New Delhi: The Union cabinet on Wednesday approved the national biofuels policy that will help India’s efforts to cut energy imports and carbon emissions.

The policy will also help improve farmer income and has expanded the scope of raw material for ethanol production to include sugarcane juice, sugar beet, sweet sorghum and starch containing materials such as corn, cassava, and damaged grains.

This comes in the backdrop of the central government’s plan to double farmer incomes by 2022.

“Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the policy allows use of surplus foodgrains for production of ethanol for blending with petrol," the government said.

The policy, which aims to provide financial and fiscal incentives specific to a biofuel type, categorized biofuels as first generation (1G), second generation (2G) and third generation (3G) fuels.

The first generation category of biofuels includes bioethanol and biodiesel. The second generation comprises ethanol and municipal solid waste. The third generation includes bio-compressed natural gas (CNG).

“With a thrust on advanced biofuels, the policy indicates a viability gap funding scheme for 2G ethanol bio-refineries of Rs5,000 crore in six years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels," the statement said.

According to the government, there will be reduced import dependency, given that 10 million litres of E10 (which contains 10% ethanol) saves Rs28 crore of foreign exchange at current rates. The government aims to develop a Rs1 trillion biofuel economy.

This assumes importance given that India is the world’s third largest oil importer, with oil imports increasing by over 25% in FY18 to $109 billion from a year ago. Also, Prime Minister Modi had in March 2015 set a target of lowering import dependence in oil by 10 percentage points to 67% by 2022, when the country will celebrate 75 years of Independence.

The other benefits include a cleaner environment, with 10 million litres of E10 helping cut carbon dioxide emissions by 20,000 tonnes. With the government expecting an ethanol supply of around 1.5 billion litres in 2017-18, there will be a Rs4,000 crore forex savings and carbon dioxide emission reduction by three million tonnes.

India, the biggest emitter of greenhouse gases after the US and China, plans to reduce its carbon footprint by 33-35% from its 2005 levels by 2030, as part of its commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in 2015.

The other benefits include a reduction in 62 million metric tonnes of municipal solid waste generated in the country, infrastructure investment in rural areas and job creation.

The cabinet also approved the setting up of a Rs5,000 crore dedicated micro-irrigation fund with the apex rural bank NABARD. The fund will be utilised under the Centre’s flagship scheme, Pradhan Mantri Krishi Sinchayi Yojana, to extend loans to state governments for the years 2018-19 and 2019-20.

A government statement said that the dedicated fund, announced in the budget last year (February 2017), can potentially bring a million hectares under micro-irrigation facilities, such as the use of sprinkler and drip to increase water use efficiency in farming.

In other decisions, the Cabinet Committee on Economic Affairs (CCEA) increased the budget for the Rs13,334 crore Network For Spectrum (NFS) project—that is setting up an alternate communication defence network—by an additional Rs11,330 crore.

CCEA approved a freight village worth Rs1,029.49 crore at Nangal Chaudhary in Haryana on Wednesday. The integrated multi-modal logistic hub will come up in area of 886.78 acres and will be connected through Western Dedicated Freight Corridor (DFC) at Dabla. It would be the third freight village in the country, with the first two coming up at Varanasi in Uttar Pradesh and Sahibganj in Jharkhand.

CCEA also approved extension of the Metro rail in Noida from Noida City Centre to Sector 62.

For speedy resolution of disputes between public sector units and government departments, the cabinet approved an institutional mechanism to ensure that these disputes do not reach the courts. While a committee of secretaries from ministries and departments involved in the dispute will try to resolve it at the first step, if unresolved, it will be referred to the cabinet secretary whose decision will be final and binding.

The cabinet also approved setting up an All India Institute of Medical Sciences in Deoghar, Jharkhand, at a cost of Rs1,103 crore.