Uttar Pradesh’s Bioenergy Policy: Good on paper, execution may be tricky

Offers cheap land for lease, tax and tariff exemptions to reduce fossil fuel use

By Rahul Jain
Published: Tuesday 01 November 2022
The policy highlights four bioenergy constituents: Compressed biogas (CBG), ethanol, biodiesel and bio-coal. Photo: iStock
The policy highlights four bioenergy constituents: Compressed biogas (CBG), ethanol, biodiesel and bio-coal. Photo: iStock The policy highlights four bioenergy constituents: Compressed biogas (CBG), ethanol, biodiesel and bio-coal. Photo: iStock

Uttar Pradesh recently launched its Bioenergy Policy 2022 to boost bio-economy and reduce dependence on fossil fuels. There are several takeaways from the policy and there may be several challenges ahead for on-ground implementation. 

The policy highlights four bioenergy constituents: Compressed biogas (CBG), ethanol, biodiesel and bio-coal, a carbon-neutral fuel from biomass waste.

It also sets a highly ambitious target to generate 1,000 tonnes per day (TPD) of CBG, 4,000 tonnes per day of bio-coal and 2,000 kilolitre per day of bioethanol and biodiesel by 2026-27. Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) is the nodal agency for implementing this scheme across the state. 

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The scheme provides a subsidy of Rs 75 lakh per tonne of CBG, Rs 75,000 per tonne of bio-coal and Rs 3 lakh per kilolitre of biodiesel, with a cap of Rs 20 crores.

Units can use this subsidy for plant and machinery, infrastructure, construction, power supply, and transmission system-related works, excluding administrative building and land costs. 

In total, Rs 1,040.75 crores have been sanctioned with a maximum Rs 750 crore contribution towards CBG. Each tehsil in the state is to have at least one bioenergy plant, which means a minimum of 350 bioenergy units across UP. 

Here are five key takeaways from this policy:

1) Electricity tariffs and tax exemptions 

Bioenergy units will get a 100 per cent electricity charge waiver for ten years from the date of product commencement. Stamp duty for rent agreement, lease and sale deed registration fees for the land for units has been waived too. Additionally, the state’s development authority will charge no development charges.

2) Land on lease @Re 1 per acre 

Under this policy, the state’s revenue department will provide land (on non-transferable lease) at the rate of Re 1 per acre to feedstock aggregators and bioenergy plant establishers for a maximum of 30 years. 

Moreover, if an investor infuses Rs 50 crores or more in a bioenergy plant, a 5 km approach road connecting it with the main highway will be constructed as well.

A 10 TPD capacity CBG plant generally requires 10 acres of land for installation and 25 acres for feedstock storage. A 100 TPD capacity bio-coal plant needs two acres of land and a 100 kilolitre per day biodiesel plant needs 1.5 acres of land. 

3) Incentives on equipment

Agricultural equipment receives a subsidy under the central government’s Sub-Mission on Agricultural Mechanization (SMAM) scheme.

The state government will also provide a 30 per cent subsidy (max Rs 20 lakh) on purchasing equipment like balers, rakers and trolleys that collect compress and transport agricultural waste from farms. 

The scheme was established to boost agricultural mechanization in the nation and increase inclusivity. It provides subsidies going up to 40-50 per cent for purchasing certain types of agricultural machinery and equipment in almost all states.

In the northeastern states, the subsidy is 100 per cent, going up to a maximum of Rs 1.25 lakh per user.

4) Online portal for single window clearance

UPNEDA’s Bioenergy online portal went live on October 15, 2022, for easy application and improved transparency. It has a single-window clearance for potential investors, wherein they could directly file and monitor the progress of their applications. 

“The portal will also help to build pressure on the district officials to clear bioenergy project-related regulatory clearances in a time-bound manner,” Ajai Kumar, in charge of bioenergy, UPNEDA, told Down To Earth

5) Coordination among state departments

A project officer will be deployed in each district to help potential investors and will be the focal point of contact to facilitate necessary approvals from the district magistrate’s office. 

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Moreover, the state nodal agency will collaborate with other state departments like rural development, animal husbandry, town development and agriculture marketing to receive relevant data for sanctioning future realistic projects and better marketing of the produced by-products. 

Oil or gas market companies and banks have been briefed about this bioenergy scheme as well to provide a readily available market and finance to investors.

“A district-level committee will ensure that bioenergy plants remain economically viable and every investor gets a level playing field,” said Director UPNEDA Anupam Shukla.

The panel will also manage the feedstock supply chain and ensure right costing, Shukla announced at prospective investors meet on the Bio-Energy Policy, 2022, October 15, 2022.

This committee will coordinate and act as the point of contact between farmers, feedstock aggregators and bioenergy plant owners to maintain adequate feedstock supply to bioenergy plants.

It will convince all farmers of the district about the unanimous price of the feedstock with a long-term contract between parties and ensure that the payments are transferred within 15 days. 

A mobile application and online portal will also be developed so that all these parties can register for better communication.    

Several vital points will influence the on-ground implementation of this UP bioenergy policy, said Koshy Cherail, programme director for Renewable Energy, non-profit Centre for Science and Environment. 

“Timely project and regulatory clearances from state agencies, attracting the right investors, timely release of the subsidy amount, district level capacity building, and addressing the grievances of the bioenergy stakeholders are key,” Cherail told DTE

There are three main challenges to strengthening the bioenergy policy and specifically promoting CBG, according to Deepak Agrawal, executive director of EverEnviro Resource Management Pvt Ltd. The private company handles waste management businesses. 

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“Firstly, a continuous and long-term feedstock supply below a fixed price is needed to ensure the right functioning and healthy economic factors for the bioenergy plant. Secondly, oil marketing companies shall refrain from procuring the CBG on a ‘best endeavours’ basis as it leads to financial instability for the manufacturer when his product is left unsold,” Agrawal said.

Lastly, despite having the same fuel characteristics, there is a large disparity in the CBG and CNG procuring prices that needs to be addressed, he added. 

It will be interesting to see the on-ground implementation of this policy and how other states could bring out similar initiatives. 

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