The Union Budget’s excise duty waiver on biogas blended with compressed natural gas could unlock investments worth up to Rs 1 lakh crore, industry body Indian Biogas Association said on Sunday, highlighting a potential boost to India’s clean energy transition.
The industry body said the Union Budget 2026 decision to waive excise duty on compressed biogas (CBG) blended with compressed natural gas (CNG) marks a significant policy step supporting India’s transition towards its 2070 net-zero emissions target, PTI reported.
According to an IBA statement, even a modest nationwide blending level of 5 per cent across city gas distribution (CGD) networks over the next five years would require around 2.5–3 MMTPA of CBG, translating into investments of about Rs 45,000–55,000 crore.
The statement was issued to PTI.
“If there is a clear policy and predictable prices, blending could realistically grow to 7–8 per cent by 2032. This would double the investment potential to almost Rs 1 lakh crore,” it said.
The association said the excise waiver corrects a long-standing imbalance where renewable CBG, despite environmental advantages, was taxed at par with fossil-based CNG. Removing the excise component on the biogas share of blended fuel makes the product immediately more cost-effective.
The move, it added, could speed up private investment, strengthen energy security and generate measurable benefits for climate action and rural development.
For CGD companies, the waiver is expected to reduce weighted-average fuel costs, while consumers may see prices remain stable or decline. Producers, meanwhile, gain assured sales and more predictable revenue streams, improving project bankability.
India’s compressed biogas potential is estimated at about 60 million tonnes annually, based on feedstock such as paddy straw, press mud, municipal solid waste and cattle dung.
The IBA said the policy change is likely to improve internal rates of return for typical 4.8–10 tonnes-per-day CBG plants, depending on feedstock availability and logistics, enabling financing for projects that were earlier considered marginal.
CBG production can reduce greenhouse gas emissions by 70–90 per cent over its lifecycle, particularly when derived from agricultural waste. A 10 per cent blending level could lower emissions by 12–15 million tonnes of CO2-equivalent annually, the association added.
