New Delhi: The government plans to bring a new policy to promote use of biofuels in transport fuel that will catalyse Rs 1 lakh crore of investment in the entire value chain, Oil Minister Dharmendra Pradhan said today.

India imports 80 per cent of its crude oil needs and use of biofuel extracted from non-edible oils will help meet the target of reducing imports by 10 per cent by 2022, he said at a function organised to mark 'World Biofuel Day'.

State-owned oil marketing companies Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) have committed USD 2 billion investment in research and development (R&D) on biofuels, he said.

"We will soon take to the Cabinet a biofuel policy that will provide for investment climate, incentives, government role and commercial returns for developers," he said.

The policy will help develop "a biofuel economy worth Rs 1 lakh crore in the next two years," he said adding the government has already asked state oil companies to set up ethanol plants at 12 locations over the coming year.

"Promoting biofuels creates jobs, fosters economic growth, supports farmers and helps improve energy security for the country," he said.

Ways are being explored on conversion of urban, rural waste to fuel and use of waste/barren lands for cultivation of feedstock for 2G biofuels.

Road Transport & Highways and Shipping Minister Nitin Gadkari stressed upon the importance of biofuels as cost effective and environment friendly substitutes to conventional fuels.

He said that besides bringing down pollution, biofuels produced indigenously from agricultural waste, plants like bamboo, non-edible oilseeds, or municipal waste will help reduce the country's huge import burden.

In addition, it will also generate employment and boost the economy of rural areas, including the North East and the barren wastelands of the country.

Gadkari said that the automobile growth in the country is an unsustainable 22 per cent. So efforts are on in a big way to promote public transport based on cheaper and greener biofuels and electricity.

India has brought in the necessary regulations for flexi engines. Nagpur city is running 55 buses on 100 per cent bio ethanol and another 50 on bio CNG derived from methane from sewage water.

This is in addition to a 200 strong fleet of electric taxis and autos. The shipping and inland waterways sectors too are gearing up for running ships and barges on methanol, he said.