Explained: What is the boost given to the biogas industry in Budget 2024?

Finance Minister Nirmala Sitharaman presented the interim budget on February 1.

The interim budget presented on February 1 was a big positive for the biogas industry as the finance minister announced monetary assistance for procurement of biomass aggregation machinery.

The budget announcement comes on the back of the government’s push for infrastructure development to boost adoption of alternative fuels such as biofuels and green hydrogen.

Biofuels, or bio-energy, are a form of energy generated from organic and agricultural materials known as biomass. Biofuels help in reducing emissions and have gained worldwide popularity, contributing to meeting net-zero carbon emission targets.

What has FM announced in the budget for biogas?

Finance minister Nirmala Sitharaman, without disclosing the amount, said the government would provide financial assistance for procurement of machinery to help in biomass collection, adding that blending of compressed biogas (CBG) in compressed natural gas (CNG) and piped natural gas (PNG) would be compulsory.

“Phased mandatory blending of compressed biogas in compressed natural gas for transport and piped natural gas for domestic purposes will be mandated. Financial assistance will be provided for procurement of biomass aggregation machinery to support collection,” she said.

What is the phased CBG blending mandate?

In November 2023, the government announced mandatory blending of CBG in CNG and PNG in a phased manner to promote consumption of biogas. The government said the CBG blending obligation (CBO) would be voluntary till financial year 2024-25 (FY25), and the mandatory blending obligation would start from FY26. CBO would be kept at 1 percent, 3 percent and 4 percent of total CNG/PNG consumption for FY26, FY27 and FY28, respectively.

CBO would be mandated at 5 percent from FY29 onwards, according to the government notification. A central repository body (CRB) would monitor and implement the blending mandate.

Biogas boost in India

India’s energy requirements depend in very large part on imports, with over 85 percent of crude oil and nearly 50 percent of natural gas coming from overseas.

The government intends to use biomass, widely and cheaply available here, as a fuel to reduce this import dependency. Petroleum and Natural Gas Minister Hardeep Singh Puri in November 2023 said CBO would encourage investment of around Rs 37,500 crore and facilitate establishment of 750 CBG projects by 2028-29.

The government highlighted that the key objectives of CBO are to stimulate demand for CBG in the city gas distribution sector, besides serving as import substitution for liquefied natural gas, thereby saving on foreign exchange.

CBG plants in India

Several energy companies in India including Reliance Industries Limited (RIL), Indian Oil Corporation Limited and Bharat Petroleum Corporation Limited have pledged to set up CBG plants.

The Ministry of Petroleum and Natural Gas had launched a scheme called Sustainable Alternative Towards Affordable Transportation in 2018 with the ambition of setting up 5,000 CBG plants in India by 2023. However, the government was unable to meet the target due to the disruptions caused by the COVID-19 pandemic.

With the recent boost given to the sector, several companies have come up with individual targets to set up CBG plants. RIL targets to establish 100 CBG plants in the next five years, consuming 5.5 million tonnes of agri-residue and organic waste.

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