Subsidies & Tax Benefits in the Biomass Business

Are you searching for a high-demand, 100% tax-free business opportunity in India? The Biomass Briquettes and Pellets Business represents a massive growth opportunity in the thrust sector, focusing on crucial Waste-to-Energy projects. This sector is currently experiencing extremely high demand across India.

This comprehensive guide, compiled from the latest eBook, offers investors detailed insights into the biomass briquettes and pellets business, including government subsidies, tax benefits, and financial incentives. KIP Financial Consultancy Private Limited, a trusted business subsidy consultant since 2008, provides expert consultancy and investment advice for these bio-energy projects.

Why Invest in Biomass Briquettes and Pellets?

The biomass business involves converting agricultural and forest waste into fuel. Biomass briquettes and pellets are eco-friendly alternatives to coal and are widely used in industrial and domestic heating applications. Supported by the Central and State Governments, these products help reduce carbon emissions while offering a profitable business opportunity.

Feature	Coal	Briquettes/Pellets
Ash Content	15–30%	6–10%
Pollution	High	Low
Cost	Expensive	Less Expensive
Wastage/Loss	15–20%	8–10%
Handling	Requires special facilities	Easy handling

Massive Market Demand Potential

India’s biomass demand is enormous. The country requires approximately 95,000 tons per day, while the current production capacity is only 8,000–10,000 tons per day.

A key driver is the Ministry of Environment, Forest, and Climate Change (MoEFCC) mandate, issued on July 11, 2023, requiring all coal-based thermal power plants to co-fire at least 5% biomass (pellets or briquettes) with coal. With over 208 thermal power plants operating in India, demand for biomass is set to soar.

Other major industrial consumers include Textile Mills, Paper Mills, Brick Kilns, Food Industry, and Chemical Plants.

Government Incentives and Subsidies

The biomass sector is classified as a Thrust Sector, offering multiple financial incentives:

1. Central Financial Assistance (CFA) – MNRE

The Ministry of New and Renewable Energy (MNRE) provides CFA to encourage production:

Project Type	CFA Rate (Per MTPH)	Maximum Subsidy (5 MTPH)
Briquette Manufacturing	₹9.0 lakhs	₹45 lakhs
Non-Torrefied Pellets	₹21.0 lakhs	₹105 lakhs
Torrefied Pellets	₹42.0 lakhs	₹210 lakhs

2. 100% Tax Exemption

Businesses producing biomass briquettes or pellets can avail 100% tax deduction on profits for five consecutive assessment years under Section 80JJA of the Income Tax Act, 1961.

3. Agri Infra Fund (AIF) Benefits

Projects involved in post-harvest management or bio-waste processing may get AIF benefits, including 3% interest subvention (up to ₹2 crore) for 7 years.

4. PMEGP (For Small Projects)

For small projects (up to 2 TPH capacity or ₹50 lakh investment), the PMEGP scheme provides up to 35% subsidy (₹17.5 lakh max).

Types of Biomass Products

Briquettes

Compressed blocks from sawdust, rice husk, or crop residues
Efficient for large-scale industrial use
Lower production cost, slower burning

Pellets

Cylindrical granules from compressed biomass
High energy density, burns faster
Easy storage and handling

Torrefied vs. Non-Torrefied Pellets

Torrefied: High-temperature processed (300–350°C), moisture-free, longer shelf life, higher subsidy (₹42 lakhs/MTPH)
Non-Torrefied: Moisture content 10–14%, widely used in power plants, lower subsidy (₹21 lakhs/MTPH)

How KIP Can Help

Navigating subsidy schemes can be complex. KIP helps entrepreneurs with:

Subsidy Viability Reports (SVR): Customized incentives analysis
Business Modeling & Registrations: MSME, GST, Startup India, IEC
Bank Financing Assistance: Documentation and processing
Subsidy Filing & Processing: End-to-end MNRE, AIF, PMEGP support
Compliance & Claim Management: Ensuring ongoing benefits

Frequently Asked Questions (FAQs)

Q1: What is the main objective of this business?

To convert agricultural or biodegradable waste into biomass briquettes and pellets for green energy.

Q2: Are profits taxable?

No, eligible profits enjoy 100% tax deduction for five consecutive years under Section 80JJA.

Q3: What is the current demand-supply gap?

India’s daily demand is 95,000 tons, but current production is only 8,000–10,000 tons, highlighting huge commercial potential.

Q4: What raw materials are eligible for subsidies?

Agricultural residues (paddy straw, mustard stalks, cotton stalks), forestry residue (pine needles), bamboo, and horticultural waste.

Q5: Why is Torrefied Pellet subsidy higher?

Torrefied pellets require advanced high-temperature machinery, resulting in higher capital costs. The subsidy compensates for this.

Q6: Who are the major consumers?

Thermal power plants, textile mills, paper mills, brick kilns, food processing, and chemical industries.

Q7: Can self-financed projects claim CFA?

Yes, both self-financed and bank-financed projects are eligible, but the CFA must be approved by MNRE before production starts.

Subsidies & Tax Benefits in the Biomass Business