Excise Waiver on CBG Blending Can Unlock ₹1 Lakh Crore Investment, Says Indian Biogas Association

New Delhi, February 22: The proposed excise duty waiver on biogas blended with compressed natural gas is set to reshape India’s renewable energy landscape, with the Indian Biogas Association stating that the move could unlock investments of up to ₹1 lakh crore if backed by a clear and predictable policy framework.

The announcement follows provisions in the Union Budget 2026, which granted an excise duty waiver on Compressed Biogas blended with Compressed Natural Gas. The industry body described the measure as a significant milestone in advancing India’s energy transition aligned with its 2070 Net Zero target.

5 Percent Blending Could Trigger ₹55,000 Crore Investment​

According to the association, even a modest nationwide biogas blending level of 5 percent in city gas distribution networks over the next five years would require around 2.5 to 3 million metric tonnes per annum of Compressed Biogas.

This scale of demand alone could generate investments of approximately ₹45,000 crore to ₹55,000 crore.

The association further indicated that with policy clarity and predictable pricing, blending levels could realistically rise to 7 to 8 percent by 2032. Such growth would nearly double the investment potential to around ₹1 lakh crore.

Excise Relief to Improve Sector Economics​

The excise waiver addresses what the association described as a long-standing imbalance. Although Compressed Biogas is a renewable and environmentally beneficial fuel, it was previously taxed in the same manner as conventional Compressed Natural Gas.

By removing the excise component on the biogas portion of blended fuel, the cost structure becomes more favorable. For city gas distribution companies, this translates into lower weighted average fuel costs. Consumers could benefit from stable or reduced prices, while producers gain assured offtake and more reliable revenue streams.

The association noted that the waiver is expected to significantly improve internal rates of return for typical 4.8 to 10 tonnes per day plants, depending on feedstock mix and logistics. This improvement could make previously marginal projects financially viable and unlock project financing.

India’s CBG Potential and Climate Impact​

India’s Compressed Biogas potential is estimated at nearly 60 million tonnes per year, derived from organic waste sources such as paddy straw, press mud, municipal solid waste, and cattle dung.

From a climate perspective, Compressed Biogas can cut greenhouse gas emissions by 70 to 90 percent over its full life cycle, particularly when produced from agricultural waste. A 10 percent blending level could reduce emissions by 12 to 15 million tonnes of CO2 equivalent annually.

The association emphasized that beyond price reductions, the excise waiver can accelerate private investment, strengthen energy security, and deliver measurable climate and rural development benefits, positioning the biogas sector as a critical pillar in India’s clean energy transition.