Addressing feedstock challenges to unlock India’s biofuel potential

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Biofuels have emerged as an important solution for both India’s decarbonisation and energy security ambitions. Bioethanol, in particular, has shown rapid growth in the last few years, backed by a strong policy push. The Initial Biofuel Policy aimed to achieve a 20-percent ethanol blending rate with petrol by 2030. However, last year, the central government advanced this target to 2025.

While initial progress was slow, recently the blending rate has improved rapidly, hovering between 10-12 percent through most of last year and reaching an all-time high of 15 percent in May 2024.

Emerging feedstock challenges

Ethanol can be produced from a variety of sources. In India, most ethanol production currently relies on edible feedstocks, known as first-generation (1G) biofuels. To enhance biofuel output, the central government has recently expanded the range of permitted feedstocks for ethanol production, including various sugarcane by-products and food grains. While sugarcane juice and syrup have traditionally been the primary sources of biofuel, rice and maize have become increasingly important in the last year.

Although strong policy support has significantly boosted biofuel production, feedstock availability continues to remain a concern as policymakers try to balance the use of edible feedstock for fuel and food.

To enhance biofuel output, the central government has recently expanded the range of permitted feedstocks for ethanol production, including various sugarcane by-products and food grains.

For example, last year, after the sugar output fell short of expectations, the central government halted the use of sugarcane juice and syrup for ethanol production to ensure sufficient sugar supply for domestic consumption. Additionally, policymakers have also consistently struggled with setting a fair price for sugarcane-based ethanol due to similar concerns. This uncertainty has caused hesitation amongst investors and sugar mill owners and has prompted a shift towards producing ethanol from food grains and B-heavy molasses, which require less sugar diversion. While alternative foodgrain-based feedstocks may sustain current ethanol production levels, a more diversified and sustainable approach will be essential for the long-term growth of this sector.

There is now a need to expand beyond 1G biofuels and create pathways to expand the production of second generation (2G) or waste-based biofuels. Utilising agricultural and forestry waste for biofuel production can not only help meet decarbonisation and energy security goals but also promote a circular economy and reduce pollution from waste burning.

The 2G biofuel proposition

India's National Biofuel Policy has consistently emphasised 2G biofuels. The 2018 Biofuel Policy underscored the need for production pathways reliant on waste biomass and placed a clear focus on promoting research and development for 2G technologies. However, the ethanol blending roadmap proposed by NITI Aayog in 2021-22 marked a shift in strategy. This new approach aimed to achieve the 20 percent blending target by 2025 exclusively using sugarcane and foodgrain-based feedstocks.

There is now a need to re-emphasise the initial principles of India’s biofuel policy and create a roadmap for scaling up 2G biofuels.

Encouragingly, unlike many other green fuels, the technology needed for producing waste-based biofuels is to a large extent available within India. For example, in 2022, Indian Oil Corporation Limited (IOCL) launched Asia’s first 2G Ethanol Biorefinery in Panipat, Haryana. The technology for this plant was provided by Praj Industries, an Indian biotechnology company that has successfully created various localised biofuel solutions. Praj's technology enables the use of rice straw as feedstock, allowing the plant to produce up to 3 crore litres of ethanol from 2 lakh tonnes of rice straw. Praj and similar companies have developed technological capabilities not only for bio-ethanol but also for compressed biogas and sustainable aviation fuel. These advancements position India to be a leader in the 2G biofuel space.

The 2018 Biofuel Policy underscored the need for production pathways reliant on waste biomass and placed a clear focus on promoting research and development for 2G technologies.

There is also an abundance of potential sources of feedstock for 2G biofuels. Agricultural waste is a promising source. Estimates suggest that out of the total 754 million tonnes of agricultural waste generated annually, at least 228 million tonnes are surplus and can be used for fuel production. Based on conversion metrics used in the Biofuel Policy, this would be enough to produce around 42.75 billion litres of ethanol. For context, the achievement of the 20 percent blending target would require around 12 billion litres of ethanol.

Resolving the feedstock supply problem 

Despite the abundant availability of feedstock, establishing a cost-effective and reliable supply chain for the collection, storage, and transportation of feedstock for waste-based biofuels remains a significant challenge.

The experience with existing 2G bio-ethanol refineries reveals the following major challenges:

• The incentive challenge: Without guaranteed economic incentives, farmers lack the motivation to collect and sort agricultural waste for fuel production. Consequently, much of the biomass that could be converted into biofuels ends up being burnt or destroyed, as farmers are often unaware of the potential alternative uses for agricultural residue. Consequently, even when collection systems are established, farmers are hesitant to participate due to the unclear economic benefits.

• The quality challenge: A certain quality of biomass is necessary for the production of ethanol that meets the required standards. However, due to the lack of a standardised collection process the biomass that reaches the refinery often differs substantially in terms of moisture, inert matter, and size. This leads to delays in production and increased costs for biofuel producers. This is due to the lack of standardised collection machinery and the lack of awareness among farmers regarding the collection process. Moreover, given that the collection window for biomass is short, farmers need to clean the land within a certain window. However, due to a lack of collection machinery, they are forced to depend on unorganised aggregators who also lack a standardised collection process.

• The infrastructure challenge: The feedstock collection supply chain for 2G biofuels faces significant infrastructure deficiencies, particularly in storage. Currently, the absence of decentralised storage or sorting facilities necessitates direct transportation of collected waste to the refineries, increasing both collection time and costs. Additionally, farmers lack access to the machinery required for efficient collection. Ideally, infrastructure investments should focus on creating a hub-and-spoke model, where regional collection and storage facilities gather and process waste from nearby farms before forwarding it to refineries.

While in this case the challenges are highlighted specifically for ethanol, similar challenges are also likely to be faced for other waste-based biofuels.

The way forward

Improving the proliferation of 2G biofuels will require concerted efforts from a range of stakeholders across the feedstock supply chain. Policymakers must now play an active role by implementing forward looking initiatives aimed at resolving the specific challenges highlighted above.

First, a clear target for 2G biofuels at the national level could act as a strong catalyst for positive and coordinated actions across a wide range of stakeholders. For instance, the Central Government could  revise its current ethanol roadmap and designate a certain share of 2G biofuels in the 2025 blending target. There is also a need to set some sort of target for other biofuels such as compressed biogas and sustainable aviation fuel to take advantage of technological developments happening in the country.

Agricultural universities should be leveraged to develop courses and train educators who can then work with farmers to improve their ability to be positive contributors to the 2G biofuel supply chain.

Secondly, it is essential to raise awareness among farmers about the value of agricultural waste as a fuel source, the proper methods for waste collection, and the economic opportunities they can derive from it. This can be achieved by mobilising organisations that already have strong connections with farmers, such as Krishi Vikas Kendra and farming-focused NGOs. Agricultural universities should be leveraged to develop courses and train educators who can then work with farmers to improve their ability to be positive contributors to the 2G biofuel supply chain.

Third, there is a need to create decentralised biomass collection and storage system. To this end, State governments should work with oil marketing companies to identify ideal locations for decentralised storage depots and aid in the procurement of land to set up such facilities. In July 2023, the Central Government released the Crop Residue Management Guidelines for four states, aiming to establish an effective system for agricultural waste collection. The guidelines propose a mechanism for sharing the investment cost needed to procure collection equipment, with the government covering 65 percent of the expenses. However, these guidelines have yet to be notified and must be fast-tracked. More importantly, the central and state governments need to work together to ensure these guidelines are actually implemented on the ground.

Finally, there is a need for greater incentives for farmers to participate in the supply chain. To this end, states could look to provide direct incentives to farmers for waste collection. For instance, the Haryana government has decided to provide a subsidy of INR 1,000/tonne of biomass collection. Improving access to the carbon credit market for stakeholders in the biofuel supply chain could also provide an additional source of finance. The Green Credit Programme announced by the Central Government could play a crucial role in this regard. However, so far the programme has only outlined the process for tree plantation projects to claim credits. In the next stage, the scheme should prioritise creating a mechanism for claiming green credits for agricultural feedstock used in biofuels.

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Promit Mookherjee is an Associate Fellow at the Centre for Economy and Growth at the Observer Research Foundation

• Energy
• India
• agricultural waste
• agricultural waste
• bioethanol
• bioethanol
• biofuels
• Decarbonisation
• energy security
• ethanol blending
• ethanol production
• ethanol production
• feedstock
• feedstock
• first-generation biofuels
• first-generation biofuels
• maize
• maize
• National Biofuel Policy
• National Biofuel Policy
• rice
• second-generation biofuels
• second-generation biofuels
• sugarcane
• waste-based biofu
• waste-based biofu

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