A proposed excise duty waiver on biogas blended with compressed natural gas (CNG), combined with a predictable and clear policy framework, has the potential to unlock investments of nearly Rs 1 lakh crore in India's biogas sector, the Indian Biogas Association (IBA) said on Sunday.
The Union Budget 2026 announced an excise duty waiver on Compressed Biogas (CBG) when blended into CNG, a move the IBA described as a significant step in advancing India's energy transition and its commitment to achieving net-zero emissions by 2070.
According to the association, if city gas distribution (CGD) networks achieve a modest 5 per cent biogas blending nationwide over the next five years, it would require 2.5-3 million metric tonnes per annum (MMTPA) of CBG production. This level alone could attract investments of Rs 45,000-55,000 crore.
“With a stable policy environment and predictable offtake prices, blending could realistically scale to 7-8 per cent by 2032, effectively doubling the investment potential to around Rs 1 lakh crore,” the IBA stated.
The waiver addresses a long-standing anomaly: CBG, a renewable and lower-carbon fuel, was previously subject to the same excise duty as fossil-based CNG. Removing the excise component on the biogas portion of the blend immediately improves cost competitiveness.
Also read: Biogas sector may receive ₹5,000-cr next year: IBA
For CGD companies, this translates into lower weighted-average fuel costs. For end consumers, retail prices of CNG are expected to remain stable or decline slightly. For CBG producers, it ensures guaranteed offtake and bankable revenue streams, thereby accelerating private sector participation.
India possesses substantial untapped CBG potential, estimated at around 60 million tonnes per year from feedstocks such as paddy straw, press mud, municipal solid waste (MSW), and cattle dung. The duty relief is expected to significantly enhance project internal rates of return (IRR) for typical plants (4.8-10 tonnes per day capacity), depending on feedstock mix and logistics, making many previously marginal projects financially viable and easier to finance.
Environmentally, CBG offers lifecycle greenhouse gas emission reductions of 70-90 per cent compared with conventional natural gas, particularly when derived from agricultural residues. A 10 per cent national blending level could cut CO₂-equivalent emissions by 12-15 million tonnes annually.
The IBA emphasised that the excise waiver not only lowers gas prices but also reshapes sector dynamics by promoting energy security, driving rural economic development through waste-to-energy projects, and delivering measurable climate benefits.
The announcement reflects growing policy momentum to integrate bioenergy into India's mainstream fuel mix, positioning CBG as a key pillar in decarbonising transport and industrial sectors while creating sustainable livelihoods in rural areas.
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