National Biofuel Mission: Harnessing Renewable Energy for India’s Future

India imports around 80% of its crude oil requirements, spending tens of billions of dollars in foreign exchange every year. Against this backdrop, the National Policy on Biofuels (NPB) 2018 – notified by the Ministry of Petroleum and Natural Gas – represents one of the country’s most significant steps toward energy self-reliance. The policy is not just about replacing petrol and diesel. It connects energy security, climate goals, farm incomes, and waste management into a single, cohesive framework. Whether you’re studying environmental policy or simply curious about how India plans to fuel its future, the National Biofuel Mission is a story worth understanding.

Overview of the National Biofuel Mission 🔗

India’s first National Policy on Biofuels was introduced in 2009 by the Ministry of New and Renewable Energy. By 2018, the policy was substantially revised and taken over by the Ministry of Petroleum and Natural Gas to reflect the pace of global developments and India’s evolving energy needs. The NPB 2018 set an indicative target of blending 20% ethanol in petrol and 5% biodiesel in diesel by 2030 – a target that was later advanced to 2025-26 through the 2022 amendment to the policy.

The mission’s core objective is to utilize domestic feedstock to produce biofuels that can increasingly substitute fossil fuels, contributing to national energy security, climate change mitigation, and new employment opportunities. Importantly, it also aligns with several other government programs – Make in India, Swachh Bharat Abhiyan, and the goal of doubling farmers’ incomes – making it a cross-sectoral policy with wide economic relevance.

Governance of the mission is overseen by the National Biofuel Coordination Committee (NBCC), chaired by the Minister of Petroleum and Natural Gas, with representation from 14 other ministries. This structure ensures coordinated implementation across agriculture, environment, finance, and transport sectors.

Key feedstocks and biofuel types 🔗

One of the NPB 2018’s most notable features is how it expanded the range of raw materials eligible for biofuel production. The policy classifies biofuels into three broad generations, each with its own feedstocks, incentive structure, and technological requirements.

First-generation (1G) biofuels 🔗

Bioethanol is the dominant 1G biofuel in India. It is produced primarily from sugarcane molasses, a by-product of the sugar industry. The NPB 2018 significantly expanded the feedstock list to include sugarcane juice, sugar beet, sweet sorghum, starch-containing materials like corn and cassava, and even damaged food grains – wheat, broken rice, and rotten potatoes unfit for human consumption. This means surplus agricultural produce that would otherwise go to waste can now be directed toward fuel production.

Biodiesel, the other major 1G biofuel, is produced from non-edible oilseeds, used cooking oil (UCO), and short-gestation crops. The Food Safety and Standards Authority of India (FSSAI) has also initiated a program to collect used cooking oil from restaurants and food establishments and convert it into biodiesel – addressing a public health concern while producing renewable fuel.

Second and third generation (2G and 3G) biofuels 🔗

Second-generation ethanol is produced from lignocellulosic biomass – agricultural residues like crop stubble, forestry waste, and industrial by-products. These feedstocks do not compete with food production, making them environmentally preferable. The government has allocated a viability gap funding scheme of ₹5,000 crore over six years specifically to support 2G ethanol bio-refineries, with higher purchase prices offered compared to 1G biofuels.

The Pradhan Mantri JI-VAN Yojana, notified in 2019 and amended in 2024, supports the commercial development of advanced biofuel projects using lignocellulosic biomass and other renewable feedstocks. Its total financial outlay is ₹1,969.50 crore.

Third-generation biofuels include algae-based fuels, Municipal Solid Waste (MSW) converted to drop-in fuels, and bio-CNG. India generates approximately 62 million metric tonnes of MSW annually, and available technologies can convert waste and plastic into liquid fuels – one tonne of such waste yielding roughly 20% drop-in fuel content.

Socioeconomic and environmental benefits 🔗

The National Biofuel Mission is not purely an energy initiative – its impact on rural livelihoods and the environment has been substantial and well-documented.

Farmer income and rural economy 🔗

The Ethanol Blended Petrol (EBP) Programme, which operates under the umbrella of the biofuel policy, has created a sustained demand for agricultural produce. Since ESY 2014-15 to July 2025, oil marketing companies have directly paid over ₹1.25 lakh crore to farmers, while the country has saved more than ₹1.44 lakh crore in foreign exchange. Distilleries and ethanol plants have also attracted ₹40,000 crore in new private investments, generating employment in both rural and semi-urban areas.

Beyond direct payments, the policy encourages a shift from water-intensive crops like rice and wheat toward alternatives such as maize and sweet sorghum. This diversification promotes more sustainable agriculture, particularly in water-stressed states. The PM JI-VAN Yojana goes further by creating a market for crop residues – agricultural waste that farmers would otherwise burn in the fields – converting stubble burning from a pollution problem into a revenue opportunity.

Environmental impact 🔗

The EBP Programme’s environmental gains are concrete. Since 2014, India’s ethanol blending programme has reduced CO₂ emissions by 544 lakh metric tonnes and substituted over 181 lakh metric tonnes of crude oil. Ethanol contains oxygen molecules that enable more complete combustion, which reduces carbon monoxide and particulate matter emissions – two major contributors to urban air pollution.

These gains directly support India’s commitments under the Paris Agreement and its Panchamrit goals announced at COP26 in 2021, which include achieving 500 GW of renewable energy capacity and reducing the carbon intensity of GDP by 45% by 2030.

The conversion of used cooking oil into biodiesel also addresses a public health concern – preventing the recycling of degraded cooking oil into the food supply – while simultaneously reducing solid waste. Similarly, MSW-to-fuel technologies reduce landfill burden in rapidly urbanizing cities.

Challenges and future potential 🔗

Despite strong policy intent and measurable progress, the National Biofuel Mission faces several structural challenges that will determine whether it can scale sustainably.

Feedstock availability and food security 🔗

The most persistent challenge is the competition between food and fuel. As the Observer Research Foundation notes, the 2021 Niti Aayog roadmap’s renewed reliance on food-based feedstocks has reignited the food-versus-fuel debate. In December 2023, the government had to halt the diversion of cane juice to ethanol production due to domestic sugar shortages – an episode that highlighted how fragile this balance can be. Monsoon variability and water availability further complicate the consistent supply of sugarcane, maize, and other primary feedstocks.

Policy and market barriers 🔗

The Biodiesel Blending Programme has struggled partly because of an 18% GST applied from 2017, which made biodiesel more expensive than regular diesel, effectively undermining blending mandates. While the GST on ethanol has since been reduced to 5% and an interest subvention scheme introduced to boost production capacity, similar relief has been slower to reach the biodiesel segment. Restrictions on interstate movement of molasses – maintained by most states – also create supply bottlenecks for ethanol producers.

Infrastructure and technology gaps 🔗

Scaling up to 20% ethanol blending nationwide requires an ethanol production capacity of approximately 1,700 crore litres per year, assuming plants operate at 80% efficiency. As of September 2024, India’s production capacity reached 1,623 crore litres – close but still requiring expansion. Vehicle compatibility is another gap: most existing petrol and diesel engines are not designed for high-blend biofuels, which is why the government is actively pushing automakers to roll out E20-compliant engines. As of April 2024, E20 petrol is available at 13,569 PSU fuel stations across India – a strong foundation, but still a fraction of total fuel retail outlets.

The path forward 🔗

The future of India’s biofuel mission lies substantially in second and third generation technologies. Scaling up 2G bio-refineries using crop residue, MSW, and other non-food biomass can decouple biofuel production from food markets. The modified Pradhan Mantri JI-VAN Yojana, approved in August 2024, extends the scheme’s timeline to 2028-29 and broadens its scope to include algae and synthesis gas. India’s leadership of the Global Biofuels Alliance (GBA), launched at the G20 Summit in 2023, further positions the country as a hub for biofuel technology transfer and international collaboration.

Decentralized production models – small-scale rural distilleries linked to Farmer Producer Organizations (FPOs) – can reduce logistics costs and improve supply-chain resilience. Equally important is building a Minimum Support Price framework for biofuel-linked crops, which would give farmers the income certainty they need to commit land and labor to feedstock cultivation rather than waiting for spot market prices.

India’s ethanol blending percentage rose from just 1.53% in 2014 to nearly 20% by mid-2025 – a trajectory that few developing nations have matched. The challenge now is to sustain that growth without compromising food security, water resources, or the quality of India’s agricultural land. How that balance is struck over the next decade will define whether the National Biofuel Mission becomes a genuine model for the global energy transition or remains a work in progress.

What do you think? As India pushes toward advanced 2G and 3G biofuels to avoid the food-versus-fuel conflict, what role should small and marginal farmers play in supplying non-food biomass feedstocks – and how should they be compensated fairly? With India nearing its 20% ethanol blending target, should the policy now shift its primary focus to biodiesel scale-up and MSW-to-fuel technologies to ensure a more diversified biofuel ecosystem?

References

1. https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1532265
2. https://policy.asiapacificenergy.org/node/3643
3. https://www.iea.org/policies/17006-national-policy-on-biofuels-2022-amendment
4. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2159409
5. https://bioenergytimes.com/ethanol-blending-drives-increased-farmers-income-and-strengthens-rural-economy/
6. https://superkalam.com/current-affairs/articles/ethanol-blending-in-India
7. https://www.orfonline.org/expert-speak/biofuels-in-india-do-the-benefits-justify-the-costs
8. https://www.drishtiias.com/daily-updates/daily-news-editorials/ethanol-blending-for-sustainable-india
9. https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=153363&ModuleId=3&reg=3&lang=1