The compressed biogas (CBG) segment in India seems to be finally coming of age. This is an encouraging trend as the production of CBG has multiple benefits for the economy. It helps reduce natural gas imports, greenhouse gas emissions and stubble burning. Apart from this, it provides additional income to farmers, promotes employment in rural and semi-urban areas and improves waste management. The uptake of CBG is critical for the government as it aims to promote a gas-based economy and increase the share of gas in the energy mix to 15 per cent by 2030. The segment becomes all the more important from a macroeconomic viewpoint as currently, the country imports around 50 per cent of its natural gas requirements. While domestic gas production is gradually increasing, the demand for gas is also growing rapidly. Therefore, it is essential to promote the use of cleaner forms of gas in order to achieve the country’s ambitious climate goals, particularly the target of achieving net-zero emissions by 2070.
According to the Sustainable Alternative Towards Affordable Transportation (SATAT) portal, the Ministry of New and Renewable Energy (MNRE), and data provided by the Centre for Science and Environment (CSE), 58 CBG plants have been commissioned in India as of March 2023, and 3,694 letters of intent have been issued for setting up CBG plants. Moreover, approximately 9,019 tonnes of CBG have been sold. In April 2023, the minister of petroleum and natural gas stated that there are 100 outlets currently dispensing CBG across the country.
Key initiatives to promote CBG
The Union Budget 2023-24 has allocated a priority investment fund of Rs 350 billion to support the energy transition and achieve net-zero emissions. Of this, Rs 100 billion was announced for the Galvanizing Organic Bio-Agro Resources Dhan (GOBARdhan) scheme. The scheme is aimed at installing 500 new waste-to-wealth plants in order to promote a circular economy. This will comprise 200 CBG plants (75 to be set up in cities) and 300 community or cluster-based plants. In addition, the budget announced a 5 per cent CBG mandate for all organisations marketing natural and biogas. Furthermore, to avoid the cascading of taxes on blended compressed natural gas (CNG), the excise duty on the amount of GST paid on CBG in blended CNG has now been exempted.
The CBG segment received a significant policy impetus with the launch of the SATAT initiative by the Ministry of Petroleum and Natural Gas on October 1, 2018. The initiative aims to create an ecosystem for the production of CBG from various waste/biomass sources and to promote its use alongside natural gas. The SATAT initiative aims to encourage private entrepreneurs to establish a large number of CBG plants. As part of the initiative, oil and gas marketing companies are inviting expressions of interest for the procurement of CBG on a long-term basis. The target is to set up 5,000 CBG plants across the country with an estimated production of 15 mmt CBG per annum by 2023. It has been decided that the minimum procurement price of CBG will not be lower than Rs 46 per kg, plus taxes, until March 31, 2029.
In the same year, the National Policy on Biofuels was first published and the GOBARdhan scheme was launched. Under this scheme, financial aid of Rs 5 million per district is provided. Another key policy fillip for the CBG segment was the inclusion of CBG plants in the priority sector lending category by the Reserve Bank of India in 2020. During this time, bio manure, a byproduct of CBG plants, was included as fermented organic manure (FOM) and liquid fermented organic manure (LFOM) under the Fertilizer Control Order, 1985. It is expected that the utilisation of FOM and LFOM will help improve soil health, promote organic farming and reduce the dependence on chemical fertilisers. The Department of Fertilizers has mandated fertiliser companies to offtake FOM along with chemical fertilisers.
In 2022, the National Bioenergy Programme was launched and the procurement price of CBG was linked to the retail selling price of CNG. As part of the National Bioenergy Programme, the MNRE is offering central financial assistance to various CBG/biogas plants up to March 31, 2026. The programme includes provisions for Rs 40 million for new bio-CNG plants with a capacity of 4,800 kg per day and Rs 30 million for existing bio-CNG plants with 4,800 kg per day capacity. In addition, the Central Pollution Control Board has classified certain CBG plants under the “white category”. This category includes CBG plants that produce FOM and LFOM without discharging any wastewater, subject to verification by the State Pollution Control Board. It also includes household biodigester/cow dung-based gas plants, provided the feedstock has a volatile organic fraction higher than 75 per cent. Industrial projects under the white category are considered non-polluting. Such projects do not require environmental clearance under the Environment (Protection) Act, 1986, and consent under the Air (Prevention and Control of Pollution) Act, 1981 and the Water (Prevention and Control of Pollution) Act, 1974. Meanwhile, select categories of CBG plants fall under the green and orange categories, indicating a higher pollution index score.
According to CSE, the approximate cost of installing a 5 tonne per day (tpd) CBG plant is Rs 200 million-Rs 250 million. About 75-80 per cent of the plant’s capital expenditure goes towards purchasing machinery and equipment such as anaerobic digesters, and biogas purification and compression units. Moreover, a minimum 2 tpd capacity CBG plant needs to be planned to maintain financial viability. Meanwhile, the yearly operational cost to run a 5 tpd bio-CNG plant in India can be Rs 25 million-Rs 40 million depending on factors such as the cost of raw material, labour, electricity and maintenance. Agricultural waste such as rice straw, wheat straw and sugarcane bagasse can be sold for Rs 1,000-2,500 per tonne. This number varies due to factors like location and demand.
The way forward
Going forward, a key challenge in the CBG segment is the uncertainty regarding CBG offtake. Due to this issue, plants are not able to operate at full capacity, impacting project economics. To address this, the government is working on expanding the CGD network and providing support for pipeline infrastructure to connect CBG plants to the grid. The lack of monetisation of byproducts such as organic fertiliser is another key issue. The acceptance of new organic fertilisers by farmers will take time and this issue needs to be mostly solved by CBG producers themselves. At the supply chain level, feedstock management presents several challenges including low quality, lack of segregation and uncertain demand. Therefore, critical decisions regarding site selection, plant size, the choice of feedstock and technology become important. Going forward, the government should also ensure that good quality feedstock is not exported and there is efficient interministerial coordination to promote this segment. Despite the challenges in the CBG segment, the government’s commitment to address them through policy initiatives is encouraging. Overall, it is exciting to see the CBG segment receive the attention it deserves.
By Sarthak Takyar