India is preparing to roll out a new policy aimed at increasing biogas production through higher guaranteed purchase prices and subsidies for new projects, as the government looks to reduce carbon emissions, lower dependence on imported fossil fuels and address rising energy costs.
The proposed programme, expected to be launched this month, would increase the offtake price of compressed biogas (CBG) and offer financial incentives to companies investing in new plants, according to people familiar with the matter. The policy aims to expand the number of operational CBG plants to around 700 over the next several years from nearly 200 currently.
Compressed biogas is methane produced from organic waste, including paddy straw, cattle dung, food waste and household leftovers. Policymakers consider it a carbon-negative fuel as it captures emissions that would otherwise enter the atmosphere while also serving as an alternative to fossil fuels.
Currently, state-owned oil marketing companies and gas utilities pay producers about Rs 72 to Rs 74 per kilogram for CBG, which is blended with natural gas supplied to households and vehicles through pipelines.
Programme Aims To Reduce Import Dependence, Boost Commercial Viability
India has been attempting to scale up biogas production for much of the last decade, though output has remained below earlier targets. The renewed push has gained urgency amid the Iran conflict, which has exposed India’s vulnerability to global energy price fluctuations and supply disruptions. India imports nearly half of its gas requirements, much of which passes through the Strait of Hormuz.
The new programme, named Sampoorn, will be implemented by the Ministry of Petroleum and Natural Gas, according to people familiar with the matter. The ministry did not immediately respond to an email seeking comment.
In 2018, the government had set a target of establishing 5,000 biogas plants nationwide by March 2024, with the aim of producing 54 million cubic metres of gas daily, equivalent to nearly half of India’s demand at the time.
In February this year, India’s oil minister said in a post on X that the country’s 134 CBG plants were producing nearly 930 tonnes of biogas per day, representing less than 1 per cent of domestic consumption requirements. The government is targeting a higher share of biogas blending with natural gas by the fiscal year ending March 2029.
Government incentives under the new policy are expected to support projects using agricultural residue and food waste, including feedstock sourced through agencies such as the Food Corporation of India.
India had earlier attempted to attract investment into the sector through initiatives such as Sustainable Alternative Towards Affordable Transportation (SATAT), which encouraged biogas plant development, and the Galvanizing Organic Bio-Agro Resources Dhan programme focused on converting farm waste into fertiliser and biogas. However, these efforts fell short of targets amid financing challenges, feedstock constraints and concerns around commercial viability.
The latest policy effort seeks to improve project economics and attract greater private investment, particularly as developers have argued that existing returns remain insufficient to justify large-scale investment in biogas infrastructure.
Several large corporates have already invested in the sector. Reliance Industries last year announced plans to operationalise 55 compressed biogas plants with a combined capacity of 400,000 tonnes annually and is targeting 500 plants by 2030. Japan’s Suzuki Motor Corp, parent company of Maruti Suzuki, opened a pilot biogas plant in 2024, followed by its first commercial-scale facility in India in December and another a month later. The company plans to build five biogas facilities in Gujarat using cattle dung as feedstock.
The programme is also expected to help address seasonal crop residue burning in northern India, where farmers often burn paddy straw after harvest, contributing to severe air pollution across Delhi and neighbouring regions.
(Bloomberg iinputs)