Madhya Pradesh and Punjab, two of India’s key agrarian states, have immense potential for biofuel production due to their abundant agricultural and biomass resources. By leveraging their agricultural strengths and promoting innovation, both states aim to reduce dependence on fossil fuels and boost rural incomes. Compressed biogas (CBG) presents a dual opportunity in this regard, addressing both waste management challenges and renewable energy goals. Both states have begun tapping into their rich biomass reserves to promote the adoption of CBG and other biofuels. While Madhya Pradesh has already launched its Biofuel Policy, 2025, Punjab is expected to notify its policy soon.
In line with this, this article delves into the evolving policy landscape and state-led initiatives in Madhya Pradesh and Punjab to scale up CBG adoption. It draws on insights shared by Jaspal Singh, Additional Director, Punjab Energy Development Agency (PEDA), and Manu Srivastava, Additional Chief Secretary, New and Renewable Energy Department, Government of Madhya Pradesh, at the Renewable Watch’s second edition of Renewable Watch’s “Compressed Biogas in India” conference…
Madhya Pradesh
The Madhya Pradesh government has launched the Biofuels Policy, 2025, focusing on creating a robust bioenergy ecosystem that supports clean energy and rural economic growth. The policy encompasses the entire biofuel value chain, ranging from feedstock cultivation and processing to distribution and consumption. A diverse range of biofuels is covered under the policy, such as CBG/bio-compressed natural gas, synthesis gas, biodiesel, bio-coal/briquettes, and drop-in fuels derived from biomass, municipal solid waste, industrial residues and plastic waste. The policy also supports third-generation fuels such as algae-based biofuels, halophyte-derived biofuels, biomethanol and dimethyl ether from biomethanol. However, first-generation ethanol (1G ethanol) is excluded from its scope to avoid competition with food crops.
Incentives
To attract investments, the policy provides a structured incentive package. Projects with investments above Rs 100 million are eligible for benefits, although exceptions have been made for briquette manufacturing units, biomass-based steam generation, cogeneration and sewage treatment plant conversions. Under the Investment Promotion Policy, 2025, eligible projects can receive Basic Investment Promotion Assistance of up to Rs 2 billion, distributed over seven years. Infrastructure development support of up to Rs 50 million is available for essential utilities like roads, water and gas connections. Additionally, projects that implement zero liquid discharge systems can receive up to Rs 100 million as green industrialisation assistance.
Other incentives include 100 per cent exemption from electricity duty, energy development cess and cross-subsidy surcharge for 10 years. Intellectual property-related expenses are reimbursed up to Rs 1 million, and quality certification costs are partially covered. For land acquisition, 50 per cent of stamp duty is reimbursed. Large-scale investors (Rs 5 billion or more) are eligible for a customised incentive package under the Cabinet Committee on Investment Promotion scheme.
Farmer producer organisations, cooperatives and aggregators are also supported through a 30 per cent upfront subsidy, capped at Rs 2 million, for equipment such as rakers, balers and trawlers. This is in addition to existing central government subsidies.
The policy incorporates performance-linked multipliers based on criteria such as capacity utilisation, exports, employment generation and location in priority blocks, enabling regionally balanced growth.
Other provisions
Land availability and access have been streamlined under the policy. Revenue land is offered at 50 per cent of the circle rate, while land for biomass generation can be leased at 10 per cent of the collector rate. Specific ceilings apply to land use: 10 acres for a 10 tonne per day (tpd) CBG plant, 0.02 acres per tpd for biocoal, and 0.015 acres per kilolitre for biodiesel/bioethanol facilities.
To ensure smooth implementation, the policy mandates multi departmental coordination. The state’s agriculture department supports training and aggregator development, and facilitates long-term feedstock contracts. The forest department identifies degraded land for biomass production, while the urban development and housing department coordinates waste collection. The animal husbandry department and the Agricultural Produce Market Committee are involved in enabling raw material supply and organic manure distribution. Meanwhile, at the district level, a committee chaired by the district collector oversees aggregator registration, pricing mechanisms, supply assurance and interdepartmental coordination.
To streamline operations, the state’s New and Renewable Energy [NRE] Department is developing an IT-enabled platform and mobile app to connect farmers, aggregators and developers. The system will manage aggregator command areas, contract compliance, feedstock pricing and payment reconciliation. The project registration process involves submitting financials, land documents and a pre-feasibility report to the commissioner of the NRE Department, along with a fee of Rs 20,000 per Rs 10 million of investment. A detailed project report, biomass assessment and necessary clearances must be submitted within three months. Project approval is contingent upon confirmation of feedstock availability within the proposed block by the district committee.
Punjab
Punjab’s bioenergy strategy is driven by the urgent need to mitigate the environmental impact of stubble burning. To address this, PEDA has promoted the establishment of CBG plants to utilise surplus paddy straw as a resource. As of June 2025, Punjab’s total installed biopower capacity stood at 576.59 MW. The state has around 60 sanctioned CBG projects, five of which are operational. These plants collectively process around 350,000 tonnes of paddy straw annually. Once all projects become operational, annual consumption is expected to rise to 3 million tonnes (mt). Punjab produces approximately 20 mt of paddy straw every year, with an estimated 10 mt available for bioenergy applications.
The state mandates that 80 per cent of feedstock used in CBG plants must be paddy straw, with the remaining 20 per cent allowed from other agri-residues. Aggregators collect and supply paddy straw year-round, ensuring availability despite its seasonal nature. Land requirement for storage is high – a acre per 1,000 tonnes of straw – but the agriculture department provides warehousing support.
Policy initiatives
While the state currently operates under the New and Renewable Sources of Energy Policy, 2012, a new dedicated state biofuel policy is expected to be notified soon. The new policy will offer up to Rs 50 million in capital financial assistance per project and introduce tax waivers for CBG transport vehicles for a period of one to three years. Road tax exemptions will also apply to goods and passenger vehicles supporting the bioenergy sector. PEDA has facilitated offtake agreements with oil marketing companies, including Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited. These agreements ensure consistent demand and strengthen the financial viability of the projects. While feedstock pricing is not yet regulated, the agriculture department is expected to develop a pricing framework to protect both farmers and developers.
Other provisions
Sufficient land has been identified and made available for long-term leasing (25-33 years) for both plant operations and feedstock storage. The state has implemented a single-window clearance system to fast-track regulatory approvals. Developers can obtain all necessary permits, including those related to pollution control and environment clearance, within 30 days. PEDA plays a facilitative role, helping developers navigate administrative processes and liaise with relevant departments. In addition, to ensure long-term success, the state has undertaken farmer awareness campaigns highlighting the economic and environmental benefits of supplying paddy straw and not burning it.
Conclusion
The bioenergy initiatives of Madhya Pradesh and Punjab show how state-level efforts can effectively harness agricultural residues to accelerate clean energy growth. Both states are addressing key sectoral challenges such as feedstock aggregation, infrastructure development, regulatory clearances and market linkages through targeted incentives and coordinated institutional support. As the policy landscape evolves and more projects become operational, these states will not only meet their energy needs but also improve farmer incomes and reduce environmental pollution by leveraging their agricultural resources
