The Indian Biogas Association (IBA) stated that the proposed excise duty waiver on biogas blended with compressed natural gas (CNG) has the potential to attract investments worth up to Rs 1 lakh crore in India. This move, part of the recent Union Budget 2026, is seen as a significant step towards promoting clean energy and supporting India’s 2070 Net Zero target. The excise duty exemption on compressed biogas (CBG) blended with CNG is expected to enhance project financial viability and draw substantial private investment.
The IBA highlighted that achieving a 5% blending level of biogas in city gas distribution networks nationwide over the next five years would necessitate around 2.5 to 3 million metric tonnes per annum (MMTPA) of CBG. This could lead to investments ranging from Rs 45,000 crore to Rs 55,000 crore. Moreover, with a clear and stable policy framework and predictable pricing from the government, the blending level could potentially increase to 7-8% by 2032, doubling the total investment potential to approximately Rs 1 lakh crore.
The excise waiver on biogas blended fuel rectifies a longstanding disparity where CBG, despite being an eco-friendly fuel, was previously taxed similarly to CNG. By eliminating the excise component on the biogas portion, the fuel is expected to become more cost-effective. This change translates to lower average fuel costs for city gas distribution companies, potentially leading to stable or reduced gas prices for consumers and ensuring more reliable revenue streams for producers.
The IBA emphasized that this policy shift could accelerate private investments, enhance energy security, and bolster rural development in India. The country’s capacity to produce CBG is estimated at approximately 60 million tonnes per year, utilizing organic waste like paddy straw, press mud, municipal solid waste, and cattle dung. The excise waiver is anticipated to enhance the internal rate of return for typical 4.8 to 10 tonnes per day plants, thereby enabling previously financially unviable projects to secure funding.
CBG has the potential to reduce greenhouse gas emissions by 70 to 90% throughout its lifecycle, particularly when derived from agricultural waste. A 10% blending level could result in a reduction of carbon emissions by 12 to 15 million tonnes of CO2-equivalent annually, aligning with India’s climate objectives and underscoring the policy’s significant environmental impact.
