6.1 Biofuels in India: How and Why
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6.1.3 India’s Biofuel Policy Framework
India’s first biofuel policies came about in 2003, by the erstwhile Planning Commission—which until its 2014 dissolution by the Modi administration prepared national
five-year development plans. The Commission elaborated on the advantages of
producing biofuels and launched an Ethanol Blending Programme and a National
Biodiesel Mission (see Planning Commission 2003). The former included the phasein of ethanol blending mandates and the minimum purchase price to be paid by OMCs
to sugarcane mills. Ethanol was initially to be produced exclusively from sugarcane
molasses, until the government allowed mills to manufacture it directly from sugar
juice in years of surplus production. India’s ethanol strategy, therefore, uses existing
agroindustry and does not foresee new cultivation. The country’s sugarcane cropland has remained mostly stable at 4–5 million hectares (Mha) since the year 2000
(Directorate of Economics and Statistics 2019).
In contrast, the National Biodiesel Mission promoted the deployment of jatropha
on 11.1–13.4 Mha of uncultivated “wastelands.” This strategy would “reclaim” these
lands and put them to commercial use while avoiding a food vs. fuel conflict, which
would emerge if biodiesel production utilized edible oil. First, the mission’s demonstration phase (2003–2007) promoted the government-led development of jatropha
nurseries, seed procurement, and pilot projects. A self -sustaining execution phase
(2008–2012) allowed commercial private and government-run jatropha plantations
and buy-back schemes with smallholders. The final target was to replace 20% of the
country’s diesel consumption with jatropha biodiesel by 2012 (Planning Commission
2003), something still far from being achieved even in the 2020s.
In 2009, the National Policy on Biofuels integrated economic and regulatory
instruments under a single coherent framework (MNRE 2009). These instruments
have included, in addition to the investment, blending and minimum price policies: (i)
eligibility of jatropha cultivation under the National Rural Employment Guarantee
Scheme (NREGS), which provides rural workers with 100 days of governmentpaid labor at a minimum wage each year; (ii) priority lending for biofuel projects at
public banks; (iii) tax breaks and excise duty concessions on biofuels, plant materials,
machinery and engines related to them; (iv) grants for R&D on biofuels; and (v) 100%
foreign equity allowance on biofuel industry technology and products, to stimulate
foreign direct investment—but only if production is for the domestic market (MNRE
2009). Foreigners are not allowed to own land or plantations, and the policy prohibits
biofuel exports before meeting the domestic demand. Besides, only domestically
produced ethanol can be used to meet the blending mandate. Ethanol may be imported
(as it has been, from Brazil; Pohit et al. 2009), but only for non-fuel industrial
purposes. Finally, the policy changed and postponed the consumption target. The
new goal was to replace 20% of total diesel and gasoline consumption by 2017,
allowing it to take the ethanol blending into account (MNRE 2009).
It is important to note that biofuels have created unprecedented changes in India’s
land-use regulations at both national and state levels. Since colonial times, lands have
129
6.1.3 India’s Biofuel Policy Framework
India’s first biofuel policies came about in 2003, by the erstwhile Planning Commission—which until its 2014 dissolution by the Modi administration prepared national
five-year development plans. The Commission elaborated on the advantages of
producing biofuels and launched an Ethanol Blending Programme and a National
Biodiesel Mission (see Planning Commission 2003). The former included the phasein of ethanol blending mandates and the minimum purchase price to be paid by OMCs
to sugarcane mills. Ethanol was initially to be produced exclusively from sugarcane
molasses, until the government allowed mills to manufacture it directly from sugar
juice in years of surplus production. India’s ethanol strategy, therefore, uses existing
agroindustry and does not foresee new cultivation. The country’s sugarcane cropland has remained mostly stable at 4–5 million hectares (Mha) since the year 2000
(Directorate of Economics and Statistics 2019).
In contrast, the National Biodiesel Mission promoted the deployment of jatropha
on 11.1–13.4 Mha of uncultivated “wastelands.” This strategy would “reclaim” these
lands and put them to commercial use while avoiding a food vs. fuel conflict, which
would emerge if biodiesel production utilized edible oil. First, the mission’s demonstration phase (2003–2007) promoted the government-led development of jatropha
nurseries, seed procurement, and pilot projects. A self -sustaining execution phase
(2008–2012) allowed commercial private and government-run jatropha plantations
and buy-back schemes with smallholders. The final target was to replace 20% of the
country’s diesel consumption with jatropha biodiesel by 2012 (Planning Commission
2003), something still far from being achieved even in the 2020s.
In 2009, the National Policy on Biofuels integrated economic and regulatory
instruments under a single coherent framework (MNRE 2009). These instruments
have included, in addition to the investment, blending and minimum price policies: (i)
eligibility of jatropha cultivation under the National Rural Employment Guarantee
Scheme (NREGS), which provides rural workers with 100 days of governmentpaid labor at a minimum wage each year; (ii) priority lending for biofuel projects at
public banks; (iii) tax breaks and excise duty concessions on biofuels, plant materials,
machinery and engines related to them; (iv) grants for R&D on biofuels; and (v) 100%
foreign equity allowance on biofuel industry technology and products, to stimulate
foreign direct investment—but only if production is for the domestic market (MNRE
2009). Foreigners are not allowed to own land or plantations, and the policy prohibits
biofuel exports before meeting the domestic demand. Besides, only domestically
produced ethanol can be used to meet the blending mandate. Ethanol may be imported
(as it has been, from Brazil; Pohit et al. 2009), but only for non-fuel industrial
purposes. Finally, the policy changed and postponed the consumption target. The
new goal was to replace 20% of total diesel and gasoline consumption by 2017,
allowing it to take the ethanol blending into account (MNRE 2009).
It is important to note that biofuels have created unprecedented changes in India’s
land-use regulations at both national and state levels. Since colonial times, lands have