Compressed Biogas Blending to Cut Natural Gas Imports by ₹17,000 Crore

Chennai: Mandatory blending of compressed biogas (CBG) with conventional natural gas used in city gas distribution can lower India’s natural gas import burden by Rs 17,000 crore annually by FY2029. However, capacity addition will require a ~Rs. 24,000-crore investment during FY2027-FY2029.

The one per cent mandatory blending obligations are in place since April 1, 2026. It has the potential to lessen India’s import burden for Liquefied Natural Gas (LNG), especially piped natural gas (domestic) and compressed natural gas (transport).

The City Gas Distribution (CGD) segment accounts for nearly one-fourth (45 mmscmd in FY2026) of domestic gas demand. The 1 per cent mandatory CBG blending in CNG and PNG(D) in FY2026, which translates to 0.36 mmscmd or 1,00,000 MTPA of CBG has been met.

ICRA expects domestic CBG production to lessen India’s import burden by Rs. 17,000 crore annually by FY2029. However, a minimum 1000 TPD installed capacity needs to be added annually over the next three fiscal years, thereby increasing the installed capacity from 900 TPD in FY2026 to 4,000 TPD by FY2029. This capacity addition will require a Rs. 24,000-crore investment during FY2027-FY2029.

The viability of CBG plants in India is shaped by several factors such as raw material costs, fermented organic manure (FOM) offtake price, CBG procurement price, electricity costs, interest rates, viability gap funding (VGF), etc. Moreover, certain impediments such as the absence of year-round supply of raw material, inadequate pipeline connectivity, disposal of carbon dioxide produced as a byproduct, etc. need to be resolved for CBG to be a success in India.

The CBG Blending Obligation initiative under the CGD-CBG Synchronisation Scheme along with other government initiatives are expected to make considerable contributions towards meeting the targets going forward, finds ICRA.