India SAF policy proposes fixed-price model barring corn, soy, palm as feedstocks

India is weighing an ethanol-style fixed price model for sustainable aviation fuel, under which oil marketing companies would buy SAF from producers at a government-set, cost-plus rate, and edible crops including corn, soybean and palm oil would be barred as feedstock, according to a draft of the country's SAF policy reviewed by Platts, part of S&P Global Energy.

The draft proposes a "Fixed Producer Price for SAF" that oil marketing companies would be required to pay. The Ministry of Petroleum and Natural Gas would set it annually or every six months, in consultation with an inter-ministerial SAF council, based on transparent production costs plus a guaranteed profit margin.

The approach mirrors how India sets administered procurement prices for ethanol. The draft cites the ethanol blending program as a model, saying price visibility, long-term offtake agreements and industry coordination helped attract large-scale investment in biofuel capacity.

"This fixed pricing model effectively transfers the cost risk from the investor to the government, similar to the successful ethanol model, ensuring the mandatory blending targets can be met with a predictable domestic supply," the draft said.

Pathways price band

The draft proposes different prices for each ASTM-approved production route, reflecting their costs and maturity.

HEFA-based SAF, made from waste oil and animal fats, would get the lowest fixed price, while alcohol-to-jet would get a mid-level price to encourage scale-up. Power-to-liquid fuel would get a premium rate to offset high capital costs and support the National Green Hydrogen Mission.

The draft does not specify the prices themselves or the profit margin.

The petroleum ministry could pay oil marketing companies a blending subsidy for each liter of SAF bought at the fixed price, covering the difference between that price and a market-linked ceiling, particularly during the 2027-2030 mandatory phase.

SAF producers that meet CORSIA criteria would also be able to earn carbon credits, which the draft says could lower the required fixed price and reduce the government's subsidy burden.

The government could also set a minimum support price for certified SAF feedstocks such as UCO and agricultural residues.

Corn ruled out

The feedstock rules set the SAF policy apart from India's ethanol program, which now relies on corn and surplus rice for most ethanol supply after sugar diversion was halted for the 2026-27 supply year.

The draft excludes edible food crops such as corn, soybean and palm oil, citing direct competition with food production and the risk of higher food prices. Feedstocks linked to deforestation or biodiversity loss, and unapproved genetically modified species, are also excluded.

A watchlist would conditionally allow feedstocks grown on carbon-rich soils or irrigated in water-stressed regions, subject to verified sustainable practices.

However, the draft's feedstock plan still lists cane molasses, cane syrup and surplus sugar as alcohol-to-jet inputs and also proposes using existing second-generation ethanol supply chains for agricultural residues.

Each feedstock batch would be geo-tagged at its point of origin and validated against satellite imagery to verify land-use compliance.

Anti-tankering rule

The draft keeps the indicative blending targets for international flights of 1% in 2027, 2% in 2028 and 5% by 2030.

An annex suggests a path to 7.5% by 2035, and the government could revise the targets based on feedstock availability, technology readiness and costs.

Fuel suppliers at major airports would carry the blending obligation as International operators with more than 500 passenger flights, or 52 all-cargo flights, from major airports would have to uplift at least 90% of their annual fuel requirement there, to prevent airlines from tankering cheaper fuel from overseas. Penalties are yet to be decided.

Compliance could be met through mass balance, direct delivery or purchase-based claims, which would let environmental attributes be claimed separately from physical fuel.

A national SAF registry hosted by the Directorate General of Civil Aviation would issue a digital "Unique Fuel Certificate" for each SAF batch, recording feedstock origin, lifecycle emissions and claim category to prevent double counting across CORSIA, India's domestic carbon market and voluntary markets.

The draft proposes that the National Accreditation Board for Certification Bodies authorize domestic certifiers.

Incentive package

The draft also proposes viability gap funding of up to 30% of capital costs for new SAF plants, linked to firm offtake agreements with airlines or oil marketing companies, with higher support for power-to-liquid and lignocellulosic alcohol-to-jet projects.

Existing biodiesel and biofuel plants would be encouraged to retrofit for SAF, while refineries could co-process renewable feedstocks.

The draft estimates India has more than 750 million mt/year of biomass, including about 230 million mt of surplus agricultural residue, and cites an industry estimate that the country could produce 8 million-10 million mt/year of SAF by 2040, requiring investment of $70 billion-$85 billion.