Domestic Energy Security Takes Priority

The Indian government has imposed immediate export curbs on wood briquettes, a key eco-friendly alternative fuel. The policy shift by the Directorate General of Foreign Trade (DGFT) moves wood briquettes from a 'Free' export category to 'Restricted,' requiring government authorization for shipments. This action comes as the West Asia crisis intensifies disruptions to global oil and gas supplies, affecting vital transit routes for India's energy imports.

Strategic Shift to Domestic Energy

The government's move to restrict wood briquette exports highlights a strategic shift to strengthen domestic energy security. India imports about 85-90% of its crude oil and significant natural gas volumes, leaving it vulnerable to geopolitical shocks. Disruptions in West Asia have already led to industrial gas shortages and increased coal demand, underscoring the need to rely more on domestic renewable resources like biomass. The policy prioritizes using processed biomass fuels, such as briquettes, for India's growing energy needs.

A Dual Strategy: Restrictions and Easing

While restricting wood briquettes, the government also eased export curbs on sawdust, wood waste, and scrap. This dual approach suggests a calculated strategy. Previously, in February 2023, agri residue-based biomass and briquettes were moved to the 'Free' export category. The current shift to 'Restricted' for briquettes, alongside easier rules for raw waste materials, may aim to manage the supply chain dynamically. This could keep processed fuels for domestic use while encouraging exports of less processed waste. Such a move might create a split market for biomass producers, affecting their revenues and operations.

Biomass Sector Growth and Challenges

India's biomass energy sector is a growing part of its renewable energy strategy, supported by government initiatives and energy security goals. Market forecasts predict substantial growth: the biomass power market could reach over $12.2 billion by 2030, with the overall Indian biomass market projected to grow from $2.5 billion in 2024 to $4.3 billion by 2035. The ethanol and compressed biogas (CBG) sectors are expanding rapidly due to policy support and blending mandates. However, the sector faces challenges like supply chain inefficiencies and a significant gap between biomass fuel demand and supply. This is particularly an issue in North India, where stubble burning impacts air quality. Globally, many countries restrict forest product exports as a tool for resource management.

Risks for the Export Industry

While the policy aims to secure domestic energy, it creates risks for the biomass export industry. Companies previously focused on briquette exports may face immediate operational and financial difficulties due to the 'Restricted' status and licensing requirements. Furthermore, the gap between domestic demand and supply means internal utilization rules could strain infrastructure, potentially causing price fluctuations for local users. India's export policies have historically been flexible, which aids adaptation but can also create uncertainty for long-term business planning. This latest move might draw attention from international trading partners, though retaliatory measures are unlikely without wider trade disputes.

Future Focus on Domestic Energy

The government's actions show a commitment to diversifying India's energy sources away from volatile fossil fuel imports. The expanding biomass sector, backed by policies like the National Policy on Biofuels and the Biomass Power and Bagasse Co-generation Programme, is set to play a larger role. This policy shift indicates a long-term plan to reserve processed biomass fuels for domestic needs, supporting India's renewable energy targets and its goal of energy self-reliance.