Waste opportunity: Gobardhan scheme could be gamechanger for biofuel sector

National framework combines capital grants, guaranteed offtake and infrastructure funding to turn agricultural waste into an investable, bankable asset class

In less than 20 days since July 31, 2026, the Union Cabinet has approved three major energy schemes: Samudra Manthan (offshore oil and gas), Surya Sarovar (floating solar), and Gobardhan (biofuels). Among them, the compressed biogas-focused Gobardhan holds the highest potential — promising to boost the gas economy and curb costly imports while lifting farm incomes and curbing stubble pollution.  

 

The National Unified Scheme for Compressed Biogas (CBG) — also called the National Circular Bioenergy Scheme — has a ₹23,731 crore outlay running from FY27 to FY36. Designed to turn organic waste and crop residues into clean fuel and rural economic value, the scheme targets a nearly ten-fold leap in domestic CBG production by moblising private capital. Its six pillars target historical gaps in demand, pricing, infrastructure, financing, and tech support — crucial fixes for a sector where only 216 plants are currently active against the 5,000 targeted under Sustainable Alternative Towards Affordable Transportation (SATAT) in 2018.

 

"SATAT was the foundational initiative that created the market for compressed biogas in India. It established the concept of procuring CBG through oil marketing companies and encouraged entrepreneurs to enter the sector. However, SATAT primarily addressed offtake,” said Varun Karad, cofounder and chief executive officer of bioenergy firm REnergy Dynamics.

 

“It did not comprehensively address all the other factors required to make projects bankable, including long-term pricing visibility, capital support, pipeline connectivity, credit availability and feedstock infrastructure. The new scheme is fundamentally different because it brings the entire CBG value chain under one integrated framework,” he said. Karad believes the Gobardhan scheme will lead to ₹50,000 crore of investments into the CBG sector over five years. His company is building a sustainable bioenergy and CBG project pipeline, targeting a ₹5,000 crore order book by 2029.

 

Karad said that the scheme guarantees CBG offtake through mandatory blending obligations and a minimum 10-year framework with an administered price of ₹2,110 per million British thermal unit. It offers capital assistance of up to ₹2 crore per tonne per day of capacity for greenfield projects — alongside support for brownfield expansions — and funds pipeline connectivity to city gas distribution and trunk networks. Additionally, the initiative provides a dedicated credit guarantee for MSME-led projects and an Ecosystem Challenge Fund to drive feedstock assessment, district planning, tech adoption, infrastructure, and capacity building.

 

“The most important difference is that Gobardhan is not replacing SATAT. It is building upon SATAT, the CBG blending obligation, Market Development Assistance for organic manure, the Biomass Aggregation Machinery scheme, pipeline assistance and the National Bioenergy Programme, integrating these interventions into a single national framework. In simple terms, SATAT created the market. Gobardhan seeks to make that market investable, financeable and scalable. The government has moved from promoting individual CBG plants to creating a complete national bioenergy ecosystem," Karad said.

 

The ₹23,731 crore government commitment could be viewed as catalytic capital rather than the total investment in the sector. This is because the capital assistance, credit guarantees, assured offtake and long-term pricing visibility can unlock substantially larger private-sector debt and equity.

 

The scheme’s capital assistance of ₹2 crore per tonne per day of capacity covers core plant machinery alongside key assets for feedstock aggregation, manure processing, and value addition, with brownfield expansions also eligible. By lowering upfront costs, this framework aims to accelerate financial closure and boost private developer participation. Additionally, Gobardhan’s credit guarantee mechanism absorbs lending risk, improving access to affordable, low-collateral finance to speed up execution.

 

A CBG project can require ₹8-10 crore of capital investment per tonne per day of installed capacity, depending upon the feedstock, pretreatment requirement, land, logistics and plant configuration. Government assistance of up to ₹2 crore per tonne per day can, therefore, reduce the effective equity burden and improve project returns, debt-service capability and lender confidence. “On this basis, I believe the scheme can catalyse at least ₹50,000 crore of private investment over the next three to five years, while the total investment over the scheme’s ten-year duration could be significantly higher,” Karad said.

 

Reduced natural gas imports will be the largest economic gain from the Gobardhan scheme, according to the Indian Biogas Association (IBA). India imports around half of its natural gas requirements, exposing the economy to volatile international prices and geopolitical risks.

 

“As an example, in 2024 -25, LNG import bill was $15.2 billion (approximately ₹1.28 trillion), assuming average exchange rate of ₹84 per US dollar. Though the 2025-26 data is not yet published, it is surely a sharp jump over the previous year, owing to the prolonged West Asia crisis and plummeting Indian rupee against the US dollar,” said IBA.

 

“Even with a conservative estimate of 1,500 fully functional CBG plants in the forthcoming years, the trade deficit on account of natural gas import shall be diminished at least by one-third of its current level, i.e. $5 billion,” the association said in a note after the launch of the Gobardhan scheme.

 

A R Shukla, IBA’s president, said that the real impact of the scheme should not be measured in kilograms of gas alone. “It will be measured in paddy straw that is baled instead of burnt across India, in dung that earns a dairy farmer a second income, in fermented organic manure that rebuilds our depleted soils, and in imported LNG we no longer have to pay for. Our sector has long argued that biogas needed three things, including a remunerative price, assured offtake and capital support. This scheme delivers all three,” Shukla said.

 

Industry leaders argue Gobardhan could do for biogas what the production linked incentive scheme did for solar manufacturing — converting policy intent into bankable projects — especially now that feedstock is proven, with India producing 500 million tonnes of crop residue annually that is otherwise burned and polluting the air.

 

“The real bottlenecks have been assured offtake, stable pricing, evacuation infrastructure and efficient feedstock aggregation. With only about 216 CBG plants commissioned against the ambitious CBG blending targets, project viability has been constrained by inadequate synchronization between CBG production and City Gas Distribution networks,” said Sanjay Ganjoo, director general of the Indian Federation of Green Energy.

 

The government has addressed the biogas sector's most critical challenges by supporting both the production and distribution infrastructure, he said. Assured offtake and pipeline connectivity will improve project bankability, enhance investor confidence and provide lenders with the long-term revenue visibility required to finance projects. Alongside, the organised procurement of paddy straw, press mud and other biomass will create reliable rural value chains.