Sustainable aviation fuel may cost 2-3 times more than conventional jet fuel: Centre’s draft policy

Sustainable aviation fuel (SAF) could cost at least two to three times as much as conventional jet fuel, according to a draft policy by the Centre, which proposes financial incentives to encourage its production as India prepares to introduce blending mandates for airlines.

Sustainable aviation fuel (SAF) is an alternative fuel made from non-petroleum feedstocks that reduces air pollution from air transportation, according to the US Department of Energy.

The draft proposes a phased blending mandate for international aviation, requiring fuel suppliers to ensure a 1% SAF blend in 2027, 2% in 2028, 3% in 2029 and 5% in 2030. Targets beyond 2030, including 20% by 2040, are mentioned as ‘indicative’. The National Council on SAF will decide which of these become mandatory, taking into account factors such as supply-chain readiness, technology and market conditions.

The draft states that SAF can reduce lifecycle carbon dioxide emissions by up to 80% compared with conventional jet fuel.

The proposed mandate will initially apply to international flights covered under the International Civil Aviation Organization’s (ICAO) CORSIA framework, with fuel suppliers required to blend SAF with ATF. As per the draft, only domestically manufactured SAF will qualify under the policy.

According to the draft, the government may consider extending financial incentives and support measures to promote SAF production. These could include support through existing or new schemes, green bonds and tax concessions, it said.

The proposed fiscal measures include exemption or reduction in goods and services tax (GST), import duty waivers, income-tax holidays and accelerated depreciation, subject to consideration by the relevant ministries and departments, the draft said.

India has an estimated 230 million tonnes of surplus agricultural residue that could produce the fuel, alongside feedstocks such as used cooking oil and ethanol.

To support research and development in the sector, the policy also proposes an SAF Innovation Seed Fund of about ₹500 crore under the Centre for High Technology, which functions under the petroleum ministry.

The draft also seeks to build a domestic supply chain, stating that SAF used to meet the blending requirements must be manufactured in India. The fuel would be blended with conventional ATF at a production facility, refinery or intermediate storage point before being supplied to airports, it said.

It further proposes a digital National SAF Registry, to be maintained by the Directorate General of Civil Aviation (DGCA), to track SAF production, blending and transactions. Each transaction would be supported by a digitally secured certificate carrying details such as the fuel batch, feedstock origin, producer and emissions reduction, it stated.