The compressed biogas (CBG) sector has received a much-needed fillip. The new Galvanizing Organic Bio-Agro Resources Dhan (GOBARdhan) scheme has been approved by the union cabinet with an outlay of Rs 237.31 billion. It will be implemented over the next 10 years, till 2035-36, and is expected to drive a tenfold growth in domestic CBG production. This development is timely given the ongoing crisis in West Asia that has buttressed the need for energy independence. That the scheme has been positively received by the industry as it solves several legacy pain points is another upside.
The regulatory framework for the CBG sector has been perhaps one of the most complex in the renewable space, with several different policies and ministries involved, leading to slower pace of implementation. There was the Sustainable Alternative Towards Affordable Transportation initiative, the Market Development Assistance Scheme for organic manure, the Biomass Aggregation Machinery Scheme, the Development of Pipeline Infrastructure Scheme, and central financial assistance for CBG plants under the National Bioenergy Programme, which provided various incentives and guidelines. The policy framework involved the Ministry of Petroleum and Natural Gas (MoPNG), the Ministry of New and Renewable Energy, the Ministry of Chemicals and Fertilisers, and the Ministry of Agriculture and Farmers Welfare, making policy navigation by stakeholders an arduous task. A strong link between all concerned ministries or a unified policy scheme under just one ministry was a common policy ask by the industry. The new scheme has instituted the latter, with the MoPNG being given sole charge. This move is expected to simplify the policymaking process and bring in decisive and clear decision-making.
Good things come in pairs. The second key concern of the industry that the policymakers have considered and worked on is offtake pricing. Developers have regularly been requesting an increase over the previous price of Rs 1,478 per metric million British thermal unit (mmBtu), excluding compression charges, as it had proven insufficient to make projects bankable. The new fixed offtake price – for the next 10 years, at least – has been set at the significantly increased Rs 2,110 per mmBtu, improving long-term revenue stability and investor confidence. Developers indeed have a big reason to cheer now.
Apart from these two key developments, the new policy also signals long-term demand by outlining assured CBG offtake by city gas distribution players. The CBG obligation is set to increase from 3 per cent in the current financial year to 4 per cent in the next one and 5 per cent post 2028-29. Capital assistance of Rs 20 million per tonne per day of CBG capacity, a dedicated credit guarantee mechanism and a CBG Ecosystem Challenge Fund are other key highlights of the new scheme.
Despite the positives, it remains to be seen if the new GOBARdhan scheme can usher in a boom in the CBG space. Commissioning a bankable CBG project relies not only on an attractive offtake price, simplified policy and subsidies, but also on an efficient feedstock supply chain, quality of raw material, choosing the right technology, favourable financing terms, additional revenue streams and carbon credits. Therefore, while the policy interventions will draw investors to this space, the sector still has a long way to go.
