RIL’s biogas entry ticks all the boxes on green investment

RIL Chairman and MD Mukesh Ambani had on Monday made positive announcements for the biogas sector.

Reliance Industries Limited (RIL) Chairman and Managing Director Mukesh Ambani has made positive announcements on Monday for the biogas sector. The company plans to establish 100 Compressed Biogas (CBG) plants in the next five years, using 5.5 million metric tons of agro- and organic waste annually.

The impact will be huge considering it will help reduce nearly two million tonnes year-on-year of carbon emissions, apart from producing 2.5 million tonnes of organic manure. This would also result in India having to import 0.7 million metric tonnes per annum less of LNG, saving crucial forex reserves of roughly Rs 1,500 crore.

The move will pave the way for better environmental outcomes in the long term. Recall the farm fires in Punjab and Haryana during the winter season when the whole of North India faces the scourge of air pollution. Demand for biomass that gets wastefully burnt at present is expected to shoot up with big investments in biogas production.

These initiatives from the private sector will go a long way in improving the quality of life for present and future generations. The overall impact could be an estimated saving of Rs 10,000 crore, which can be measured in terms of socio-economic impact.

The biogas sector has been growing at a rate of more than 10 percent since the last decade, with the help of GoI’s incentives and policies. Central Financial Assistance (CAPEX subsidy) for setting up biogas/compressed biogas (CBG) projects and the SATAT (Sustainable Alternative Towards Affordable Transportation) scheme which underwent further amendments to benchmark CBG prices to CNG have helped.

The sync scheme introduced by GAIL for insertion of CBG into the city gas grid, the excise exemption on CBG-blended with CNG, and the Market Development Assistance (MDA) of Rs 1.5/kg for organic manure under PM-PRANAM, and several other state-level initiatives was providing the needed thrust to the biogas ecosystem.

With the entry of conglomerates like RIL, the biogas sector is poised for a major push. They can provide the sector with significant resource mobilisation, leading to an overall accelerated realisation rate of projects.

In general, due to the wide range of positive impacts associated with biogas, further possibilities of minimising existing gaps in the policy frameworks, including additional exemptions and other incentives to encourage investment in the sector, and streamlining several regulatory requirements seem inevitable. Furthermore, proper investment in the sector can also help in setting aside the apprehension regarding the feasibility of CBG projects among potential investors.

Another dimension of the entry of established companies into the biogas sector will be that it encourages parity between CNG and CBG prices. Currently, with CBG being in the GST regime vis-à-vis excise/ VAT regime for natural gas, there remain tax ambiguities that prevent gas distribution companies (City Gas Distribution players) from fully leveraging the available gas grid infrastructure.

In addition, with the industry reaching a certain scale, the upstream supply chain of raw materials for biogas plants will also get streamlined. Currently, there is a lack of coordination between the producers of biomass and the operators of biogas plants.

This leads to problems such as shortage of feedstock and high prices. However, with major players entering, coordination is likely to improve coordination between the two sectors, which will ensure a more reliable and affordable supply of feedstock.

The most important of all is the sale and marketing of organic fertilizers, which may also get streamlined. Organic fertilizer, which is technically known as Fermented Organic Manure (FOM) in biogas fields, is in a way a byproduct of biogas production, and these are valuable sources of nutrients, especially organic carbon, which acts as a conditioner for the soil that is being depleted.

Big ticket investments like the RIL' entry are likely to promote the sale of organic fertilizers as a natural revenue generation model, which in turn will pave the way for other players to market their organic fertilizers. This will further help in creating awareness amongst farmers, improving the capacity building of intermediary institutions, and ensuring market linkages for organic end products.

Overall, the RIL entry is a positive development for the biogas industry. The sector is welcoming the investment possibilities, and with a proper push, it can help the country become self-reliant in terms of its energy needs. The sector will become even more lucrative for foreign investors.

More investment in turn is likely to lead to a number of positive impacts, including better policy decisions, parity between CNG and CBG, a more streamlined supply chain, and better pricing for biofertilizers. It should be remembered here that the biogas sector is in essence catering to several Sustainable Development Goals.