different to the current international approach as India’s focus has been on non-feedstock which are raised on degraded or wasteland thus avoiding the conflict of fuel vs. food security. India's policy surrounding biofuels favours utilisation of indigenous biomass food stocks for the production of biofuel. The goal of the policy has been to ensure that a minimum level of biofuels become readily available in the market to meet the demand at any given time. An indicative target proposed to be implemented by 2017 is to have of 20 percent blending of biofuels, both for bio-diesel and bio-ethanol.
To make the issues of fuel vs. food security irrelevant in the Indian context, the development focus is to utilise waste, degraded forest and non-forest lands only for cultivation of shrubs and trees bearing non-edible oil seeds for production of bio-diesel fuel. The price dependency is also worked out so that future growth of biofuel is not hindered by the rise of diesel or the petroleum price. For the moment, the Minimum Purchase Price (MPP) for bio-diesel will be linked to the prevailing retail diesel price and based on actual production cost and import price of bio-ethanol. If the prices of diesel or petroleum fall below the minimum purchase price decided by the government in order to compensate the oil marketing companies (OMC).
Although India’s Ministry of New and Renewable Energy has strongly implemented and supported policy and budgetary support for renewable energy over the years, there are still a few major barriers that are hindering the substantial growth of renewable energy in India. There needs to be huge policy reformations in order to conceal the innovation induction, and strategies to up-scale deployment and provide investor’s access to capital through technology development and adaptation.
Author: Ajay Pal Singh, RESET editorial