Report Highlights:

Domestic ethanol production in calendar year (CY) 2016 will remain close to this year's level of 2.2 billion liters due to stable supply of sugarcane for sixth consecutive year (MY 2015/16). Fuel ethanol market penetration in CY 2016 and CY 2015 will be 2.9 percent and 2.8 percent, respectively. Both the ethanol blending program (EBP) and National Biodiesel Mission (NBM) are likely to see some momentum after the government amended and introduced several recent policy changes; which were long expected.

Executive Summary:

Domestic ethanol production in CY 2016 will remain close to this year's level of 2.2 billion liters due to stable supply of sugarcane for sixth consecutive year (MY 2015/16, Oct-Sept). Fuel ethanol market penetration will be 2.9 percent. The government owned petroleum companies (known colloquially as oil marketing companies (OMCs) are forecast to purchase an estimated 800 million liters of ethanol in CY 2015 and achieve fuel ethanol market penetration of 2.8 percent.

Lately, some measures such as fixed pricing mechanism for fuel ethanol procurement for OMCs, allowing ethanol produced from other non-food feedstock's besides molasses for the Ethanol Blending Program (EBP), and providing an excise duty exemption for ethanol produced in MY 2015/16, will help sugar mill clear partial debts, infuse cash flows and curtail (by some estimates) upwards of $750 million in crude oil imports.

On the biodiesel front, the market penetration is way below one percent but following the deregulation of diesel price in line with gasoline, private biodiesel manufacturers will now be encouraged to sell biodiesel directly to consumers. Further, the price of biodiesel will now be market determined, encouraging biodiesel production from multiple feedstock (crude oil, used cooking oils, animal fats etc.). A advanced biofuel production is in nascent stage as its commercial production and economic viability remains to be demonstrated.

Overview:

India is expected to be the world's fastest growing economy in Indian fiscal 2015-16 (April-March) at 7.5 percent. Growth is expected to further accelerate to 7.9 percent in 2016-17 and eight percent in 2017-18. Gradual implementation of reforms in India has supported business and investor confidence and encouraged capital inflows. Further, the decline in global oil prices has helped India improve fiscal and current account balances, enabled some subsidy reforms and facilitated an easing of monetary policy.

According to the latest Worldbank Report, global growth is expected to be 2.8 percent in 2015, but is expected to pick up to 3.2 percent in 2016–17. Developing economies are facing two transitions. First, the appreciation in the U.S. dollar is exerting downward pressure on capital flows to developing countries. Second, despite some pickup in the first quarter of 2015, lower oil prices are having an increasingly pronounced impact. In oil-importing countries, the benefits to activity have so far been limited, although they are helping to reduce vulnerabilities.

Post assumes that India's economic growth will further drive its energy consumption across all major sectors, and will continue to be the fourth largest primary energy consumer, trailing only the China, United States, and Russia (Source: U.S. EIA). India continues to rely on imports for a considerable amount of its energy use. India's import of gasoline and petroleum products has outgrown consumption demand in last decade. However, in last fiscal (2014/15), imports grew marginally while its value shrunk due to the steep fall in crude oil prices (since mid of last year) which incidentally provided cushion against the strengthening dollar during same period. Industry think tanks assume that India's crude oil import bill in current fiscal (2015/16) will reduce further if crude oil prices remain modest and USD/INR exchange rate remains stable.

Energy consumption basket and end usage Of the total primary energy consumption basket, coal and oil constitute 66 percent and combustible renewable and waste accounts for 25 percent of the total energy use. Natural gas has seven percent share. Other renewable such as wind, geothermal, solar, and hydroelectricity represent a 2 percent share of the Indian fuel mix. Nuclear holds a one percent share.

In terms of end usage across major sectors, energy demand across the transport sector is highest. Road transport sector accounts for 5 percent of India's Gross Domestic Product (GDP) as of fiscal 2011/12).

Easy availability, adaptability to individual needs and cost saving are some of the factors which go in favor of road transport. Road transport also acts as a feeder service to railway, shipping and air traffic. With the vehicle population growing at 8-10 percent annually, the share of road traffic as percent of freight and passenger traffic is estimated upwards of 60 percent and 90 percent, respectively. The total number of registered motor vehicles in India as of March 31, 2013 were 173 million wherein two-wheelers constituted 73 percent and 'car, jeep and taxis' held 14 percent of total share, respectively (Annual Report 2014-15, Ministry of Road Transport and Highways (MRTH)). Continued economic growth, increasing urbanization, rise in consumer spending levels and with improving road infrastructure, new vehicle registration is expected to push total registered motor vehicle population to 210 million mark by end of current fiscal (2015/16).

As vehicle ownership expands, so will the demand for gasoline and petroleum products rise in tandem. Currently, diesel alone meets an estimated 72 percent of transportation fuel demand followed by gasoline at 23 percent and their combined demand is expected to grow at the rate of 6 percent in coming years. Further, it's estimated that in next ten years, by the average demand for transport fuels will rise from an estimated 124 billion liters in CY 2015 to 202 billion liters in CY 2024.

The current growth in transport activity and consequent increase in expenditure and consumption of petroleum products which comes at a cost to the environment is raising serious concerns. Since India is the fourth (EIA energy data) largest global contributor to carbon emissions, the government of India (GoI) transport policy has targeted EURO-III and IV as reference emission norms for vehicles, which in turn require adoption of clean and green fuel. Bharat Stage-III norms are already enforced across the country while Bharat stage-IV (equivalent to Euro-IV) emission norms are applicable across 12 to 14 major cities. To meet that objective, the Union Cabinet approved the National Policy on biofuels on December 24, 2009 (PIB press release).

Scope Biofuels seek to provide a higher degree of national energy security in an environmentally friendly, cost-effective and sustainable manner by supplementing conventional energy resources, reducing dependence on imported fossil fuels and meeting energy needs of India's vast rural population by use of non-food feed stocks. Believing India to be endowed with significant potential for generating energy through renewable resources, the GoI is promoting and encouraging production and use of a) ethanol derived from sugar molasses/juice for blending with gasoline and b) biodiesel derived from inedible oils and oil waste for blending with diesel.

Additionally, biomass has been playing an important role as fuel for sugar mills (captive use), textiles, paper mills, small and medium enterprises (SME) and has significant potential in breweries, textile mills, fertilizer plants, paper and pulp industry, solvent extraction units, rice mills, and petrochemical plants. The total estimated biomass power potential in India is estimated upwards of 40,000 MW of which the power generation through bagasse cogeneration is estimated at 10,000 MW (conservative estimate is close to 5000 MW).

POLICY AND PROGRAM: 'INDIA'S BIOFUEL POLICY'

The GoI approved the National Policy on Biofuels on December 24, 2009. The policy encourages use of renewable energy resources as alternate fuel to supplement transport fuels and had proposed an indicative target to replace 20 percent of petroleum fuel consumption with biofuels (bioethanol and biodiesel) by end of 12th Five-Year Plan (2017). In a bid to renew its focus and strongly implement the EBP, the Cabinet Committee of Economic Affairs (CCEA) on November 22, 2012, recommended 5 percent mandatory blending of ethanol with gasoline. The government's current target of 5 percent blending of ethanol in gasoline has been partially successful in years of surplus sugar production and unfilled when sugar production declines. Presently, the contracted ethanol supply for CY 2015 is sufficient to meet 2.8 percent blending target. Notably, several recent policy decisions such as deregulating diesel prices in line with gasoline, allowing private biodiesel manufacturers to sell biodiesel directly to consumers, fixed pricing mechanism for fuel ethanol procurement for OMCs and excise duty exemption for ethanol produced in MY 2015/16 will induce some momentum to the EBP, infuse cash into the local sugar industry, help millers clear partial debts, and curtail (by some estimates) upwards of $750 million in crude oil imports.

SALIENT FEATURES OF INDIA'S BIOFUEL POLICY

  • Derive biofuel from non-feed stock that would be grown on degraded soils or wastelands not otherwise suited to agriculture, thus avoiding a possible conflict of fuel versus food security.
  • Strengthen India's energy security by encouraging use of renewable energy resources to supplement motor transport fuels. An indicative 20-percent target for blending of biofuel for both biodiesel and bioethanol is proposed by end of 12th Five-Year Plan (fiscal 2012/13 through fiscal 2016/17).
  • Minimum Support Price (MSP) mechanism for inedible oilseeds to provide fair price to oilseed growers but subject to periodic revision.
  • Ethanol produced from other non-food feedstock's besides molasses like cellulosic and lingo- cellulosic materials and including petrochemical route, may be allowed to be procured subject to meeting the relevant Bureau of Indian Standards (BIS) standards (Cabinet Decisions).
  • On December 10, 2014, the GoI announced a price fixing scheme for fuel ethanol procurement for parastatal oil marketing companies (OMCs). The program fixes landed-ethanol prices at OMC depots from INR 48.50 to INR 49.50 per liter, a three to five percent increase over the previous price.
  • On January 16, 2015, the Union Cabinet decided to suitably amend Para 5.11 and 5.12 of the national biofuel policy for facilitating consumers of diesel in procuring bio-diesel directly from private bio-diesel manufacturers, their authorized dealers and joint ventures (JVs) of OMCs authorized by the Ministry of Petroleum and Natural Gas (MoPNG), GoI.
  • The price of biodiesel will now be market determined.
  • If necessary, GoI proposes to consider creating a National Biofuel Fund for providing financial incentives, including subsidies and grants, for new and second generation feed stocks, advanced technologies and conversion processes, and production units based on new and second generation feedstock.
  • Thrust for innovation, (multi-institutional, indigenous and time bound) research and development on biofuel feedstock (utilization of indigenous biomass feedstock included) production including second generation biofuels.
  • Meet the energy needs of India's vast rural population by stimulating rural development and creating employment opportunities and addressing global concerns about containment of carbon emissions through use of environment friendly biofuels.
  • Bring biofuels under the ambit of "Declared Goods" by the GoI so as to ensure their unrestricted interstate and intrastate movement. Except for a concessional excise duty of 16 percent on bioethanol, no other central taxes and duties are proposed to be levied on biodiesel and bioethanol.
  • Biofuel technologies and projects would be allowed 100 percent foreign equity through automatic approval to attract foreign direct investment (FDI), provided the biofuel is for domestic use only, and not for export. Plantations of inedible oil bearing plants would not be open for FDI participation.
  • Setting up of National Biofuel Steering Committee (NBSC) under Prime Minister to provide policy guidelines.

Institutional Mechanism

The National Biofuel Policy proposes to set up a National Biofuel Coordination Committee (NBCC) headed by the Prime Minister. Given the role of different agencies and ministries in the biofuel program, the role of NBCC to provide high level coordination, policy guidance and review on different aspects of biofuel development, promotion and utilization becomes more imperative. The committee would meet periodically to review the progress and monitor the biofuel program. The policy also supports development of Biofuel Steering Committee headed by Cabinet Secretary to oversee implementation of its policies on regular basis.

Various state governments will work closely with respective research institutions, forestry department, universities etc. for development and promotion of biofuel program in respective states. Several states have drafted policies and set up institutions for promoting biofuel in their states. In order to deal with different aspects of biofuel development and promotion in the country, several ministries have been allocated specific roles and responsibilities.

ETHANOL POLICY

Ethanol is produced in India from sugarcane molasses and partly from grains. Beginning January 2003, GoI mandated the use of 5-percent ethanol blend in gasoline through its ambitious EBP. Ethanol and alcohol production in India depends largely on availability of sugar molasses (a byproduct of sugar production). Since sugarcane production in India is cyclical, ethanol production also varies accordingly and therefore does not assure optimum supply levels needed to meet the demand at any given time.

At times, lower availability of sugar molasses and resultant higher molasses prices affect the cost of production of ethanol, thereby disrupting supply of ethanol for the blending program at pre-negotiated fixed ethanol prices. However, recently announced price fixing scheme for fuel ethanol procurement for OMCs and with sugarcane cycle expected to enter its sixth year of surplus production, the EBP is likely to accelerate; but with slower pace.

Expanding domestic ethanol supply could address supply issues

  • If mills are given the freedom to flexibly deploy the juice extracted from cane, whether to crystallize most of it into sugar or ferment it into alcohol, they will produce more of whichever fetches higher revenues. Additionally, diverting B-heavy molasses could produce additional ethanol when required. The cyclical swings in sugar production could also be addressed provided India's EBP is robust.
  • Current research and development activities are focused more on second-generation bio-diesel production from locally available ligno-cellulosic material or agricultural and forest residues; which has its own set of challenges and opportunities. Both the private and public sectors claim to be successful in customizing technology (low-cost) to generate power (on pilot scale) from bio-mass resources, particularly ligno-cellulosic material. However, scaling up of such projects on a commercial scale is yet to be seen, while industry observers are optimistic.
  • Public and private institutions can also promote use of alternate crops such as sweet sorghum, sugar beet, sweet potatoes, pearl millet and broken rice to supplement domestic ethanol production, though the efforts to produce ethanol from these feed stocks are only experimental or at pilot stage.
  • The GoI offers subsidized loans through sugarcane development funds to sugar mills for setting up of ethanol production units.

Impediments

Procedural hurdles such as non-issuance of export permits for interstate transport of ethanol, delay in issuing no-objection certificates (NOC), plus higher taxes and levies across different states have impeded the EBP. Rules and regulations, including the high excise duty (central excise duty of INR 750 per metric ton on molasses versus 12.36% ad valorem on industrial alcohol (exempted from next sugar cycle), interstate charges, and so on applicable to control alcohol for potable industry use are equally applicable for ethanol blending with gasoline, thereby severely constraining its availability and utilization for EBP.

BIODIESEL POLICY

The GoI had launched the National Biodiesel Mission (NBM) identifying jatropha (jatropha curcas) as the most suitable inedible oilseed for biodiesel production. The central government and several state governments provide fiscal incentives for supporting planting of jatropha and other inedible oilseeds.

Several public institutions, government departments, state biofuel boards, state agricultural universities and cooperative sectors also supported the biofuel mission in various capacities.

The Planning Commission of India had set an ambitious target of planting 11.2 to 13.4 million hectares to jatropha by the end of 11th Five Year Plan (2011/12). However, the GoI's ambitious plan of producing sufficient biodiesel by 2011/12 (marketing year October/September) to meet its mandate of 20-percent blending with diesel was unachievable mostly due to unavailability of sufficient feedstock (jatropha seeds) and lack of high-yielding drought-tolerant jatropha cultivars. Hence most of the biodiesel units operating in India have shifted to alternative feed-stocks such as edible oil waste (unusable oil fractions), animal fat and inedible oils, utilizing almost 28 percent of their existing capacity to continue year round operations.

Meeting a hypothetical 5-percent biodiesel blending target would require a dedicated plantation of energy crops or a probable switch to alternate sources of biodiesel from locally available tree-borne oilseeds, utilizing multiple feedstock and imported biodiesel (if viable).

Lately, GoI has deregulated diesel price in line with gasoline. Following up, the Union Cabinet has also allowed private biodiesel manufacturers, their authorized dealers and joint ventures (JVs) of OMCs authorized by the MoPNG to sell biodiesel directly to consumers subject to their product meeting prescribed BIS standards.

Impediments

The combination of smaller land holdings and ownership issues with government- or community-owned wastelands has resulted in very little progress made by state governments to create large jatropha plantations. Negligible commercial production of biodiesel from jatropha seeds (through old technology) has stymied efforts and investments by both private and public-sector companies. Additionally, purchase price of biodiesel should be made attractive to boost production.

ETHANOL

India has around 330 distilleries which can produce over 4 billion litres of rectified spirit (alcohol) per year. Of this total, about 143 distilleries have the capacity to distill over 2 billion liters of conventional ethanol. India produces conventional bioethanol mostly from sugar molasses and partly from grains. Production of advanced bioethanol is in its research and development stage.

India: Ethanol Used as Fuel and Other Industrial Chemicals(Million Liters)

Calendar Year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016*

Beginning Stocks

734

1,374

1,642

1,240

1,021

627

624

468

377

166

Production

2,398

2,150

1,073

1,522

1,681

2,154

2,057

2,002

2,219

2,186

Imports

15

70

320

92

39

34

33

107

120

300

Exports

23

12

14

53

119

177

234

175

200

140

Consumption

1,750

1,940

1,780

1,780

1,995

2,015

2,012

2,025

2350

2350

Fuel Consumption

200

280

100

50

365

305

382

350

800

900

Ending Stocks

1,374

1,642

1,240

1,021

627

624

468

377

166

162

Production Capacity

No. of Refineries

115

115

115

115

115

115

115

115

115

115

Nameplate Capacity

1,500

1,500

1,500

1,500

1,500

2,000

2,000

2,000

2,000

2,000

Capacity Use (%)

160

143

72

101

112

108

103

100

111

109

Feedstock Use (1,000 MT)

Feedstock A

9,992

8,958

4,469

6,342

7,004

8,975

8,573

8,343

9,246

9,108

Market Penetration

Fuel Ethanol

200

280

100

50

365

305

382

350

800

900

Gasoline

14,189

15,368

17,606

19,563

20,716

21,842

23,749

25,848

28,252

30,879

Blend Rate (%)

1.4

1.8

0.6

0.3

1.8

1.4

1.6

1.4

2.8

2.9

Source: FAS/New Delhi Estimates based on information from trade sources *: Forecast

Production

Domestic ethanol production in CY 2016 will remain close to this year's level of 2.2 billion liters due to stable supply of sugarcane for sixth consecutive year. Fuel ethanol market penetration will be 2.9 percent. Likewise blend rate of 2.8 percent looks achievable in CY 2015. Industry sources have indicated that the OMCs have committed to procure close to 800 million liters during CY 2015. Technically, the installed capacity is sufficient to meet around 8 percent of blending with gasoline.

The landed-ethanol price delivered at OMC depot is fixed from INR 48.50 to INR 49.50 per liter ($0.76 to $0.78/liter), a three to five percent increase over the previous price. The offer is attractive for sugar mill given that average retail price of gasoline is on slightly higher side. However, with sugar mills already running on negative margins due to high production cost and depressed sugar prices, any procedural delay in EBP could encourage them to divert ethanol to chemical and potable industries. Additionally, mills could divert molasses as cattle feed or for exports if their prices are competitive.

Consumption

Ethanol consumption in CY 2016 will remain stable at this year's level of 2.3 billion liters despite the fact that a third of total ethanol supply is expected to blend with gasoline. Steady rise in supply of molasses and strong demand from allied sectors will support larger ethanol consumption.

Trade

India continues to be a net importer of ethanol. Starting 2003, when GoI laid its ambitious EBP, the trade balance for ethanol has been negative, but has tapered down in last five years in response to rise in domestic production. During CY 2014, India imported 107 million liters (largest in last five years) of ethanol worth $87 million dollars mostly from United States (66 million liters). Exports were limited to over 18 million liters; worth $15 million. The United States, Netherland, Spain, Bhutan and Pakistan were major exporters of ethanol to India while Saudi Arabia, Ghana, Kenya, Nepal, Cote d lvoire, and Cameroon were major importers. The latest trade data for first quarter of CY 2015 indicate that India has imported ethanol upwards of 35 million liters; worth $29 million, of which 25 million liters were from the United States. Exports were close to 2.8 million liters worth $ 2.6 million of which Ghana bought close to a million liter. In India, export of biofuel is only permitted after it meets the domestic requirement and the final decision is taken by the National Biofuel Coordination Committee. The GoI provides no financial assistance for exports of biofuels. However, current trade regulations allow duty-free imports of feed stocks for re-export by certified export oriented units.

Duty

The basic Customs duty on import of denatured ethanol has been reduced from 7.5 percent to 5 percent as per Customs Notification No.12/2014 dated July 11, 2014. Lower import duty helps make imports attractive and economically viable. Traditionally, India imports ethanol only to meet shortfalls in demand during years of lower sugar production. Demand is mostly for consumption across the potable liquor and chemical industries and not for fuel. There are no quantitative restrictions on import of biofuels as well.

India: Import duty on biofuels(percent ad valorem on CIF value)

ITC HS Tariff Number

Total Import duty (percent)

2207.20 Denatured Ethyl Alcohol and Spirits (including ethanol)

5

3824.90 Chemical products not elsewhere specified (including biodiesel)

26.42

Ending Stocks

Steady rise in consumption demand; particularly in last 5 years has led to steep decline in stocks from over one million liters in CY 2010 to just 166 million liters in CY 2015. Anticipating higher blend rate in CY 2016, end stock will remain tight.

BIODIESEL

The enthusiasm of producing biodiesel from jatropha has apparently faded despite its potential to withstand drought and rehabilitate degraded wastelands. Limited availability of jatropha seeds (due to poor productivity), static plantations (inspite of being state subject, only a few states have been able actively to promote jatropha plantation with public and private sector participation), lack of promising varieties/cultivars, rising wage rates, and inefficient marketing channels has risen the cost of production, making it economically unviable proposition. Consequently, there has been no commercial sale of biodiesel across the biodiesel purchase centers set up by the GoI. The initial hypothesis that 'jatropha' (Jatropha curcus) could grow in semi-arid regions with little care and fertilization' is proven void, with research trials contradicting the initial claim. Evidently, researchers have gradually shifted their focus and resources to study feasibility of producing bio-diesel from tree-borne oilseeds (TBOs) such as pongamia (Pongamia pinnata), neem (Azadirachta indica), kusum (Schleichera oleosa), mahua (Madhuca longifolia), and waste edible oils. Some firms claim to import limited quantity of biodiesel (assuming they were viable) and sell it locally after meeting prescribed standards.

India: Biodiesel Production from Multiple Feedstock (Million Liters)

Calendar Year

2010

2011

2012

2013

2014

2015

2016

Beginning Stocks

45

38

42

45

45

50

45

Production

90

102

115

120

130

135

140

Imports

0

0

0

0

0

0

0

Exports

0

0

0

0

0

0

0

Consumption

52

60

70

75

80

90

100

Ending Stocks

38

42

45

45

50

45

40

Production Capacity

No of Biorefineries

5

5

5

6

6

6

6

Nameplate Capacity

450

450

460

465

480

480

500

Capacity Use (%)

20.0%

22.7%

25.0%

25.8%

27.1%

28.1%

28.0%

Feedstock Use (1,000 MT)*

Used Cooking Oil

38

42

48

49

50

50

52

Animal Fats & Tallow's

6

6

7

7

6

5

6

Other Oils

50

58

65

70

75

85

85

Market Penetration

Biodiesel, on-road use

26

30

35

38

40

45

50

Diesel, on-road use

42,625

45,520

49,343

49,354

49,605

53,284

57,244

Blend Rate (%)

0.06

0.07

0.07

0.08

0.08

0.08

0.09

Diesel, total use

71,041

75,866

82,238

82,256

82,674

88,807

95,407

Source: Industry and Post estimates CY 2016 is projected

* Used cooking oil includes vegetable oils such as rice bran oil, palm stearine, cotton seed oil and fatty acid oils while 'Other Oils' include tree oils, palm sludge etc.

Currently, India has 5-6 large capacity plants (10,000 to 250,000 MT per year) currently utilizing 28 percent of the installed capacity to produce 125-140 million liters of biodiesel from multiple feed-stocks such as inedible vegetable oils, unusable edible oil waste (used-once), and animal fats. The biodiesel thus produced is purchased by small and medium enterprises, sold to experimental projects carried out by automobiles and transport companies (state sponsored or private trial runs), apart from minor sales to unorganized consumers such as cellular communication towers, brick kilns, progressive farmers, and to institutions that run diesel generators as source of power back-up.

ADVANCED BIOFUELS

The Indian biofuel industry, both private and public sector, claim to be successful in developing and customizing technology for converting ligno-cellulosic materials in form of wood biomass, agricultural (corn cob, bagasse, stalk of forage crops) waste and forest waste. Trials are underway to process municipal solid waste, micro-algae and photosynthetic organisms into advanced biofuels. However, given the technological challenges, commercial production and economic viability remains to be demonstrated.

Biomass for heat and power Scope

Biomass resource has the potential to produce grid-quality power utilizing various conversion technologies notwithstanding the scope to optimize power generation from sugar bagasse. Wide benefits include its renewability, wide adaptability, carbon neutrality and the potential to generate employment in rural areas. The potential could be enhanced further if dedicated plantation in forest and degraded land are linked to biomass power (MNRE, GoI). Additionally, biomass (non-fossilized and biodegradable organic material originating from plants, animals and micro-organisms) has been playing an important role as fuel for sugar mills, rice mills, textiles, and raw material for paper mills, small and medium enterprises.

Biomass material

Bagasse, rice husk, straw, cotton stalk, coconut shells, soy husk, de-oiled cakes, coffee waste, jute wastes, peanut shells, and sawdust are used a raw material for power generation The crop residues from non-fodder crops, e.g., cotton, oilseeds, chilies and bamboo residues may also be considered as good alternatives for biomass power production (DST, GoI). However, the use of biomass as cattle feed and part utilization by power industries may lead to a rise in cost of fuel for biomass power plant as it may not be available unless exclusively grown for power generation.

Biomass Availability and Power Potential

Biomass availability in India is estimated at upwards of 915 million metric tons (MMT) which covers both agricultural (657 MMT/year) and 'forestry & wasteland' residues (260 MMT/year). The combined power potential from both resources is estimated at 33,292 MWe (agro: 18,730 MWe and forest and wasteland: 14,562 MWe) (Source: Biomass Knowledge Portal).

Bagasse power cogeneration

With modernization of new and existing sugar mills, surplus power generation through bagasse cogeneration in India's 550 sugar mills is estimated at 10,000 MW (target for 12th Five-year plan is to achieve 32 percent of total potential) if these mills were to adopt technically and economically optimal levels of cogeneration for extracting power from the bagasse they produce.^ The optimum cogeneration capacity installed in Indian sugar mills is one of the highest among major sugar producing countries. The total estimated biomass power potential is thus estimated upwards of 40,000 MW. Note: Some think tank estimate bagasse based power generation potential close to 5000 MW. Considering the preceding estimate, total biomass power potential scales down to proportionate value. The GoI has initiated several programs and schemes for promoting renewable energy sources.

Seventeen Indian states have policies for development of biomass power. Biomass power projects attract fiscal incentives such as accelerated depreciation, concessional customs duties, and income tax exemptions. Emphasis will be put on development of fuel value-chain business models while encouraging the operating period of bagasse cogeneration projects from 180-220 to 300-plus days.