Compressed biogas emerges as fast-growing pillar of India's energy mix

India's compressed biogas sector has expanded rapidly in recent years, aided by policy support, blending mandates and investment, though challenges around feedstock and scale persist

Few industries within the energy sector have witnessed the kind of growth registered by the compressed biogas (CBG) sector. From an industry failing to rise above the survival threshold for years to the rapid expansion of CBG plants over the past two years, the growth of this clean energy alternative technology, with huge collateral benefits for the agriculture economy and the fight against pollution, has been transformative.

 

The value chain of CBG begins with the collection and segregation of raw materials, followed by processing in CBG plants where the anaerobic digestion of the raw material—including municipal solid waste (MSW), agricultural products, animal or industrial waste—leads to biogas production, which is compressed and transported to end consumers (CNG and PNG sectors) via pipelines and cascades. 

 

Globally, Europe is the largest market for CBG, led by Germany, with strong policy support and high plant capacity, while China and India are driving rapid growth in the Asia-Pacific region, with China having the most plants, making them key players alongside established markets such as North America and emerging ones such as Brazil in South America.

 

In India, key players in the plant installation and technology space include Indian Oil (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL), besides private players such as Nature Energy and Future Biogas. Key players in the downstream retailing segment include city gas distribution (CGD) entities and oil marketing companies (OMCs). In India, key players in the plant installation and technology space include Indian Oil (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL), besides private players such as Nature Energy and Future Biogas. Key players in the downstream retailing segment include city gas distribution (CGD) entities and oil marketing companies (OMCs).  India, with its large agricultural base, had in 2018 set an ambitious target of producing 15 million tonnes per annum (MTPA) of CBG through 5,000 plants by 2025, signalling the potential for green gas in its energy basket. However, that deadline has not been met despite the projected increase in demand. Now, India’s CBG demand is set to rise further, especially in areas without pipeline connectivity, with a mandatory 1 per cent blending with compressed natural gas (CNG) and piped natural gas (PNG) obligation that kicked in this fiscal year. The blend is expected to increase to 5 per cent by 2028-29, with a target of 3 million standard cubic metres per day (mmscmd) of CBG.

How policy support accelerated India’s CBG expansion

The current financial year (2025-26) also marked a turning point for India’s CBG sector, with the government allocating over Rs 325 crore to the programme, a 75 per cent increase over FY25’s allocation. However, the basic groundwork for CBG’s growth and market development was laid many years ago with initiatives such as the Sustainable Alternative Towards Affordable Transportation (Satat) scheme launched in 2018, followed by the Galvanizing Organic Bio-Agro Resources Dhan (GOBARDhan) scheme under the Swachh Bharat Mission, the National Bio-Energy Programme (NBP), and, finally, the introduction of mandatory CBG blending in CNG and PNG segments this fiscal.

 

The current financial year has also seen the rollout of other critical interventions that significantly strengthened investor confidence and accelerated project execution across the value chain.

 

“Among the most consequential measures was the earmarking of Rs 250 crore for development of pipeline infrastructure to connect CBG plants with city gas distribution networks, substantial reduction in goods and services tax (GST) on biogas plants and associated equipment, and introduction of biomass aggregation machinery to channelise the biomass feedstock from agricultural residues and other waste streams to CBG plants,” said Arun Kumar, partner at law firm JSA Advocates & Solicitors.

What data show on CBG plants and production capacity

Current data from the GOBARDhan portal under the Ministry of Petroleum and Natural Gas (MoPNG) show that around 145 plants were commissioned last year using agricultural residue, MSW, and industrial waste, producing more than 0.13 mmscmd of CBG. Additionally, 594 plants were under construction or yet to start, which together will have a production capacity of 16 mmscmd. However, based on current utilisation levels, the expected output from these upcoming plants is estimated to be only around 1.1 mmscmd. Additionally, another 1,014 plants are under construction or yet to start construction.

 

The past few years have also seen state-specific policies to promote CBG, with public sector undertakings (PSUs) forming joint ventures to enhance technical capabilities in collaboration with existing installers.

Key challenges holding back large-scale CBG deployment

However, the ongoing growth phase has also exposed a few issues. While CBG production continues to progress, the sector’s scale-up remains constrained due to the absence of feedstock mapping, inconsistent and poor-quality feedstock supply, decentralised production models, high upfront capital expenditure, and continued dependence on imported technologies and equipment.

 

“However, given India’s substantial resource potential, significant volumes of municipal solid waste and agricultural residues produced in the country can be effectively channelled into CBG production,” Kumar said.

 

Ahead of the Union Budget for 2026-27, industry stakeholders are advocating targeted fiscal interventions to unlock the next phase of growth. The Indian Biogas Association, for instance, has proposed a dedicated capital outlay of Rs 10,000 crore for CBG projects and the revival of five million biogas units. Complementary measures, such as enhancing the biomass aggregation machinery scheme to improve feedstock collection and standardisation, reducing customs duties on imported CBG equipment, and increasing financial support from the government and lenders, could stabilise revenues, improve project bankability and support the transition of CBG from a policy-driven initiative to a commercially scalable pillar of India’s clean energy goals, Kumar said.