IBA suggests Rs 10k cr fund to provide capital subsidy to biogas industry

New Delhi, Jan 11 (PTI) Indian Biogas Association (IBA) has recommended a Rs 10,000 crore fund to provide capital subsidy for the biogas industry in the forthcoming Budget.

The association also urged the government to increase the subsidy by 50 per cent to Rs 6 crore per 4.8 TPD of compressed biogas (CBG) and suggested capping the upper cap at Rs 25 crore per project, according to an IBA statement issued on Sunday.

IBA will share the recommendations with the Ministry of New & Renewable Energy and the Ministry of Finance, it added.

The industry body also raised the demand at various forums before the general Budget.

IBA has proposed a minimum 5 per cent mandated FOM (fermented organic manure) blending in overall fertiliser application by 2028, and further ramped up in a phased manner to 10 per cent by 2030.

For the Union Budget 2026, the Indian Biogas Association would like to advocate for positioning of the biogas/CBG sector as a fast-maturing pillar of green growth, which now needs deeper fiscal support, faster implementation, and easier finance to unlock large-scale private investment and rural income opportunities, the statement said.

It has also called for scaling up project incentives by raising Central Financial Assistance (CFA).

The CBG plant's capex outlay has increased by more than 50 per cent since the launch of the CFA (Central Financial Assistance) (subsidy) scheme in 2014, due to various factors, it pointed out.

In accordance, it suggested that the capital subsidy should be increased to at least Rs 6 crores per 4.8 TPD of CBG (Compressed Biogas) production capacity and the CFA (Central Financial Assistance) upper limit raised to Rs 25 crore in order to accommodate projects up to 20 TPD with a minimum corpus of Rs 10,000 crore.

Presently, the scheme offers Rs 4 crore per 4.8 TPD set up with a cap of Rs 10 crores per project.

The central government allocates around Rs 2 lakh crore annually for chemical fertiliser subsidies, which contributes nil to the soil organic content.

Redirecting even a small portion (10 per cent or Rs 20,000-25,000 crore) of the chemical fertiliser subsidy toward FOM-linked (Fermented Organic Manure) or carbon-based incentives within Nature Based Solution (NBS) or a similar subsidy window can improve soil health, reduce import dependency, and promote climate-smart agricultural practices, it suggested.

Compared to chemical fertiliser subsidies, even the consolidated allocations for PMKVY and other organic farming schemes are insignificant.

More particularly, the present Rs 1,450 crore allocated over three years for the MDA (Market Development Assistance) of organic manure from CBG plants is just a starting point and abysmally low, it pointed out.

In alignment with the Ministry of Petroleum and Natural Gas (MoPNG)'s compressed bio-gas blending obligation (CBO), which requires a gradual blending of CBG with CNG and PNG for a cleaner energy transition, the Ministry of Chemicals & Fertilizers should consider introducing the FOM–Chemical Fertilizer Blending Obligation (FCFBO) under the Organic–Chemical Fertilizer Blending Programme, it suggested.

IBA also called for carbon monetisation through the Green Certificate mechanism.

To foster the growth of the biogas and Compressed Biogas (CBG) producers, IBA suggested that the government should develop a framework to allow the biogas plant promoters to sell carbon credits on international and domestic platforms.

This would not only aid the government with its climate change targets, but would also open up different revenue channels for the producers as well.

The transfer of carbon credits into the voluntary carbon market, where carbon is valued at approximately USD 5 to 50 per tonne of CO2, is expected to raise the financial viability of the biogas/CBG projects significantly.

Even at the lowest pricing of USD 5 per tonne of CO2, the carbon price premium of CBG for its GHG mitigation effect is estimated to be in the range of around Rs 10-12 per kg of methane produced. With roughly 1,000 CBG plants anticipated by 2030, the market value of the CBG-based green certificate is conservatively estimated to be roughly Rs 4,000 crore.

The government should consider implementing ''cap and trade'' practices (buy green certificates if the allocated GHG quota is overshot) for carbon-intensive entities and also subsidise a portion of the above-proposed carbon premium pricing initiative to at least kick-start the process, it suggested. PTI KKS BAL BAL