Union Budget's Biogas Excise Waiver Could Unlock Rs 1 Lakh Crore Investments
The Union Budget's decision to waive excise duty on compressed biogas (CBG) blended with compressed natural gas (CNG) has the potential to unlock investments worth up to Rs 1 lakh crore, according to the industry body Indian Biogas Association (IBA). This significant policy step, announced in the Union Budget 2026, is expected to provide a major boost to India's clean energy transition and support the nation's ambitious 2070 net-zero emissions target.
Investment Potential and Blending Targets
In a statement issued to PTI, the IBA highlighted that even a modest nationwide blending level of 5 per cent across city gas distribution (CGD) networks over the next five years would require approximately 2.5–3 million metric tonnes per annum (MMTPA) of CBG. This initial phase alone could translate into investments ranging from Rs 45,000 crore to Rs 55,000 crore.
The association projected that with clear policy frameworks and predictable pricing mechanisms, blending levels could realistically grow to 7–8 per cent by 2032. This expansion would effectively double the investment potential to nearly Rs 1 lakh crore, creating substantial opportunities across the renewable energy sector.
Correcting Long-Standing Imbalances
The excise waiver addresses a persistent imbalance in the energy market where renewable CBG, despite its significant environmental advantages, was previously taxed at the same rate as fossil-based CNG. By removing the excise component on the biogas share of blended fuel, the government has made the product immediately more cost-effective and competitive.
This strategic move is expected to accelerate private investment in biogas infrastructure, strengthen India's energy security, and generate measurable benefits for both climate action and rural development initiatives. The policy correction creates a more level playing field for renewable energy sources while incentivizing sustainable fuel alternatives.
Benefits Across the Value Chain
For city gas distribution companies, the excise waiver is anticipated to reduce weighted-average fuel costs, potentially leading to more stable or even declining prices for consumers. Producers of compressed biogas stand to gain from assured sales and more predictable revenue streams, significantly improving project bankability and attracting financing for ventures that were previously considered marginal.
India's compressed biogas potential is estimated at approximately 60 million tonnes annually, based on abundant feedstock sources including paddy straw, press mud, municipal solid waste, and cattle dung. The policy change is likely to enhance internal rates of return for typical CBG plants with capacities ranging from 4.8 to 10 tonnes per day, depending on feedstock availability and logistical considerations.
Environmental Impact and Emission Reductions
CBG production offers substantial environmental benefits, with the potential to reduce greenhouse gas emissions by 70–90 per cent over its lifecycle, particularly when derived from agricultural waste materials. The IBA emphasized that achieving a 10 per cent blending level across CGD networks could lower emissions by 12–15 million tonnes of CO2-equivalent annually, making a significant contribution to India's climate goals.
This comprehensive approach to renewable energy development not only addresses immediate economic and energy security concerns but also positions India as a leader in sustainable fuel innovation. The excise duty waiver represents a crucial policy intervention that aligns financial incentives with environmental objectives, creating a virtuous cycle of investment, innovation, and emission reduction in the clean energy sector.
