India's National Biofuel Policy (NBP) 2018 — amended significantly in 2022 — has created one of the most comprehensive biofuel frameworks in Asia. While much public attention focuses on ethanol blending in petrol, the policy's provisions for solid biofuels (biomass pellets and briquettes) have profound implications for industrial energy buyers across the country.
Classification of Solid Biomass as Biofuel
Under the NBP 2018 and its 2022 amendments, solid biomass pellets manufactured from agricultural residue, wood waste, and municipal solid waste are officially classified as second-generation (2G) biofuels. This classification brings them under the government's biofuel incentive framework, distinct from conventional biomass burning.
Key implication: industrial buyers who procure certified biomass pellets are purchasing a recognized biofuel under Indian law — qualifying for various tax benefits, green financing, and regulatory relaxations.
Key Provisions Affecting Industrial Buyers
1. Priority Sector Status
Biomass energy manufacturing is classified under Priority Sector Lending by the RBI. This means loans for biomass-related investments (boiler conversions, storage systems, fuel contracts) attract lower interest rates and preferential credit from public sector banks.
2. GST Benefits
Biomass pellets attract a GST rate of 5% (compared to 5–18% for coal and petroleum products, depending on the specific product). This tax differential adds to the overall cost competitiveness of biomass fuel.
3. State-Level Policy Support
States like Gujarat, Uttar Pradesh, and Punjab have adopted state biofuel policies aligned with the national framework, offering additional subsidies for biomass consumption, storage infrastructure, and supply chain development.
The 5% Co-firing Mandate: Where Solid Biomass Is Non-Optional
The most impactful regulatory development is the Ministry of Power's mandate for 5–7% biomass co-firing in all coal-based thermal power plants. This mandatory off-take from power plants creates a guaranteed base demand for biomass pellets, supporting stable pricing for the entire market — including industrial buyers outside the power sector.
What Should Industrial Buyers Do Now?
With coal prices projected to rise further and environmental regulations tightening, the policy environment strongly favours early adoption of biomass. Companies that establish long-term supply contracts now will lock in favourable pricing before demand from the power sector creates supply pressure.
Contact BBI today to secure your annual supply contract and take advantage of current biomass pricing before Q3 2026 demand season begins.