The terrestrial biomass feedstock can be generally categorized into two groups. The first group includes corn grain, sugarcane, soy bean, oil seed, etc. The second group of terrestrial biomass feed stocks, the cellulosic biomass, can avoid adverse impacts on food supply, because they are non-starch, non-edible and non-food feedstocks. Cellulosic biomass feed stocks can be obtained from a number of sources, such as agricultural residues, forest residues and energy crops. Currently, most bio-fuels are made from these feed stocks, due to the maturity in technologies and lower unit production cost. However, the use of these feed stocks for bio-fuel production might have implications both in terms of world food prices and production. Agricultural residues are typically plant parts left in the field after harvest (e.g., corn stover), as well as the secondary residues like manure and food processing wastes. Bio-fuel policies play an important role in the development of the energy sector specifically in the developing countries. The profitability of bio energy and bio-fuel production is significantly influenced by policies affecting multiple sectors such as agriculture, research, industry and trade. Identifying relevant policies and quantifying their specific impacts is difficult given the variety of policy instruments (taxes, subsidies, price support, etc) and the way they are applied. While reviewing the literature and the implementation projects, it has been observed that one of the main challenges is to develop an efficient and robust supply chain management system for sustainable bio-energy and bio-fuel production. There are many research activities found on bio-energy and bio-fuel production but the number of implementation as a business case is scant in the developing countries including India. Present study has reviewed the biomass and bio waste supply chain for bio energy and bio fuel production and investigated the cause of the major challenges and issues in India. It also proposed some feasible solutions for the developing countries. It may be concluded that the main challenge lie on the feedstock supply, farmers’ choice for traditional use of biomass, economy of scale, efficiency, export of output energy and the major issue being the government policy. The study will definitely help in implementation of bio-energy production projects and the researchers for further improvement.