Petroleum ministry’s latest price revision a breather for compressed biogas sector

India’s clean energy landscape received a significant boost with the recent announcement by the Union Ministry of Petroleum and Natural Gas (MoPNG) to revise the procurement price of compressed biogas (CBG). The move marked a critical step in addressing long-standing concerns of producers and encouraging investment in the green gas sector.

Effective from June 1, 2025 till October 31, 2025, the new rate increased the CBG procurement price to Rs 1,478 per million British thermal unit (excluding GST) from Rs 1,380, strengthening the financial viability of CBG production.

CBG, derived from biodegradable waste like cattle dung, crop residue, municipal solid waste and food waste, serves as a renewable, eco-friendly fuel that can substitute fossil fuels such as petrol and diesel. Under the government’s Sustainable Alternative Towards Affordable Transportation (SATAT) scheme, public sector companies like GAIL, IndianOil and others procure CBG from producers and inject it into the city gas distribution (CGD) network. However, for several years, CBG producers have raised concerns about pricing structures, delayed payments and lack of support for transportation costs.

MoPNG and public sector companies responded by revising the pricing methodology after extensive consultations with industry stakeholders. According to the official notification dated May 15, 2025, the base price for CBG has been revised to 85 per cent from 80 per cent of the average CNG retail price across GAIL-associated CGD companies, resulting in the updated rate of Rs 1,478 per million British thermal unit. This revision not only increases producer income but also improves investor confidence in the sector.

The notification also confirms that compression charges will remain unchanged at Rs 8 per kg and the procurement price on a weight basis is revised from around Rs 72.8 / kg to Rs 77.4 / kg (excluding GST at 95 per cent methane content for deliveries up to 50 km). Additionally, the notification introduces transportation support of Rs 1.5 per / kg for distances between 50 and 75 km, and Rs 2.5 / kg for distances beyond 75 km. For distances up to 50 km, the transport cost is included in the base price.

This structured support for transport costs is a long-awaited relief for producers, many of whom operate in rural or remote areas. It acknowledges the logistic challenges faced by the sector and ensures better operational sustainability. More importantly, the floor price of Rs 770 per million British thermal unit remains unchanged, offering price stability and protection during market downturns.

These developments highlight how responsive policy changes can address real-world challenges faced by CBG producers. The new pricing mechanism ensures that producers receive compensation that better reflects production and logistics costs. This in turn enhances the bankability of CBG projects and encourages new entrepreneurs and investors to enter the market.

The new CBG pricing — set at 85 per cent of average CNG rates with fair transport costs — is a timely step by MoPNG and GAIL that strengthens SATAT projects, supports farmers, and boosts rural green energy, said Srinivas Kasulla, chief executive officer of Arka Brenstech Private Ltd, calling it a clear push toward cleaner air, energy security, and a circular economy.

Despite these positive changes, challenges remain. Many producers continue to report delayed payments from CGD companies, which disrupt cash flow and affect daily operations. There is also a need to improve access to financing. While CBG is a promising business, setting up a plant requires significant capital. Small-scale producers and rural entrepreneurs often struggle to secure loans due to a lack of awareness or collateral.

To address this, the government could introduce credit guarantees, interest subsidies, and capital subsidies to lower the entry barrier. Moreover, single-window clearances for project approvals and state-level support can significantly reduce bureaucratic delays and simplify compliance processes.

Awareness also remains low, especially in rural areas. Many farmers and entrepreneurs are unaware of SATAT and the income opportunities from converting waste to energy. Outreach programs, training workshops, and technical support must be expanded to help more people understand how they can participate in the biogas economy.

Nonetheless, the price revision has sent a strong signal to the market. It shows that the government is willing to listen to stakeholders and take timely action to build a sustainable green energy future. With improved prices, structured transport support, and floor price stability, the CBG sector is now better positioned for growth.

MoPNG's revised CBG procurement policy is a timely and thoughtful intervention. It strengthens producer viability, supports investment, and aligns with India’s climate and energy goals. If coupled with better financing access, faster clearances, and stronger CGD engagement, India’s CBG sector can become a cornerstone of the nation’s clean energy transition.