India’s biogas problem is scale, not supply

The disruptions in West Asia have exposed how vulnerable India’s energy system remains to global shocks despite years of efforts to diversify supply. As discussions around increasing compressed biogas (CBG) blending in city gas networks gained momentum, the real question remains whether India can move CBG beyond scattered pilots and integrate it meaningfully into India’s broader energy mix . This matters in an economy where over half of gas demand and nearly all LPG imports still depend on shipments passing through the Strait of Hormuz. Emergency responses such as prioritising gas allocation under the Essential Commodities Act may have bought time, but they do not reduce the country’s structural exposure to global shocks.

CBG is far from a marginal technology. Produced from agricultural residue, pressed mud, municipal solid waste and cattle dung through anaerobic digestion, and upgraded to over 90 per cent methane, it is functionally equivalent to compressed natural gas (CNG), without being fossil-based. India has already begun deploying CBG in transport and city gas systems, with Indore operating 400 CBG-powered city buses and several city gas distributors such as Indraprastha Gas Limited integrating CBG into their networks. More importantly, it converts domestic waste streams (including biomass like dung, food processing and municipal solid waste) into a reliable fuel, offering a pathway to reduce import dependence, cut greenhouse gas emissions and improve waste management while strengthening rural incomes and resource efficiency.

India has already laid the groundwork. Under the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme, the government aims to establish 5,000 CBG plants with a production target of 15 million tonnes annually by 2030. However, India’s current CBG production stands at merely 920 tonnes per day, which is only 1 per cent of the target. Analysis by the Council on Energy, Environment and Water (CEEW) projects that scaling CBG could generate over one lakh jobs in India by 2047. In 2025, India imported 22 million tonnes of LPG, even as 100 million tonnes of crop residue was burned annually, which could have delivered 10 million tonnes of CBG instead of adding to India’s air pollution. Despite this potential, the sector has scaled slowly. Many announced projects have not been commissioned yet. Project developers continue to face four persistent problems: unreliable feedstock supply, uncertainty around gas offtake, weak markets for by-products such as bio-slurry, and difficulty accessing affordable long-term finance. Most lenders still view CBG plants as risky standalone projects rather than stable infrastructure assets.  

To reduce investor risk and improve access to long term finance, India must adopt highly standardised, modular, "plug-and-play" plant designs. Consider how rooftop solar is financed. Major investors would prefer to invest their millions into a bundled portfolio of thousands of standard installations, and not on single installations. The CBG sector needs this playbook. We must shift to ready-to-install plants and group them together, transforming isolated biogas projects into a diversified bankable infrastructure portfolio. 

First, project developers need to standardise and modularise CBG plant development to enable aggregation. The experience of countries such as Germany is instructive. Their scale – 10,000 biogas plants – was achieved through standardised, modular designs deployed by project aggregators, instead of bespoke engineering. This reduced construction timelines, lowered technical uncertainty, enables lenders to evaluate projects with greater confidence. A similar approach in India, adapted to local conditions, can allow developers to build multiple plants using uniform designs and bundle them into investable portfolios.

Second, secure feedstock supply through long-term, enforceable contracts. A major risk in CBG projects is the volatility of raw material supply. Countries such as Denmark and Germany secured their feedstock supply chains by building long-term partnerships between producers and farmer groups through legally binding contracts, incorporating ‘supply-or-pay’ clauses, feedstock price indexation linked to agricultural markets, and automatic bio-slurry return mechanisms to supply cheap bio-inputs to farmers. In India, replicating such a model of contractual security will require active involvement from state governments. By standardising contract frameworks and enabling partnerships with Farmer Producer Organisations (FPOs), governments can help developers secure predictable feedstock supply. This, in turn, allows multiple plants to be aggregated into Special Purpose Vehicles (SPVs), improving their attractiveness to institutional investors. States like Maharashtra, have already begun to do so by promoting long-term contracts with Agricultural Produce Market Committees (APMCs) and sugar factories through their new CBG policy.

Third, develop markets for by-products to strengthen project economics, CBG production generates carbon dioxide and bio-slurry, both of which are currently underutilised. CBG producers end up having to store them for long periods, increasing storage costs. Creating demand for these by-products could significantly improve plant economics. Carbon dioxide can be supplied to nearby chemical and food processing industries, while enriched bio-slurry can support farmers practising sustainable agriculture practices such as organic or natural farming. Integrating these revenue streams into project design is critical for long-term sustainability.

This shift, from project-level risk to portfolio-level investment, is what can ultimately unlock scale. India’s policy framework has already recognised the role of CBG. The resource base exists and the technology is proven. What remains is to organise the sector in a way that matches its potential to reduce import dependence. It is time we recognise that our fields and farmlands hold the key to a truly self-reliant and resilient India.

Bhimashankar Shetkar is the COO, NDDB Mrida Ltd. NDDB MRIDA is a wholly owned subsidiary of the National Dairy Development Board. Aishwarya Joshi is a Research Analyst at the Council on Energy, Environment and Water (CEEW). Views are personal.