Excise Waiver Enhances Biogas Industry Outlook Amidst Investment Potential of Rs 1 Lakh Crore
The recent Union Budget has introduced an excise duty waiver on biogas blended with compressed natural gas (CNG), a move that could potentially unlock investments of up to Rs 1 lakh crore, according to the Indian Biogas Association (IBA). This significant policy shift is seen as a crucial step in supporting India’s clean energy transition and achieving its net-zero emissions target by 2070. The IBA emphasized that even a modest blending of 5% across city gas distribution networks could lead to substantial investments and environmental benefits.
Investment Potential and Blending Levels
The IBA’s statement highlights that a nationwide blending level of just 5% over the next five years would necessitate approximately 2.5 to 3 million metric tonnes per annum (MMTPA) of compressed biogas (CBG). This demand translates into an investment requirement of around Rs 45,000 to 55,000 crore. The association believes that with a clear policy framework and predictable pricing, blending levels could realistically increase to 7-8% by 2032. Such an increase would effectively double the investment potential to nearly Rs 1 lakh crore, significantly enhancing the financial viability of biogas projects across the country.
Correcting the Tax Imbalance
The excise duty waiver is viewed as a corrective measure to address the historical tax imbalance where renewable CBG was taxed similarly to fossil-based CNG, despite its environmental benefits. By removing the excise component on the biogas portion of blended fuel, the product becomes more cost-effective for consumers. This policy change is expected to stimulate private investment in the sector, bolster energy security, and deliver tangible benefits for climate action and rural development. For city gas distribution companies, the waiver is anticipated to lower weighted-average fuel costs, while consumers may experience stable or even reduced prices.
Enhancing Project Viability and Environmental Impact
The IBA also noted that the excise waiver could improve the internal rates of return for typical CBG plants, which generally produce between 4.8 to 10 tonnes per day. This improvement is contingent on feedstock availability and logistics, enabling financing for projects that were previously deemed marginal. The potential for CBG production is substantial, with estimates suggesting an annual capacity of around 60 million tonnes, sourced from materials such as paddy straw, municipal solid waste, and cattle dung. The environmental impact of CBG production is significant, with lifecycle greenhouse gas emissions reduced by 70-90%, particularly when derived from agricultural waste. A 10% blending level could result in a reduction of 12-15 million tonnes of CO2-equivalent emissions annually.
Future Outlook for Clean Energy in India
The IBA’s advocacy for the excise duty waiver underscores a broader commitment to advancing India’s clean energy agenda. By fostering an environment conducive to investment and innovation in the biogas sector, the government is taking a decisive step toward meeting its climate goals. The anticipated growth in CBG production not only promises economic benefits but also aligns with global efforts to combat climate change. As India moves forward, the success of this initiative will depend on continued policy support and collaboration among stakeholders in the energy sector.
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