The Smoke and Mirrors of Co-Firing: Why India’s Biomass Mandate is Failing and Power Giants Prefer Penalties

For years, the promise of biomass co-firing in coal-fired thermal power plants (TPPs) was sold as the silver bullet for India’s twin nightmares: the suffocating winter smog in the north and the carbon-heavy footprint of our coal dependency. But, the ground reality has exposed a harsh, uncomfortable truth. This legacy policy has hit a brick wall, and power companies are increasingly treating environmental penalties as a mere cost of doing business—a “pollution tax” that is far easier to swallow than navigating a logistical and supply-chain hellscape.

In late December 2025, the Commission for Air Quality Management (CAQM) dropped a historic hammer, proposing a combined penalty of ₹61.85 crore as Environmental Compensation on six major thermal power plants within a 300 km radius of Delhi. These facilities missed the statutory 5% biomass co-firing blend mandated for the 2024–25 financial year.

Rather than sparking a rush for compliance, this crackdown has only highlighted a systemic rot. For many utilities, cutting a cheque for multi-crore fines is simpler and more fiscally sound than hunting for elusive, price-volatile biomass pellets.

The Cost of Non-Compliance: A Breakdown of the CAQM Penalties

The CAQM’s recent offensive represents one of the most aggressive regulatory moves under the Environment (Utilisation of Crop Residue by Thermal Power Plants) Rules, 2023. However, the sheer scale of the defiance suggests that the “pay-to-pollute” model is thriving.

Talwandi Sabo Power Ltd alone was slapped with more than half of the total fine, facing a ₹33.02 crore penalty. Despite federal frameworks designed to cushion the blow, plants have repeatedly failed to lock in a consistent supply.

Key Takeaway: Biomass utilization is a regional outlier, not a national trend. While nearly 80% of the biomass used by TPPs across the country is burnt in the Delhi-NCR cluster due to the CAQM’s heavy-handed oversight, agricultural hubs like Bihar, Karnataka, and Rajasthan have reported virtually zero utilization. This is despite these states sitting on mountains of surplus crop residue.

The “Pass-Through” Paradox

On paper, the finances of co-firing look foolproof. The Ministry of Power explicitly allows TPPs to “pass through” the extra costs of buying and processing biomass directly into their power purchase tariffs. In a rational world, this should have removed any financial friction for the power generators.

But the real world is rarely rational. This mechanism has triggered a liquidity trap known as the “Pass-Through” Paradox. State-run Distribution Companies (DISCOMs)—already drowning in debt and under intense political pressure to keep electricity cheap—have routinely delayed or flatly refused to clear bills that include these higher biomass-adjusted rates. This leaves TPPs staring at a massive cash-flow hole.

Rather than trapping their working capital in endless regulatory bickering with DISCOMs, private and state generators have run the numbers.

They’ve decided that absorbing CAQM penalties is actually better for their balance sheets than buying expensive pellets and waiting years for a reimbursement that might never come.

The Logistical Nightmare: Why Co-Firing is a Technical Hassle

India’s power plants were built for coal—a fuel that is predictable, standardized, and rugged. Forcing agricultural waste into this delicate infrastructure introduces operational chaos:

• Extreme Moisture Affinity (Hygroscopicity): Biomass pellets act like sponges. Unlike coal, you can’t just leave them in an open yard or spray them with water for dust control. Damp pellets disintegrate into mush, clog up the feeding systems, and become useless.
• Boiler Corrosion and Slagging: Agricultural residue is packed with alkali metals like sodium and potassium, along with chlorine. These elements act like acid inside the boiler, causing severe slagging and chemical corrosion on the tubes. This means more frequent, and much more expensive, maintenance shutdowns.
• Mill Fire Hazards: Biomass has a hair-trigger ignition point and high volatility (usually 60% to 66%). This forces engineers to lower the operating temperature of coal mills, which in turn spikes the risk of catastrophic fires in the pulverising units.

The Myth of Biomass Availability

Even if every boiler was magically retrofitted tomorrow, the industry would still hit a wall: the physical absence of fuel. That “surplus” of 260 million tonnes of agricultural residue India supposedly has? It’s a seasonal mirage.

Stubble burning happens in a frantic 20-to-30-day window after the harvest. To turn that straw into pellets, you need to collect, bale, transport, and process millions of tonnes in just a few weeks. The Biomass Aggregation Machinery (BAM) needed for this is still rare and far too expensive for the average farmer.

Worse, the push for power plant fuel has triggered a resource war. Traditional industries that use crop residue for animal fodder, roofing, or industrial bedding are seeing their supplies vanish. This competition has sent spot prices screaming upward. In 2026, forward contracts have hovered between ₹12,500 and ₹13,500 per tonne, making biomass look like a luxury item compared to domestic coal.

SAMARTH’s Strategic Pivot and the Torrefaction Mirage

Recognizing that the current plan is failing, the National Mission on Use of Biomass in Thermal Power Plants (SAMARTH) has tried to change its play. They’ve shifted focus toward torrefaction—essentially “roasting” biomass in an oxygen-free chamber to create a coal-like, water-resistant fuel.

But torrefaction has hit its own economic dead end. While the state-run NTPC has run several pilot plants over the last year, they’ve been plagued by massive operating expenses (OPEX) and a flaky feedstock supply. The huge capital expenditure (CAPEX) needed to build these plants has scared off private investors, leaving torrefaction as a fancy niche experiment rather than a scalable solution.

Policy Escalation vs. Operational Reality

Despite these glaring failures, the mandates are only getting stricter. As we move through the back half of 2026, the Ministry of Power’s decision to raise the mandate to 7% feels increasingly untethered from reality. For plants near the capital, the rules are even tighter: a 5% biomass blend must be supplemented by an extra 2% of biomass or municipal solid waste (MSW) charcoal.

While 75 thermal power plants have technically co-fired biomass at some point—using roughly 6.57 million metric tonnes as of July 2026—the pace is glacial. We are nowhere near hitting that 7% target.

Summary

• Systemic Failure: India’s biomass co-firing mandate is stalling as utilities find it cheaper to pay multi-crore fines than to navigate the logistical nightmare of sourcing pellets.
• The 2026 Outlook: With the winter harvest weeks away, the lack of a trading ecosystem suggests last year’s ₹61.85 crore in penalties was just the beginning.
• Technical & Supply Bottlenecks: Corrosive boiler damage, seasonal supply spikes, and the high cost of torrefaction have turned the 7% blending target into an operational fantasy.