Rs 1,478/mmBtu: Centre raises CBG procurement price to boost green fuel

To strengthen the green fuel ecosystem, the Union Ministry of Petroleum and Natural Gas (MoPNG) has raised the procurement price of compressed biogas (CBG) to Rs 1,478 per million British thermal unit (mmBtu), up from the earlier rate of Rs 1,380. The notification held that the new rate, excluding GST, will come into effect from June 1, 2025, and remain valid until October 31, 2025.

The price revision is part of the government’s continued effort to enhance the financial viability of CBG production and encourage greater private investment in the green energy sector. The decision follows extensive consultations between MoPNG, public sector companies, and industry stakeholders.

The official notification held that the pricing methodology has been revised by increasing the CBG base price linkage to 85% of the average compressed natural gas (CNG) retail price across GAIL-associated city gas distribution (CGD) networks—up from the previous 80%. This change has resulted in the updated procurement rate of Rs 1,478 per mmBtu.

The revision is expected to improve earnings for CBG producers and boost investor confidence in the sector. The notification also maintains the existing compression charge at Rs 8 per kilogram. On a weight basis, the procurement price has been increased from approximately Rs 72.8/kg to Rs 77.4/kg (excluding GST). The revision is based on a 95% methane content for deliveries within a 50 km radius.

To further support producers, the Centre has introduced new transport incentives. For delivery distances between 50 km and 75 km, a transport support of Rs 1.5/kg will be provided, while deliveries beyond 75 km will receive Rs 2.5/kg. For distances up to 50 km, transportation costs are included in the base price.

Importantly, the floor price of Rs 770 per mmBtu remains unchanged, offering a safety net to producers during periods of market volatility.

CBG is produced from biodegradable waste such as cattle dung, crop residues, municipal solid waste, and food waste. As a clean and renewable energy source, it offers a viable substitute for fossil fuels like petrol and diesel. Under the government’s Sustainable Alternative Towards Affordable Transportation (SATAT) initiative, public sector companies including GAIL and IndianOil procure CBG from producers and inject it into the CGD network.

For years, CBG producers have raised concerns regarding inadequate pricing models, delayed payments, and the lack of logistical support. The latest revision aims to address these issues and rejuvenate the sector.

Welcoming the announcement, the Indian Biogas Association (IBA) said the revised procurement price would help unlock the untapped potential of the CBG industry and provide meaningful support to producers across the country.

IBA Chairman Gaurav Kedia stated, “This change in price is a step in the right direction for CBG developers as it corresponds with their reality. However, a higher revision was anticipated, considering the economics of the production, which can also shoulder CBG’s long-held aspirations of contributing to the sustenance of India’s energy independence by fastening progress on existing and new developers in the industry.”

Challenges Remain 

Despite the positive developments, the sector continues to face some pressing challenges. Delayed payments from CGD companies remain a major concern, hampering cash flow and daily operations for many producers. Additionally, limited access to financing poses a barrier to growth. While the CBG sector offers promising returns, the high upfront capital required to set up a plant often deters small entrepreneurs and rural stakeholders, many of whom struggle to secure loans due to lack of collateral or awareness.