Budget 2026: ISMA’s 10 point policy proposal to transform industry to ‘BioEnergy Hub’
ISMA has urged the government, ahead of Union Budget 2026, to rationalise GST and support biofuels and clean mobility. It proposed incentives for ethanol, flex-fuel vehicles, SAF, bio-hydrogen and CBG to cut emissions, support farmers, reduce oil imports and accelerate India’s Net Zero goals.
As the Union Budget 2026 approaches, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) has urged the Government to undertake comprehensive GST rationalisation and targeted policy support across the biofuel and clean mobility ecosystem. The Association said that these reforms can deliver rapid emissions reductions, safeguard farmer livelihoods, reduce crude oil imports, and accelerate India’s pathway to Net Zero.
Deepak Ballani, Director General, ISMA said that the Union Budget 2026–27 presents a defining moment to align India’s fiscal policy with its clean energy ambitions. ISMA’s 10-point submission is a blueprint to transform the Indian sugar complex from a single-commodity sector into a multi-vertical ‘BioEnergy Hub’ for the world.
“We are urging the Government to establish a level playing field by rationalising GST on Flex-Fuel Vehicles and hybrids, positioning them alongside EVs as a mainstream solution. By incentivising advanced biofuels like SAF, Green Hydrogen, and Isobutanol, we can unlock immediate carbon reduction without waiting for new infrastructure. This policy push is essential to ensure that our farmers remain at the centre of India’s journey toward energy independence and Net Zero,” Ballani said.
ISMA has emphasised that its proposals present an unprecedented opportunity to align India’s tax structures and energy policies with clean air goals, rural economic stability and long-term energy security. With surplus ethanol availability, mature production capacity and vehicle technologies already validated in India, the country can secure significant emissions reduction without waiting years for new infrastructure rollout.
The proposals are given below:
- Align GST on Flex-Fuel Vehicles (FFVs) and Strong Hybrid Electric
- Vehicles (SHEVs): ISMA has recommended reducing GST on FFV two- wheelers and small cars from 18% to 5%, and on large FFVs from 40%, to achieve cost parity with conventional petrol vehicles, while aligning duties on HEVs and related components with electric vehicles. ISMA has also proposed targeted government procurement and fleet adoption of FFVs, along with demand-side incentives similar to FAME II to reduce acquisition costs and accelerate consumer adoption.
- Reduce GST on Hydrous Ethanol (E85/E100) to 5%: With ethanol recognised as a carbon-neutral fuel, ISMA has urged reduction of GST on E85/E100 from 18% to 5% to ensure pump prices remain competitive with petrol while compensating for mileage differentials. Notifying distilleries as dispensing entities will also strengthen last-mile availability.
- Reduce GST on Ethanol Production Machinery to 5%: To accelerate sectoral growth, ISMA has proposed lowering GST on ethanol-related equipment from 18–28% to 5%, following the successful model adopted during India’s early solar expansion.
- Support Fund of ₹200 crore for Isobutanol Trials: To diversify ethanol utilisation beyond the E20 ceiling, ISMA has sought a ₹200 crore fund to conduct technical validation and commercial-scale trials for isobutanol blending with diesel—critical for decarbonising freight, rail and other diesel- dependent sectors.
- Launch of the Bharat Biofuels Alliance (BBA): ISMA proposed the establishment of a Bharat Biofuels Alliance—an India-focused platform aligned with the Global Biofuels Alliance—to drive innovation, research, policy development and collaboration across the biofuels value chain. ISMA has offered to host the Secretariat for this effort.
- Creation of Integrated Bio-Energy Hubs in Sugar Refineries: ISMA has recommended a ₹2,000 crore support fund to convert sugar mills into integrated bio-energy hubs producing 1G/2G ethanol, CBG, SAF, bio- hydrogen, green electricity and bio-based products—positioning rural India as a clean energy powerhouse.
- National SAF Policy and Tax Rationalisation: To support India’s aviation decarbonisation targets, ISMA has called for a National Sustainable Aviation Fuel (SAF) Policy with a ₹10,000 crore fund, GST reduction on SAF to nil, and lower import duties on critical enzymes. It has also recommended a long-term pricing formula for 2G ethanol to secure investment viability.
- Targeted Support for Green Bio-Hydrogen: ISMA has proposed a ₹1,500 crore viability gap fund to establish 10 green bio-hydrogen production centres within sugar refineries, along with forward pricing mechanisms to ensure long- term offtake and reduce dependence on grey hydrogen.
- Incentivise Compressed Biogas (CBG) Within Sugar Refineries: The association has recommended capital support for CBG facilities, simplified environmental clearances and a premium pricing structure delinked from CNG to reflect its environmental benefits—unlocking India’s estimated CBG potential of 62 MMT annually.
- Reduce GST on Ethanol Cookstoves to 5% and Extend Subsidies for
BPL Families: ISMA has urged lowering GST on ethanol cookstoves and extending subsidies to low-income households, given their potential to reduce indoor pollution, cut LPG imports and provide a clean, affordable cooking solution for millions.
Ballani said that in India’s clean mobility and clean energy transition, ethanol and its derivatives present a unique convergence of environmental sustainability, rural prosperity and strategic energy security—a solution ready to scale, if policy enables it.
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Source : Chinimandi
