India Approves National Circular Bioenergy Scheme to Boost Compressed Biogas Production

With the aim of boosting compressed biogas (CBG) production in the country, the Union Cabinet on Thursday approved ‘GOBARdhan’, the National Circular Bioenergy Scheme, with an outlay of Rs 23,731 crore for implementation between the current financial year and 2025-26, or 10 years. The scheme aims to increase domestic CBG production by nearly 10-fold and mobilise large-scale private investment in this segment through assured offtake by city gas operators, stable administered pricing, capital subsidies, credit support, and pipeline infrastructure. CBG is an eco-friendly and purified form of biogas that is compressed to high pressures for use as a vehicle and industrial fuel. It has properties and energy content very similar to compressed natural gas (CNG), which means it can be blended with CNG or be used as a replacement fuel in automotive, industrial, and commercial sectors . Unorganised feedstock supply chains, high initial capital expenditure, inadequate local distribution infrastructure, and weak offtake have been among the major challenges and roadblocks in the CBG segment, and the scheme aims to overcome them. Given India’s dependence on imports to meet about half of its natural gas requirement, boosting CBG production and use could help meaningfully reduce the reliance on imported natural gas. It would also help insulate the domestic market against major supply and price shocks in the international market, like the prevailing Strait of Hormuz crisis. According to the government, GOBARdhan — which will be administered by the Ministry of Petroleum and Natural Gas (MoPNG) — has the potential to transform the country’s abundant agricultural residue, cattle dung, press mud, municipal organic waste and other biomass resources into clean fuel, organic manure, rural income and national economic value. “Over the past several years, the Government of India has systematically built the foundations of the CBG sector through the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative, the Market Development Assistance (MDA) Scheme for organic manure, the Biomass Aggregation Machinery (BAM) Scheme, the Development of Pipeline Infrastructure (DPI) Scheme and Central Financial Assistance (CFA) for CBG plants under the National Bioenergy Programme. Together, these initiatives have enabled the commissioning of over 200 CBG plants, established production and offtake systems, strengthened the organic manure value chain and demonstrated the potential of CBG across feedstocks and geographies,” the government said. The GOBARdhan scheme is expected to further build and strengthen the CBG ecosystem by creating an integrated platform across the entire CBG value chain. This is likely to enable faster implementation, stronger project economics and greater certainty for investors, lenders and developers. “India’s demand for natural gas is expanding across transport, households, industry and commercial sectors. CBG can meet a growing share of this demand through domestic renewable production, strengthening energy resilience and reducing dependence on imported fossil fuels. CBG is chemically equivalent to natural gas and can be seamlessly integrated into the existing gas ecosystem. It therefore combines the benefits of a renewable fuel with the reach and utility of India’s expanding gas infrastructure,” the government said. The scheme’s key facets GOBARdhan will have a dedicated CBG offtake assurance framework to provide a reliable and predictable market for producers. The procurement will be done by city gas distribution (CGD) entities to support their CBG blending obligations — 3% in 2026-27, 4% in 2027-28 and 5% from 2028-29 onwards — in CNG and household piped natural gas (PNG) segments. According to the government, the framework converts the blending obligation into a “clear, long-term demand signal for the industry”, and consistent implementation across CGD networks will improve project bankability, support capacity utilisation, which would in turn encourage long-term private investment. “GOBARdhan introduces a stable administered CBG price of Rs.2,110 per Metric Million British Thermal Unit (MMBTU), supported through a government-backed pricing framework. The framework provides long-term revenue visibility while protecting consumer affordability through a combination of Government support and a market-based cost-sharing mechanism. With a minimum ten-year horizon, the pricing framework will provide producers with durable revenue certainty, commercially attractive returns and a stronger business case for investment and capacity expansion,” the government said. Under the scheme, eligible greenfield CBG projects will receive capital assistance of up to Rs 2 crore per tonne per day of installed capacity. The support extends beyond core plant machinery to critical value-chain assets for feedstock aggregation, organic manure processing and value addition. Brownfield projects expanding their production capacity will also be eligible. As per the government, this support will lower the initial capital burden, accelerate financial closure and expand participation by private developers, small and medium enterprises, cooperatives, and rural entrepreneurs. The scheme will support cluster-based as well as standalone pipeline infrastructure connecting CBG plants with trunk pipelines and city gas distribution networks. Greater pipeline connectivity is expected to meaningfully reduce evacuation costs, improve reliability, expand market reach and enable higher utilisation of the fuel. “A dedicated Credit Guarantee mechanism will strengthen lender confidence and expand the flow of institutional credit to eligible MSME-based CBG projects. By sharing a portion of lending risk, the mechanism will improve access to affordable finance, reduce collateral requirements and support faster project development. This will widen participation by MSMEs, women entrepreneurs and first-time developers, helping build a broad, competitive and entrepreneurial CBG industry,” the government said.