By Kedar Deshpande, Director – ESG, CareEdge Advisory
As India accelerates its transition towards a low carbon future, compressed biogas (CBG) stands out as a promising bioenergy solution – bringing together waste management, rural livelihoods and climate action. According to the Sustainable Alternative Towards Affordable Transportation (SATAT) portal, the programme has issued 1,094 letters of intent and commissioned 108 CBG plants as of July 2025. Despite this momentum, the country remained significantly short of its target to establish 5,000 CBG facilities by 2023-24, revealing a critical gap in financing and implementation. Environmental, social and governance (ESG)-aligned investors, operating within a maturing green finance ecosystem, are uniquely positioned to help bridge this gap. This article explores how ESG capital can catalyse India’s CBG sector, the persistent challenges in securing such finance, and the strategic interventions required to unlock green capital for one of the country’s most compelling clean energy opportunities.
CBG landscape in India
CBG holds significant potential across the domains of energy security, climate mitigation and rural development. It is produced using agricultural residue, cattle dung, municipal solid waste and other biodegradable feedstocks to yield a high-purity, methane-rich gas that can replace compressed natural gas (CNG) or liquefied natural gas. As a domestically sourced fuel, CBG presents a strong alternative to fossil fuel-based CNG, especially in the automotive and piped gas segments. Currently, India imports approximately 46 per cent of its natural gas requirements, highlighting a significant reliance on external sources to meet domestic demand. To achieve Atmanirbhar Bharat in the energy sector and promote sustainable energy practices, CBG is expected to play a key role.
India’s policy ecosystem supports CBG deployment through three interlinked programmes. SATAT anchors demand via long-term offtake agreements with oil OMCs marketing companies, the National Bioenergy Programme (2022-26) offers capital subsidies and interest subvention, while the Galvanising Organic Bio-Agro Resources Dhan initiative covers schemes and policies to promote the conversion of organic waste to biogas and CBG.
Despite strong policy intent, on-ground execution remains challenging. Developers face issues related to feedstock aggregation, capital access and technological reliability. Most CBG promoters are micro, small and medium enterprises with limited creditworthiness, making it difficult to attract low-cost capital or institutional investment.
Why ESG funds are relevant for CBG projects?
CBG initiatives offer measurable impacts for ESG goals. Environmentally, they help mitigate methane emissions, a potent greenhouse gas with a global warming potential 28 times greater than carbon dioxide. Socially, they promote rural employment, enable waste valorisation and contribute to public health through improved sanitation. According to market research, a CBG plant processing 200 tonnes per day of municipal waste can avoid over 30,000 tonnes of carbon dioxide equivalent emissions annually.
To support the sector, the Ministry of New and Renewable Energy offers capital subsidies of up to Rs 40 million for 4,800 kg per day plants. Further, the Agri Infrastructure Fund, administered by the Ministry of Agriculture and Farmers’ Welfare, provides financial support for investments in viable projects related to post-harvest management infrastructure. These loans attract a subvention of 3 per cent per annum for loans up to Rs 20 million. Additionally, CBG is also included in the priority sector lending framework established by the Reserve Bank of India to ensure it receives adequate and timely credit from banks and financial institutions.
Notably, CBG has also been identified as one of the approved technologies under Phase I of approved sectors in the offset mechanism under India’s Carbon Credit Trading Scheme, governed by the Bureau of Energy Efficiency. This allows CBG plants to earn tradable carbon credits for methane mitigation and fossil fuel displacement, opening new revenue streams and enhancing project bankability.
On the ESG financing front, CBG is classified as an eligible source of renewable energy under domestic and international financing frameworks. This allows ESG-aligned investors’ money to be channelled into the sector. ESG investors demand standardised, verifiable impact metrics, which most Indian CBG developers are yet to institutionalise. Building capacity for transparent reporting and aligning projects with international sustainability benchmarks will be key in unlocking ESG flows.
Case studies: India and abroad
In India, the Bharat Petroleum Corporation Limited-GAIL CBG plant in Bilaspur, Haryana, converts 200 tonnes of solid waste into 5 tonnes of CBG daily, with long-term offtake support from OMCs. It exemplifies successful urban waste-to-energy integration with reliable project economics.
Verbio AG, a leading German bioenergy company, has established Asia’s largest CBG plant in Lehragaga, Punjab. The plant uses 100,000 tonnes of agricultural residues, primarily paddy straw. The generated gas is dispensed across nearby CNG pumps using cascades. The plant has helped in reducing 150,000 metric tonnes of carbon emissions annually and preventing 20,000 metric tonnes of fly ash from paddy straw burning.
In Gujarat, dairy cooperatives such as Amul have piloted CBG clusters based on cattle dung from farmer networks. These setups benefit from high feedstock certainty, rural participation and cooperative governance models that improve financial discipline and resilience.
The way forward: Making CBG projects ESG-ready
To attract ESG finance at scale, the CBG ecosystem must standardise impact measurement – tracking emissions avoided, jobs created, waste processed and rural income generated. The long-term regular supply of feedstock and source segregation is important. Non-segregated waste poses a significant operational challenge. Additionally, developers need targeted capacity building in financial structuring, ESG compliance and impact verification. Aggregation platforms or technical assistance hubs could enable smaller players to meet the eligibility criteria for green bonds or carbon markets.
Ultimately, CBG must be repositioned as a strategic, sustainability-aligned infrastructure class, not just as a bioenergy experiment. With policy stability, government incentivisation, taxonomy alignment and robust capital frameworks, CBG could help India simultaneously decarbonise its gas grid, lower vehicular emissions, reduce the reliance on imported energy, strengthen rural economies and become a model for distributed green infrastructure. Ultimately, CBG will lead in achieving sustainable development goals in a true sense.
