The new rural dividend: Converting farm waste into clean energy and income

Every winter, smoke from stubble fires blurs India’s northern skies, a symptom of an untapped resource going up in flames. What if, instead of pollution, those residues powered the grid, created rural jobs, and cut fossil fuel use? The answer lies in reimagining agricultural biomass as a national energy asset.

India’s claim as an agricultural powerhouse is well earned. With nearly 139 million hectares under cultivation, its farms do far more than feed the nation. They generate a vast and often overlooked stream of by-products. Crop residues, husks, sugarcane fibre, palm and coconut shells, even cow dung which all accounts to an abundant supply of agricultural biomass. Yet, despite its scale and potential, this resource remains on the fringes of India’s energy and rural enterprise story.

India produces an enormous volume of agricultural residues every year with an estimated 500–600 million tonnes in total. Of this, rice and wheat alone account for nearly 70%, with studies suggesting around 120–230 million tonnes of rice straw and husk and 110–130 million tonnes of wheat straw annually. Residues from crops such as cotton, sugarcane, and coconut add significantly to this pool, even if precise figures vary across regions. Collectively, India’s annual agricultural biomass output ranks among the highest in the world, second only to China, with a surplus potential of about 230 million tonnes available for productive use. These are not just statistics — they represent a vast, renewable resource waiting to be transformed into value and opportunity.

For farmers, even a modest payment can deliver meaningful revenue. In several Indian states, raw agricultural biomass currently changes hands at an average of ₹ 1.5–₹ 2 per kg, which translates to a serviceable available market (SAM) in the region of ₹ 15,000–₹ 20,000 crore. For marginal and smallholder farmers, this means a dependable supplementary income stream — achieved without additional land or major input costs.

Yet the promise is held back by structural frictions. The biomass market remains largely unorganised. Mechanisation along the agricultural-residue chain is uneven, farms are fragmented, and the costs of storage and transport continue to erode margins. For instance, a detailed supply-chain review for paddy residue indicates that transport and aggregation up to ~15 km can cost ₹ 1,150-₹ 1,330 per tonne (≈ ₹ 1.15–₹ 1.33 per kg) even before longer-haul costs kick in.

In the broader logistics landscape, India’s freight transport is expensive -road transport averages ₹ 11.03 per tonne-km. These cost pressures make long-haul aggregation of light volumes uneconomic, ultimately squeezing both farmers and processors. If biomass is to emerge as a durable pillar of rural livelihoods and clean energy, then the system must evolve — from ad-hoc collection to an organised, localised ecosystem that links farmers, cooperatives, rural entrepreneurs and energy producers. Only by reducing friction and raising value at each stage can this latent opportunity be realised in scale.

Practically, this means incentivising collection and storage close to source. Corporate players and cooperatives should be encouraged to set up structured collection and storage facilities in agricultural pockets so raw material need not travel excessively long distances. Area-wise biomass collection agents — local entrepreneurs or cooperative cadres can be deployed to aggregate feedstock from clusters of villages. These agents, working with farmers, will funnel material into strategically located “collection banks” that saturate catchment areas and ensure consistent supply.

Price signals must be clear and remunerative. Offering attractive, stable prices to farmers and collection agents will make biomass trading a viable line of business; policymakers might also explore a Minimum Support Price (MSP) mechanism for raw biomass to stabilise supply and protect small sellers from price shocks. Equally important is institutional partnership: tying up multi-state farmer cooperatives and agricultural societies can bring scale, accountability and traceability into the supply chain.

Finally, the logic of scale must meet the logic of geography. Processing should sit where collection happens. Locating bioenergy and biogas plants close to storage clusters or high-density production zones not only reduces transport costs but also lowers carbon intensity and enhances plant viability. When feedstock, logistics, and processing are co-located, the economics align for every participant in the chain — farmers earn an assured price, collection agents gain steady income, and energy producers secure reliable raw material at predictable costs.

The dividends extend far beyond economics. A functional farm-to-fuel ecosystem would substantially reduce stubble burning, improve local air quality, generate rural employment, and reinforce India’s clean energy transition. Crucially, it would convert what is today a waste-disposal problem into a sustainable income stream for millions of farmers.

India already possesses the raw material base, nearly a billion tonnes of agricultural biomass annually. What’s missing is organisation and integration. Through pragmatic incentives, district-level biomass aggregation models, and public–private collaboration in logistics and technology, farm residue can evolve into a dependable pillar of India’s renewable energy portfolio.

Our farmers have long been the custodians of food security; with the right systems and market linkages, they can now become anchors of energy security — powering a rural renaissance grounded in both sustainability and shared prosperity.

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Joint Director – Trade Promotion Council of India (TPCI)