Why Biomass Briquettes & Pellets are India’s Next Big Opportunity!

Are you looking for a business that’s not only highly in demand but also 100% tax-free and comes with amazing government support? Look no further than the Biomass Briquettes and Pellets business! This sector is considered a “thrust sector” by both the Central and State Governments in India, offering a unique opportunity to contribute to economic growth and environmental sustainability.

What Exactly Are Biomass Briquettes and Pellets?

Imagine converting waste into valuable energy. That’s precisely what this business does! Biomass briquettes and pellets are compressed forms of agricultural and forest residues, such as mustard, paddy straw, and various types of wood and bamboo waste. Instead of these residues being burned or left to waste, they are transformed into an eco-friendly alternative to traditional fuels like coal.

Why are They Such a Game-Changer? (Beyond Just Being Green!)

When you compare biomass briquettes and pellets to coal, the benefits are clear, making them a highly attractive option for various industries and even domestic use:

Eco-Friendly: They cause significantly less pollution compared to coal.
Waste-to-Energy: This business helps manage vast amounts of agricultural waste, turning a problem into a solution.
Cost-Effective: Biomass briquettes and pellets are generally less expensive than coal.
Easier Handling: They are easier to handle and store compared to coal.
Lower Ash Content: They produce much less ash (6-10%) compared to coal (15-30%).
Substitute for Coal: They are directly used as a substitute for coal, especially for co-firing with coal in thermal power plants for electricity generation.

The Exploding Demand for Biomass Fuel!

The demand for biomass briquettes and pellets in India is huge and growing rapidly. Here’s why:

Massive Demand-Supply Gap: India’s daily demand is approximately 95,000 tons, but the current production capacity is only around 8,000 to 10,000 tons per day. This creates enormous business opportunities.
Government Mandates: The Ministry of Environment, Forest and Climate Change has mandated that all coal-based thermal power plants in India must use a minimum of 5% biomass pellets or briquettes blended with coal. This alone generates massive demand. Over 60 power plants have already started co-firing.
Industrial Adoption: Beyond power plants, industries like textile mills, paper companies, food industries, chemical plants, and brick kilns are increasingly switching to biomass due to its environmental and cost advantages.
Commercial & Domestic Use: Hotels and facilities using heat equipment are also adopting biomass for reduced emissions and improved energy efficiency.

The Incredible Government Support & Incentives

The government actively promotes this business, offering a wide range of financial incentives to help new and existing units thrive. These benefits can be broadly categorized into Central and State-level incentives.

Central Government Incentives:

1.100% Tax-Free Business for 5 Years! (Section 80JJA): This is a standout benefit! Under Section 80JJA of the Income Tax Act, 1961, businesses involved in making pellets or briquettes from agricultural or biodegradable waste can claim a 100% tax deduction on their profits.

This deduction is available for five consecutive assessment years, starting from the year your business begins its qualifying activities. This means no income tax on profits for the first five years!

2.Central Financial Assistance (CFA) from MNRE:

The Ministry of New and Renewable Energy (MNRE) offers direct subsidies for setting up new or expanding existing biomass briquette and pellet manufacturing plants.

Important Update (effective July 16, 2024):

Biomass Briquettes: You can receive ₹9 lakhs per ton per hour (TPH) production capacity, with a maximum of ₹45 lakhs per project (for up to 5 TPH).
Non-Torrefied Pellets: The subsidy is ₹21 lakhs per TPH or 30% of the capital cost for plant and machinery (whichever is lower), with a maximum of ₹1.05 Crore per project.
Torrefied Pellets: This gets even better! The subsidy is ₹42 lakhs per TPH or 30% of the capital cost for plant and machinery (whichever is lower), with a maximum of ₹2.10 Crore per project.
Key Condition: To be eligible, your briquettes or pellets must be made from Agri-residue, forest residue, horticulture residues, bamboo residue, wooden chips, or dust. You cannot use municipal solid waste or other processed industrial waste. You also need to apply for ‘In-Principle Approval’ before starting production.

3. Interest Subsidy under Agri Infrastructure Fund (AIF):

This scheme from the Ministry of Agriculture and Farmer Welfare provides significant relief on loan interest.
Interest Subvention: You can get an interest subsidy of 3% per year on loans up to ₹2 Crore for a maximum period of 7 years.
Credit Guarantee: Loans up to ₹2 Crore can also receive collateral-free funding under the CGTMSE scheme, with the government paying the coverage fee.

4. PMEGP Benefit for Small Projects:

If you’re planning a smaller project (up to 2 tons capacity or ₹50 lakhs project cost), the PMEGP (Prime Minister’s Employment Generation Programme) scheme offers a capital subsidy of up to 35%, meaning you could get up to ₹17.5 lakhs. For larger projects, the MNRE scheme is more suitable.

Gujarat State Specific Subsidies (under "New Gujarat Industrial Policy 2020")

If you’re looking to set up your business in Gujarat, there are additional state-level incentives:

Capital Investment Subsidy: Depending on the Taluka category (Gujarat divides its state into three categories for regional development), you can get a capital subsidy of 10% to 25% of your term loan amount, with maximums ranging from ₹10 lakhs to ₹35 lakhs, plus additional amounts for larger investments. This is paid after commercial production starts.
Interest Subsidy: Also based on the Taluka category, you can receive an interest subsidy of 5% to 7% on your term loan for 5 to 7 years, with maximum amounts ranging from ₹25 lakhs to ₹35 lakhs per annum.
Bonus: An additional 1% interest subsidy is available for enterprises with 100% equity contribution from women entrepreneurs, differently-abled entrepreneurs, or young entrepreneurs (below 35 years).
You must bear a minimum of 2% interest on the loan yourself.
Reimbursement of CGTMSE Fees: 100% reimbursement of annual service fees paid for collateral-free term loans under CGTMSE for up to five years.
Quality Certification Assistance: Get 50% of the fees (60% for SC/ST enterprises) for national/international quality certifications (excluding ISO) and 50% of the cost of quality testing equipment, up to a maximum of ₹10 lakhs.
Assistance for Raising Capital through SME Exchange: Get 25% of eligible expenditure (30% for SC/ST enterprises) incurred on raising funds through an SME Exchange, up to a maximum of ₹5 lakhs.
Assistance for Power Connection Charges: Receive 35% of the charges paid to power distribution companies for new connections or additional load (up to ₹5 lakhs), with 50% assistance for SC/ST entrepreneurs.
Rent Assistance for Micro and Small Enterprises: If you operate from rented/leased premises, you can get 65% of the rent paid (70% for SC/ST categories), up to a maximum of ₹1 lakh per annum for five years.