For Union Budget 2026, the Indian Biogas Association would like to advocate for positioning of the biogas/CBG sector as a fast‑maturing pillar of green growth, which now needs deeper fiscal support, faster implementation, and easier finance to unlock large‑scale private investment and rural income opportunities.
Scale-up project incentives by raising Central Financial Assistance (CFA)
CBG plant's CAPEX outlay has increased by more than 50 per cent since the launch of CFA (Central Financial Assistance) (subsidy) scheme in 2014, due to various factors. In accordance, the capital subsidy should be increased to at least INR 6 crores per 4.8 TPD of CBG (Compressed Biogas) production capacity and the CFA (Central Financial Assistance) upper limit raised to 25 crores in order to accommodate projects up to 20 TPD with a minimum corpus of INR 10000 (INR ten thousand) crores. Presently, the scheme offers Rs 4 crores per 4.8 TPD set up with a cap of INR 10 crores per project.
Promoting market for FOM and support organic farming practices
With India's Soil Organic Carbon (SOC) average falling below 0.4 per cent, soil degradation has become a national concern. The optimal range is 1.5 per cent and above. GOI (Government of India) allocates around Rs 2 lakh crore annually for chemical fertilizer subsidies which contributes NIL to the Soil organic content. Redirecting even a small portion (~10%, i.e. Rs 20,000-25,000 crores) of the chemical fertiliser subsidy toward FOM-linked (Fermented Organic Manure) or carbon-based incentives within Nature Based Solution (NBS) or a similar subsidy window can improve soil health, reduce import dependency, and promote climate-smart agricultural practices.
Compared to chemical fertilizer subsidies, even the consolidated allocations for PMKVY and other organic farming schemes are insignificant. More particularly, the present Rs 1450 crores allocated over three years for the MDA (Market Development Assistance) of organic manure from CBG plants is just a starting dot and abysmally low. IBA recommends the suggested allocation for organic practices can be infused in two ways:
a. Nutrient-Based Subsidy (NBS) Scheme Organic Carbon Integration: The current NBS framework supports main and secondary nutrients including N,P,K, S, and a few micronutrients, but not organic carbon, which is critical to soil health. Thus, while pricing supports and targeted use of N, P, K, S, and a few other micronutrients as per soil health requirements is common, organic carbon(C), a key soil fertility indicator, is not. To price FOM or any organic fertilizer rationally, a nutrient-based (N, P, K, S, and organic Carbon) approach to integrated nutrient management in farming methods should be considered.
b. Organic–Chemical Fertilizer Blending Programme: In alignment with the Ministry of Petroleum and Natural Gas (MoPNG)'s Compressed Bio-Gas Blending Obligation (CBO), which requires a gradual blending of CBG with CNG and PNG for a cleaner energy transition, the Ministry of Chemicals & Fertilizers should consider introducing the FOM–Chemical Fertilizer Blending Obligation (FCFBO) under the Organic–Chemical Fertilizer Blending Programme. IBA proposes a minimum of 5 per cent mandated FOM blending in overall fertiliser application by 2028, and further ramped up in a phased manner to 10 per cent by 2030.
Carbon Monetisation through Green Certificate mechanism
To foster the growth of the biogas and Compressed Biogas (CBG) producers, IBA recommends that the Indian government develops a framework which would allow the biogas plant promoters to sell carbon credits in both international and domestic platforms. This would not only aid the Indian government with its Climate Change Targets, but would also open up different revenue channels for the producers as well. Furthermore, the legislation regarding the Renewable Energy and Green Certificates’ tokenization and trading should be hastened to maximize clean energy projects profitability.
The transfer of carbon credits into the voluntary carbon market where carbon is valued at approx. USD 5 to 50 per ton of CO2 is expected to raise the financial viability of the biogas/CBG projects significantly. Even at the lowest pricing of USD 5 per ton of CO2, the carbon price premium of CBG for its GHG mitigation effect is estimated to be in the range of around INR 10-12 per kg of methane produced. With roughly 1000 CBG plants anticipated by 2030, market value of CBG based green certificate is conservatively estimated to be roughly INR 4000 crores. GOI should consider implementing 'cap and trade' practices (buy green certificates if the allocated GHG quota is overshot) for carbon-intensive entities and also subsidise a portion of the above-proposed carbon premium pricing initiative to at least kick-start the process. |
