Madhya Pradesh’s biofuel scheme is a significant step for upscaling CBG sector in state

By Shobhit Srivastava

The Government of Madhya Pradesh has recently approved a biofuel scheme for the implementation of biofuel projects in the state. The scheme covers a wide range of biofuels, including compressed biogas (CBG), which has been defined as the drop-in fuel in the scheme. This means it is an alternative that can be used without much modification.  

Since Madhya Pradesh is an agrarian state, the scheme is expected to help scale up local CBG production and encourage entrepreneurs to come and set up CBG plants in the state. These developments can improve waste management at the domestic as well as industrial scale.

The biofuel scheme will provide capital assistance under different categories. First, a basic investment promotion assistance will be given in the 10-40 per cent range of eligible fixed capital investment, to a maximum of Rs 200 crore provided in seven equal annual installments.

Second, infrastructure development assistance of 50 per cent (maximum of Rs 5 crore) will be given for developing power, water, gas pipeline, drainage, if the investor acquires private land or gets undeveloped government land for the plant.

An additional subsidy of 30 per cent, upto Rs 20 lakh per set of biomass aggregation equipment, will be given by the state government.

There is a 100 per cent exemption from payment of electricity duty on generation or consumption of electricity for a period of 10 years and also a provision of no energy development cess on power supplied or consumed.

Also, the state is providing 50 per cent assistance for developing road infrastructure upto factory gate, as well as 50 per cent reimbursement on stamp duty on purchase of private land for project development. Since land is an important resource for setting up CBG plants, the state government has also offered to provide agricultural land under the jurisdiction of the revenue department at 50 per cent of circle rate.

To ensure the availability of feedstock (biomass) for the plants, the government of Madhya Pradesh has adopted the ‘one project, one block’ principle (similar to Uttar Pradesh’s ‘one bioenergy plant, one tehsil’) to define the catchment area of CBG plants. However, the district-level committee can increase the catchment area considering the capacity of the project, requirement of biomass, among others.

Unlike other states, the central state has tried to address the major bottlenecks in India’s CBG sector.

The first one is the feedstock supply chain, wherein Madhya Pradesh has deputed the state animal husbandry department to execute long-term contracts with letter of intent holders under the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme for availability of land for animal shelters and availability of cow dung in the state.

The scheme also intends to fix the price of cow dung and develop collection and supply mechanisms from private gaushalas to CBG plants. This step will help in ensuring feedstock security for the CBG plants based on animal waste.

Also, a mechanism for collection of waste from state Agricultural Produce Market Committee and delivery to CBG plants has been provided in the scheme. Feedstock delivery contracts are to be executed between Krishi Upaj Mandis and CBG plants.

To help build a supply chain ecosystem in the Madhya Pradesh, the state goverment also proposed to develop an information technology-based portal and mobile app by the New and Renewable Energy Department to bring waste aggregators, farmers and CBG manufacturers on one platform. Long-term contracts among these parties have been encouraged in the scheme.

Highlights of biofuel scheme of Madhya Pradesh

Parameters	Provision in biofuel scheme of Madhya Pradesh
Capital assistance	Basic investment promotion assistance for each project, limited to a maximum of Rs 200 crore, provided in seven equal annual installments. Infra development assistance of 50 per cent (maximum of Rs 5 crore) for developing power, water, gas pipeline, drainage. Green Industrialisation assistance of 50 per cent (upto Rs 5 crore for ETP, STP, PCD and upto 10 Cr for ETP with ZLD)
Registration / stamp duty and land conversion fee	50 per cent reimbursement on stamp duty on purchase of private land for project
Electricity duty	100 percent exemption from payment of electricity duty on generation or consumption of electricity for a period of 10 years. No energy development cess on power supplied or consumed.
Land assistance	Agricultural land under the jurisdiction of the revenue department shall be provided at 50 per cent of circle rate.
Approach road	50 per cent assistance for developing road infrastructure upto factory gate.
Catchment area	One block, one plant: District level committee can increase the catchment area considering capacity of project, requirement of biomass, among others.
Online portal for application	No. Application to be submitted to Commissioner, NRE offline. However, an IT-based portal and mobile app will be developed by NRE Department; GoMP to bring the supply chain stakeholders on one platform.
FOM management	Promote research marketing and distribution of organic manure produced by bio-energy units under defined standards. Sale and purchase of this biomanure at licensed fertiliser shops will be made mandatory by state agriculture department.
CBG offtake	CBG pump can be installed by investors with all statutory clearances. No assistance declared under the scheme.
Feedstock supply	Animal husbandry department, MP will execute long-term contracts with LoI holders under SATAT scheme for availability of land for animal shelters and availability of cow dung in the state. Fixing the price of cow dung and developing collection and supply mechanisms from private gaushalas to CBG plants. Mechanism for collection of waste from state APMC and delivery to CBG plants. Feedstock delivery contracts to be executed between Krishi Upaj Mandis and CBG plants.
Subsidy on biomass aggregation machinery	Additional subsidy of 30 percent upto maximum of Rs. 20 lakh per set of equipment will be given by GoMP in addition to subsidy by GoI.

The hurdle of CBG offtake (fuel distribution) has also been touched upon in the scheme as CBG plants have been provided the option of installation of CBG pumps. However, no hand-holding assistance for this has been mentioned.

The third and the most important problem regarding the viability of CBG plants is the management of fermented organic manure (FOM). Under the scheme, the state intends to promote research, marketing and distribution of organic manure produced by bio-energy units under defined standards. The government has also emphasised on FOM uptake by making the sale and purchase of the biomanure at licensed fertiliser shops mandatory and making the state agriculture department the responsible agency for the same. This will surely help CBG manufacturers in the management of FOM / Liquid FOM (LFOM). 

“To scale up the CBG sector at the state level, committees have been formed in each district to encourage investors and engage with farmers. These interactions help ensure a regular supply of feedstock and support the development of a sustainable ecosystem for CBG plants,” said Manu Srivastava, additional chief secretary, New and Renewable Energy Department, Government of Madhya Pradesh.

Additionally, there is a tie-up with the city gas distribution (CGD) companies to facilitate effective engagement between entrepreneurs and CGD operators, ensuring smooth offtake of the produced fuel, mentioned Srivastava.

While the state government has followed a holistic approach, specifying the role of the municipal corporation in feedstock supply for CBG plants needs to be looked into.

The government should spread awareness among farmers regarding the utilisation of FOM in their fields and demonstrate the impacts of its application on yield. These activities can help increase the uptake and develop a market for FOM / LFOM in the state.

This article has been republished from The Down to Earth Magazine.