India’s Biofuel Dreams Meet Ground Reality—Progress In Pockets, Challenges In Plenty

The report by YES Securities said that while government support through initiatives like SAMARTH, E20, and SATAT remains strong, the actual progress in building the required infrastructure is uneven.

The report concluded that while the biofuel sector holds significant promise, actual implementation will depend on overcoming these practical challenges and ensuring consistent progress across all segments.

Source : Freepik

India's biofuel sector is slowly moving from a stage of promise to partial implementation, supported by strong government policies, rising need for decarbonization, and the push for rural value creation, according to a report by YES Securities.

The report highlighted that while government support through initiatives like SAMARTH (for biomass), E20 (for ethanol), and SATAT (for compressed biogas or CBG) remains strong, the actual progress in building the required infrastructure is uneven across different segments.

It said "India's biofuel sector is transitioning from promise to partial implementation, driven by policy tailwinds". Among all segments, ethanol blending has shown significant progress, with around 18 per cent blending achieved. This has also resulted in a visible return on capital employed (RoCE) for producers. Solid biofuels are also gaining ground in industries as substitutes for coal and furnace oil.

This shift is being driven by better economics and pressure to meet environmental, social, and governance (ESG) goals. However, the report noted that the CBG segment still faces several challenges. These include problems with feedstock logistics, underutilised production capacity, and the lack of infrastructure needed to monetise by-products, which are crucial for making CBG plants financially viable.

The report added that investors should now focus on segments that are showing operational progress, have clear offtake guarantees linked to policy, and show a realistic path to scale.

In terms of policy and mechanism support, the report explained the role of co-firing, which involves blending solid biofuels with coal in power plants. According to a Ministry of Power (MoP) order issued in 2021, all thermal power plants with a capacity of more than 200 MW are required to blend 5 per cent biomass starting from FY22.

In regions prone to high stubble burning like Punjab, Haryana, and Uttar Pradesh, the limit has been increased to 7 per cent. This effort is being driven under the SAMARTH Mission, a government initiative to promote sustainable fuel use.

India's coal-fired power capacity stands at about 210 GW. Even a 5 per cent blend would require around 10.5 GW of power to be generated from biofuels. This would translate to the use of 15-20 million metric tonnes (mmt) of biomass every year, creating a potential market of over Rs 500 billion.

Public sector power utility NTPC has emerged as a leader in the co-firing space. As of early calendar year 2025, it has already co-fired more than 2.5 lakh tonnes of biomass across its units in Dadri, Jhajjar, and others. Some of these units have achieved 7-10 per cent biomass blending.

Despite the policy push, the report pointed out several bottlenecks. These include variation in the calorific value and combustion characteristics of biomass, difficulties in logistics and storage due to the perishable nature of biomass, and the need for plant-specific burner modifications to enable efficient co-firing.

The report concluded that while the biofuel sector holds significant promise, actual implementation will depend on overcoming these practical challenges and ensuring consistent progress across all segments.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)