MP Biofuel Scheme 2025: Up to ₹200 Crore Investment Assistance, 50% Land Rebate and 10-Year Power Duty Exemption – Complete Guide

Introduction

Madhya Pradesh produces huge quantities of crop residue every year. Soybean straw, wheat and paddy straw, maize stalks, cotton sticks, mandi waste and cow dung are mostly burnt or wasted. The State Government now wants this waste to become fuel, and it has notified a dedicated scheme for it.

The Scheme for Implementation of Biofuel Projects in Madhya Pradesh was notified in April 2025 by the office of the Commissioner, New and Renewable Energy (NRE), under the Madhya Pradesh Renewable Energy Policy 2025. It gives investors a package of capital assistance, land concessions, power duty exemptions and biomass supply support.

The best part for small and medium entrepreneurs is this: biomass briquette and pellet plants are eligible even if the investment is below ₹10 crore. This blog explains the scheme in simple language, with worked examples.

What Counts as a Biofuel Under This Scheme?

The scheme uses a wide definition. Biofuels are fuels made from renewable resources such as agricultural and forest residue (rice and wheat straw, corn cobs and stover, bagasse, pressmud, woody biomass), non-food energy crops (grasses, algae), animal dung, used cooking oil, non-edible oils, and the biodegradable part of industrial and municipal waste.

The following products are covered:

Briquettes and pellets from biomass
Syngas through biomass gasification
Bio-CNG / CBG from agri-residue, animal dung, food waste, pressmud, spent wash, MSW and sewage water
Biodiesel from non-edible oils, acid oil, used cooking oil, animal fat and bio-oil
Biomass and bagasse based cogeneration projects
Drop-in fuels that meet Indian standards for petrol (MS), diesel (HSD) and jet fuel
Electricity, heating, cooling and steam for industry produced from renewable resources
Bio-methanol, DME, algae-based 3G biofuels and halophyte-based biofuels
Any other biofuel declared by the Central or State Government from time to time

Who Is Eligible?

General rule: Biofuel manufacturing units investing more than ₹10 crore.
No ₹10 crore limit for: Biomass briquette/pellet manufacturing plants, biomass-based cogeneration projects, and conversion of existing Sewage Treatment Plants (STPs) into biofuel plants.
Existing units: Units expanding or diversifying into biofuel production are eligible if the biofuel unit is clearly demarcated from the existing business. They get the same assistance as a new standalone unit.
Technology condition: Incentives are paid only for technologies approved by the Ministry of New and Renewable Energy (MNRE) or under the National Policy on Biofuels 2018 (as amended).
No fossil mixing: Mixing fossil fuels with waste or biomass is not permitted.
Registration: The project must be registered with the Commissioner, NRE Department, Government of Madhya Pradesh.

Incentives Under the Scheme

1. Basic Investment Promotion Assistance (BIPA)

Assistance is given as per the MP Industrial Promotion Policy 2025 (IPP 2025). It is capped at ₹200 crore per project and paid in seven equal annual instalments.

Example: A project that qualifies for the maximum ₹200 crore will receive about ₹28.57 crore per year for 7 years. The actual eligible amount depends on the investment slab and eligible fixed capital investment as calculated under IPP 2025.

2. Infrastructure Development Assistance

50% assistance, up to ₹5 crore, for developing power, water, gas pipeline, road, drainage and sewage infrastructure up to the factory gate. This applies when the investor acquires private land or takes undeveloped Government land.

Example: If external infrastructure costs ₹8 crore, 50% works out to ₹4 crore. Since this is within the ₹5 crore cap, the full ₹4 crore is admissible.

3. Green Industrialisation Assistance

50% assistance on waste management systems such as ETP, STP and pollution control devices:

Up to ₹5 crore for general waste management systems
Up to ₹10 crore for ETP with Zero Liquid Discharge (ZLD)
Paid in two equal annual instalments

Example: An ETP costing ₹6 crore gets ₹3 crore, paid as ₹1.5 crore per year for two years.

4. IPR Assistance

100% reimbursement of expenses for filing patents, copyrights, trademarks and geographical indications (GI), up to ₹10 lakh per unit in the first 5 years.

5. Quality Certification

Reimbursement of 50% of the certification cost or ₹1 lakh, whichever is lower.

Example: If certification costs ₹3 lakh, 50% is ₹1.5 lakh, but the cap is ₹1 lakh. So you receive ₹1 lakh.

6. Electricity Duty Exemption

100% exemption from electricity duty on generation or consumption of power for 10 years from the Commercial Operation Date (COD), as per the MP Vidyut Shulk Adhiniyam, 2012.

7. Energy Development Cess Exemption

No energy development cess on power supplied or consumed for 10 years from COD.

8. No Cross Subsidy Surcharge

No cross-subsidy surcharge on power supplied, consumed or self-consumed for 10 years from COD, subject to approval of MPERC.

9. Stamp Duty Reimbursement

50% reimbursement of stamp duty paid on purchase of private land for the project.

10. CCIP Customised Package

Mega units investing more than ₹500 crore can apply for a customised package through the Cabinet Committee on Investment Promotion (CCIP) as per IPP 2025.

Market Support: Who Will Buy Your Product?

A biofuel project is only as strong as its sales. The scheme addresses this directly:

Own CBG pump: A CBG producer can sell gas through its own CBG pump after getting all statutory clearances.
Thermal power plants: MP Power Generating Company plants will preferentially purchase crop residue pellets and briquettes under the Ministry of Power's biomass co-firing policy. As per the scheme, mandatory biomass blending with coal has been raised to 7% from FY 2025-26. NTPC and private power producers in the State will also be encouraged to buy pellets from MP plants.
Bio-manure: Fermented organic manure from Bio-CNG plants is recognised under the Fertiliser Control Order, 1985 (Gazette notification dated 13.07.2020). The State Agriculture Department will make sale and purchase of this bio-manure mandatory at licensed fertiliser shops.

Subsidy on Balers, Rakers and Trawlers (For Farmers, FPOs and Aggregators)

To make sure biomass actually reaches the plants, the scheme gives upfront subsidy on biomass collection equipment such as balers, rakers and trawlers:

50% subsidy from the Government of India under the Sub-Mission on Agricultural Mechanization (SMAM)
Additional 30% subsidy from the Government of Madhya Pradesh, up to ₹20 lakh
Implemented by the Department of Agriculture and Farmer Welfare, MP

Example: For equipment costing ₹20 lakh, central subsidy is ₹10 lakh, state subsidy is ₹6 lakh, and the buyer's share is ₹4 lakh. Final eligibility and per-machine limits will follow the SMAM guidelines in force.

This is a real business opportunity for FPOs, cooperative societies and rural youth who want to work as biomass aggregators.

Land Related Provisions

Revenue land at 50% of circle rate for setting up bio-energy units. This applies only to land for plant and machinery, not land for growing biomass.
Government land for biomass cultivation may be allowed by CCIP at an annual charge of 10% of the Collector rate.

Land Norms by Plant Type

CBG plant: 10 acres for a 10-ton capacity plant
Bio-coal/Briquette plant: 0.02 acre per ton of capacity (example: a 50-ton plant needs 1 acre)
Biodiesel plant: 0.015 acre per kL of capacity (example: a 100 kL plant needs 1.5 acres)

Land for other plant types, and any exemption from these norms, will be decided by a high-powered committee chaired by the Chief Secretary of MP.

Biomass Supply Chain Support

Feedstock supply is the biggest risk in any biofuel project. The scheme sets up a support system for it:

Block-level aggregators: The Agriculture Department will train and support one aggregator per development block. An FPO or cooperative society can act as the aggregator. More aggregators can be registered on the recommendation of the District Level Committee.
Long-term contracts: The Agriculture Department will help execute long-term parali (crop residue) supply contracts between aggregators and biofuel plants.
Forest biomass: The Forest Department will make biomass from nearby forest areas available and study biomass that can be grown on degraded forest land.
Cow dung: The Animal Husbandry Department will help CBG plants of LoI holders under the SATAT scheme with long-term cow dung supply from gaushalas, with a fixed cow dung price mechanism for private gaushalas.
Mandi waste: Long-term feedstock contracts will be signed between Krishi Upaj Mandis and CBG plants.
Urban waste: MSW-based units can use facilities under the Urban Development and Housing Department's policy.
IT portal and app: The NRE Department will develop a portal and mobile app to bring farmers, aggregators and projects on one platform.

District Level Committee

Each district will have a committee chaired by the Collector, with the CEO Zila Panchayat, CEO Janpad Panchayat, SDM, Tehsildar, DFO/Conservator of Forests, Agriculture Department officer, APMC Secretary, NRE Department officer and an FPC/aggregator representative.

Its role includes fixing the district rate for agricultural waste with farmers' consent, supporting transport of agri-waste, helping with clearances (fire, land ceiling, land diversion, Government land, electricity, development charge waiver), ensuring each aggregator stays within its command area, reviewing payments to farmers and facilitating contracts for manure, CBG and pellets.

One Project Per Block: Your Biomass Is Protected

Once a bio-energy project is registered in a block, no other bio-energy project will be registered in that block. This avoids competition for the same biomass. Depending on plant capacity and biomass need, the District Level Committee can extend the catchment to other blocks.

For investors, this means early registration secures your feedstock area.

Registration Procedure

Step 1: Apply to the Commissioner, NRE Department, GoMP

Submit the application with:

Application in the prescribed format
Certified copy of MoA and AoA (company) or bylaws (registered society)
Certified copy of partnership deed, if applicable
Balance sheets of the last three years (for a startup, the balance sheet of the promoter company)
Pre-feasibility report
Registration fee of ₹20,000 per crore of investment (example: ₹10 lakh for a ₹50 crore project)

Step 2: Submit Approval Documents Within 3 Months

Detailed Project Report (DPR)
Biomass Assessment Report
Land documents with the project site marked
CPM/PERT chart for project implementation
Water allocation order for the project site
NOC from the urban body or village panchayat

Step 3: Comply With Environmental Laws

All projects must follow the applicable environmental laws, regulations and orders.

What Bankers Will Look For in a Biofuel Project

From our experience of preparing project reports for bank finance, a biofuel loan proposal is judged mainly on five points. Plan these before you approach the bank:

Feedstock security: Signed long-term supply agreements with block aggregators or FPOs, backed by a Biomass Assessment Report showing surplus residue within the catchment.
Offtake security: For CBG, the offtake arrangement with an oil marketing company under SATAT or your own CBG pump. For pellets, the purchase arrangement with a thermal plant. For manure, a dealer network.
Approved technology: Technology must be MNRE-approved or under the National Policy on Biofuels. Supplier credentials and performance guarantees matter.
Storage and seasonality: Crop residue is available only for a few months after harvest. The DPR must show storage space and working capital for the stock you will hold for the rest of the year.
Correct means of finance: BIPA comes in seven annual instalments after commencement, and Green Industrialisation Assistance comes in two instalments. These should not be shown as upfront promoter contribution. Banks expect the margin money to come from the promoter. The assistance improves repayment capacity in later years.

Who Should Consider This Scheme?

Entrepreneurs planning biomass briquette or pellet plants (no minimum investment threshold)
Investors planning CBG / Bio-CNG plants using parali, cow dung, mandi waste or MSW
Sugar mills and distilleries planning cogeneration or CBG from pressmud and spent wash
Used cooking oil and non-edible oil based biodiesel units
Existing industries willing to set up a clearly separate biofuel unit
FPOs, cooperatives and rural youth who want to become biomass aggregators with subsidised balers and rakers

Summary

Notified under the MP Renewable Energy Policy 2025
Eligibility: investment above ₹10 crore, except briquette/pellet plants, cogeneration and STP conversion
Investment promotion assistance up to ₹200 crore in 7 equal annual instalments
50% infrastructure assistance up to ₹5 crore
50% ETP/STP assistance up to ₹5 crore, and up to ₹10 crore for ZLD
10-year exemption from electricity duty, energy development cess and cross-subsidy surcharge
Land at 50% of circle rate and 50% stamp duty reimbursement
50% central plus 30% state subsidy on balers and rakers
One bio-energy project per block
DPR and Biomass Assessment Report due within 3 months of application

Disclaimer

This article is prepared for public awareness based on the official scheme document issued by the New and Renewable Energy Department, Government of Madhya Pradesh. Incentive amounts under IPP 2025, registration fees, land allotment and subsidy on equipment are subject to the detailed guidelines and approvals of the concerned departments. Please confirm the latest provisions with the Commissioner, New and Renewable Energy Department, GoMP, and your bank before making any investment decision.

How Pragati Saathi Can Help

A biofuel project needs more than a standard loan file. The NRE Department needs a Pre-feasibility Report, a Detailed Project Report and a Biomass Assessment Report, and your bank needs a DPR that answers every question on feedstock, offtake, technology and repayment.

Pragati Saathi Private Limited has prepared 500+ banker-ready Detailed Project Reports. We prepare DPRs for briquette and pellet plants, CBG plants and other biofuel units, with complete cost of project, means of finance, biomass availability analysis, projected financials, DSCR and repayment schedule, aligned with both the scheme requirements and bank norms.

Planning a biofuel project in Madhya Pradesh? Contact us today: pragatisaathi.in