ARTICLE
2 August 2024

From Policy To Practice: Journey Of CBG In India

Compressed Biogas (CBG) projects involve the interplay of laws and regulations pertaining to environment, energy and land. Appropriate legal advice should be sought for the purposes...
India Energy and Natural Resources

Compressed Biogas (CBG) projects involve the interplay of laws and regulations pertaining to environment, energy and land. Appropriate legal advice should be sought for the purposes of ensuring compliance, mitigation of risks and optimizing project operations and returns.

Introduction

Presently, natural gas accounts for 6.7% of India's total energy basket. The "2030 Vision" Natural Gas Infrastructure in India Report by Industry Group for Petroleum & Natural Gas Regulatory Board, commissioned by the Petroleum & Natural Gas Regulatory Board, published in May 2013, initially targeted achieving at least 20% share of natural gas in the primary energy mix by 2030. The Union Petroleum Minister subsequently revised the target at the launch of the 'Gas4India' campaign in September 2016 to 15% by 2030. As per the Petroleum Planning & Analysis Cell, India's total natural gas consumption (net production plus LNG imports) in the financial year 2023-24 was 67512 million metric standard cubic meters (mmscm), of which 31795 mmscm was obtained through LNG imports and the balance 35717 mmscm through net production.

This information was given by the Minister of State in the Ministry of Petroleum and Natural Gas, in a written reply in Rajya Sabha on December 18, 2023. available at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1987803#:~:text=Presently%20in%20India%20the%20share,the%20Government%20in%20this%20direction

A review of the trends of production of natural gas through the financial years 2020-21 to 2023-2024 depicts that natural gas production in the country has yet to surge, nor has there been a decline in LNG imports. Arguably, the need to enhance the generation, distribution, and consumption of natural gas to meet the increasing energy requirements for India's growing economy is evident. Keeping in mind the twin goals of energy security and sustainability, it is imperative to encourage the indigenous generation of natural gas, keeping in mind circularity. In this regard, Compressed Biogas (CBG) plants may emerge as a crucial component in realising the vision of a circular economy emphasized by the Hon'ble Prime Minister of India during the launch of Mission Lifestyle for Environment at the 6th UN Climate Change Conference of the Parties in Glasgow in 2021.

Biodegradable organic waste or biomass such as agricultural residue, cattle dung, sugarcane press mud, municipal solid waste and sewage treatment plant waste, etc. produce biogas through the process of anaerobic decomposition. The biogas is then purified to remove hydrogen sulfide (H2S), carbon dioxide (CO2), and water vapor and thereafter compressed as CBG. 

India has an abundance of biodegradable organic waste, and therefore, commercial production of CBG may be expected to contribute to the natural gas energy mix targets set for 2030. 

This article examines the initiatives undertaken at both Centre and State levels to promote indigenous generation, distribution and consumption of CBG across the value chain and factors that impede the growth of CBG promotion within the country.

CBG- law making power 

The Constitution of India provides the basis for the law-making power vested in the Central or Union Government and State Governments.

Parliament has the exclusive power to make laws in respect of matters enumerated in List I (Union List) of Schedule VII of the Constitution of India and any other matter not enumerated in List II (State List) or List III (Concurrent List) of Schedule VII of the Constitution of India. 

State Legislatures have exclusive powers to make laws in respect of matters enumerated in said List II (State List). 

Parliament and the State Legislatures have powers to make laws in respect of matters enumerated in said List III (Concurrent List). In case a law made by the State Legislature is repugnant to a law made by the Centre in respect of these matters, the law made by the Centre in respect of these matters shall, to the extent of the repugnancy, prevail over provisions of the law made the State Legislatures.

'Biogas' is not specifically provided under any of the Lists in Schedule VII. The 'biogas' value chain touches on several matters covered under various entries of the lists mentioned above. 

Below is an indicative list of entries that may relate to 'biogas': 

(i) Union List:

  1. Entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries.
  2. Currency, coinage and legal tender; foreign exchange. 
  3. Foreign loans.
  4. Trade and commerce with foreign countries; import and export across customs frontiers; definition of customs frontiers.

(ii) State List:

  1. Local Government, that is to say, the constitution and powers of municipal corporations, improvement trusts, districts boards, mining settlement authorities and other local authorities for the purpose of local self government or village administration. 
  2. Public health and sanitation; hospitals and dispensaries.
  3. Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases.

(iii) Concurrent List: 

17A. Forests.

  1. Economic and social planning.
  2. Trade and commerce in, and the production, supply and distribution of,— 

(a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; 

..

(c) cattle fodder, including oilcakes and other concentrates;

...

CBG Actions at the Central and State levels

Centre Initiatives:

In the past decade or so, several Policy changes and initiatives have been undertaken at the central level to promote biofuels' investments and growth, including CBG. Some key highlights have been the announcement of ethanol blending obligations and the announcement of setting up 500 waste-to-wealth plants under the GOBARdhan Scheme. On the international stage, the Indian Government, at the G20 summit in 2023, launched the Global Biofuels Alliance with the leaders of Singapore, Bangladesh, Italy, the United States, Brazil, Argentina, Mauritius and the UAE for the purposes of exchanging knowledge and technologies. Certain key initiatives of the Government towards the promotion of CBG are as follows:

Central Policy/Scheme Details of the Policy / Scheme
National Policy on Biofuels (2018) The Ministry of Petroleum and Natural Gas (MoPNG) launched this Policy with the goal of promoting biofuels. The Policy was amended in June 2022, resulting in the target of a 20% ethanol blending in petrol by Ethanol Supply Year (ESY) 2025-26. An indicative target of 5% biodiesel blending in diesel or direct sale of biodiesel is being aimed at by 2023.

Galvanizing Organic Bio- Agro Resources

(GOBARdhan) Scheme

The Scheme is an umbrella initiative of the Government of India that aims to convert waste to wealth to realize the vision of a circular economy. The Ministry of Jal Shakti is the nodal Ministry for the Scheme. The Scheme includes a number of initiatives aimed at facilitating the conversion of organic waste, such as cattle dung and agricultural residue, into biogas, CBG, and bio-CNG.

The partnering ministries and departments of this Scheme are:

  1. Ministry of Petroleum and Natural Gas (Sustainable Alternative Towards Affordable Transportation (SATAT) Initiative).
  2. Ministry of Petroleum & Natural Gas (CBG-CGD Synchronisation Scheme (GAIL)) 
  3. Ministry of Housing and Urban Affairs (Swachh Bharat Mission – Urban)
  4. Ministry of New Renewable Energy (Waste to Energy) 
  5. Department of Animal Husbandry and Dairying (Animal Husbandry Infrastructure Development Fund).
  6. The Department of Agriculture & Farmers Welfare (Agri-Infra Fund).
  7. Department of Fertilizers (Market Development Assistance).
 
This Scheme is being implemented in collaboration with State Governments and the private sector, including entrepreneurs and societies. Any plant or project that produces CBG/biogas (with a daily output exceeding 10 cubic meters) and bio-slurry as primary outputs is eligible to participate in this Scheme.

Sustainable Alternative Towards Affordable Transport (SATAT) Scheme

MoPNG has set up this initiative with the goal of creating an ecosystem for producing CBG from different waste and biomass sources to reduce the import dependency in oil and gas sector by adopting a five pronged strategy which includes, increasing domestic production, adopting biofuels & renewables, energy efficiency norms, improvement in refinery processes and demand substitution. The Scheme envisages:

  1. A target production of 15 MMT (million metric tons) of CBG by 2023, from 5000 plants.
  2. Entrepreneurs to produce and supply CBG to oil marketing companies for sale as automotive and industrial fuels. 
  3. PSU Oil Marketing Companies (OMCs) is inviting expression of interest from potential entrepreneurs to set up CBG plants under the SATAT Scheme.
  4. Compressed Biogas Obligations (CBO) aims to attract investment of around Rs. 37,500 crore and facilitate the establishment of 750 CBG projects by 2028-29.
 

Under this Scheme, CBO promotes the production and consumption of CBG in the country through the introduction of phase-wise mandatory blending of CBG in the CNG (transport) and PNG (domestic) segments of the city gas distribution sector. CBO will be voluntary until FY 2024-2025, and mandatory blending obligations will start in FY 2025-26.The initiative aims to attract around Rs. 37,500 crore investment and facilitate the establishment of 750 CBG projects by 2028-29.

Pursuant to this Scheme, the MoPNG has approved the Scheme for the Development of Pipeline Infrastructure for the injection of CBG in the city gas distribution network by providing financial assistance for creating CBG-city gas distribution grid connectivity for 100 CBG projects, which will create an ecosystem for the offtake of CBG with reduced logistics costs.

National Bioenergy Programme 

(Waste-to-Energy)

This Programme provides a framework for central financial assistance to project developers and service charges to implementing/inspection agencies in respect of the successful commissioning of Waste to Energy plants for the generation of CBG. Central financial assistance is provided for Waste to Energy plants based on the performance of the project for at least three consecutive months. Financial assistance available under the Programme for setting up BioCNG/enriched biogas/ CBG plants is as follows:

  1. Rs 4.0 crore per 4800 kg/day (for BioCNG generation from new biogas plant)
  2. Rs 3.0 crore per 4800 kg/day (for BioCNG generation from existing biogas plant)
  3. Maximum central financial assistance of Rs. 10.0 crore/project for both cases.
Agro Infrastructure Fund (AIF)

AIF is a financing mechanism established by the Department of Agriculture & Farmers Welfare to develop post-harvest management infrastructure and community farm assets.

  1. Size of the financing facility – Rs. 1 lakh crore.
  2. Credit guarantee for loans up to Rs. 2 crore.
  3. Interest subvention of 3% p.a. is limited to Rs. 2 crore per project in one location, though the loan amount can be higher.
Master Directions- Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020

The Master Directions describe the eligible categories under the priority sector, which include Renewable Energy and Agriculture. 

With respect to Renewable Energy, the Master Directions provide for bank loans up to a limit of Rs. 30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., to be eligible eligible for Priority Sector classification.

 The lending to the agriculture sector includes Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. 

Agriculture infrastructure is subject to an aggregate sanctioned limit of Rs. 100 crore per borrower from the banking system. The list of eligible activities under Agriculture infrastructure includes construction of oil extraction/ processing units for production of bio-fuels, their storage and distribution infrastructure along with loans to entrepreneurs for setting up CBG plants.


State Initiatives

Implementing the various Schemes launched by the Centre concerning bioenergy and biogas depends mainly on several factors with respect to the concerned States. Such factors may include feedstock availability and characteristics, utilization patterns for the feedstock, end-use products, and the socioeconomic factors associated with such a State. In this regard, it may be relevant to assess the policies of 3 States – Uttar Pradesh, Gujarat and Haryana, which seem have performed better as compared to other States, for reasons such as feedstock availability, supportive policies, and a focus on renewable energy 

Uttar Pradesh

Uttar Pradesh Bio Energy Policy, 2022

The Policy acknowledges waste supply as a significant challenge in bioenergy enterprises; therefore, the Policy proposes an aggregator model to form long-term associations between bioenergy entrepreneurs, waste aggregators, and farmers.

The Policy envisions the formation of at least 1 farmer producer company in each block to collect biomass and supply it to CBG plants, as well as execute long-term supply contracts of agricultural waste between them and letter of interest holders.

Initiatives:

Financial incentives-

  1. The Policy offers a ten-year 100% exemption from electricity duty.
  2. 100% exemption from stamp duty on land acquisition via lease or purchase.
  3. 100% exemption from development charges levied by the State development authority.
  4. Provision of up front subsidy to Rakers, Balers and Trawlers involved in the collection of bio-mass.
  5. The Policy promises a budgetary arrangement of Rs. 1 lakh per district to motivate entrepreneurs by giving wide publicity to the bioenergy Policy.
  6. Subsidized equipment to active Farmer Producer Companies (FPOs) and co-operative societies to provide agricultural waste to CBG plants.

Subsidy benefits –

  1. An additional 30% subsidy to feedstock aggregators, on top of Central Government's subsidy, with a cap of Rs. 20 lakh. 
  2. Bioenergy enterprises may be eligible for additional subsidies based on their production capacity, including subsidies for CBG production at a rate of 75 lakh per ton, up to a maximum of Rs. 20 crore. 
  3. All capital subsidies will be released into the unit bank loan account once commercial production commences at full capacity.

Gujarat

Gujarat Waste-to-Energy Policy, 2022

The objectives of this Policy are as listed below:

a. To help improve efficiency and effectiveness of collection and disposal of Municipal Solid Waste (MSW), thereby contributing to 'Swachh Bharat Mission'.

b. To facilitate and promote disposal of MSW in a more environment friendly manner. 

c. To facilitate and promote utilization of MSW as a renewable resource for generation of electricity. 

d. To reduce the requirement of lands for disposal of MSW, thereby saving precious public resource for alternative purpose. 

e. To promote investment, employment generation & skill enhancement in Renewable Energy Sector. 

f. To lay down a rational framework for the smooth implementation of Policy. 

Initiatives:

Urban Development Department (UDD) shall prescribe standard operating procedure/ guidelines, web portal service help desk, etc for undertaking various activities, viz., identification of potential eligible sites, preparation of detailed project reports, tendering, preparation of request for proposal document, concession agreements, land lease agreements, etc.

Financial assistance – 

  1. Exemption from tax, cess, royalty, levies or other charges on the MSW-based power plant, including stamp duty, allotment of charges, etc.
  2. Civic authorities shall provide land at a token lease rent of Rs. 1 per annum for the purpose of establishing the MSW-based power project.
  3. The UDDs/Urban Local Bodies (ULBs) are required to provide on-site MSW to Waste to Energy project, a project developer, at no cost.
  4. Under the National Biogas and Manure Management Program, subsidy provision of up to 60% of plant costs for general category beneficiaries and up to 75% for SC/ST and below poverty line categories.

Haryana

Haryana Bio-energy Policy, 2018

The objectives of this Policy are listed below:

  1. To create a conducive environment to attract private investment in biomass projects.
  2. To harness biomass based power/ biogas/ bio-CNG/ bio-manure/ bio-fuels etc. as it has huge potential for energy with sustainable environmental benefits through techno-economically viable technologies.
  3. To support research and development, demonstration and commercialization of new technologies.

Initiatives

Land and clearances –

  1. Agricultural land shall also be allowed to be used for setting up of bio mass based projects in the State.
  2. Provision for the lease of Panchayat land at reasonable rates directly through Panchayats for the establishment of biomass projects for a minimum of 35 years.
  3. There is no requirement of any change of land use approval from the Town & Country Planning Department/Urban Local Bodies (ULB) Department. 

Tariff determination & electricity connection supply –

  1. Project specific tariffs are to be determined on case to case basis for small hydro, municipal solid waste, poultry litter, mixed waste or any other new renewable energy technology approved by the Ministry of New and Renewable Energy, Government of India based projects.
  2. Provision for electricity connection within 7 days of application, on priority basis.

Assistance – 

  1. 100% waiver on all cross subsidy charges, transmission & distribution charges, surcharges and reactive power charges.
  2. Octroi on biomass fuels for all projects, including bio-CNG, bio–ethanol and bio-fertilizer shall be fully exempt.
  3. 100% entry tax exemption on all supplies made for project installation and trial operations.
  4. There is no charge or fee for issuing consent to establish and consent to operate for such projects throughout the State. 
  5. Exemption from External Development Charges (EDC), scrutiny fee and infrastructure development charges.
  6. 100% exemption from payment of fee and stamp duty charges allowed for registration of rent/lease/sale deed for the land required for setting up these projects in B, C and D category blocks as defined in the Haryana Enterprise Promotion Policy 2015.
  7. The Agriculture & Farmer Welfare Department, Haryana and State Agriculture Universities to promote organic fertilizers produced from such projects, provided they meet the specifications & standards prescribed for the purpose from time to time. The State Agriculture Universities shall conduct trials to document the results without charging any cost.


Implementation 

In order to gain a better understanding of the CBG landscape in India, it is imperative to examine the initially set targets along with the on-the-ground reality. According to statistics published on the GOBARdhan portal, a total of 694 CBG plants have been registered so far. However, at the functional level, only 99 CBG plants are operational. The table below, curated using the statistics available on the GOBARdhan portal, demonstrates the actual number of functional CBG plants in Uttar Pradesh, Gujarat and Haryana. 

State  Registered CBG plants Functional CBG plants
Uttar Pradesh  130 15
Guajarat 44 18
Haryana  53 10


Under the SATAT Scheme, CBG sales (from September 2019 up until April 2023) is presented in the table below. Combining the data from the table with the statistics available on the SATAT site and MNRE (22,097 + 16,271), only 38,368 metric tonnes of CBG have been produced so far. Thus, the natural gas development industry falls behind SATAT's aim of 15 MMT of CBG production from 5000 units by 2023. The Scheme has also introduced mandatory blending obligations; however, the blending obligations are voluntary in nature until FY 2024-2025 and are scheduled to start in FY 2025-26.

1500924a.jpg

(Source: Petroleum Planning & Analysis Cell, Snapshot of India's Oil & Gas data – Apr, 2023)

According to statistics on the GOBARdhan portal, 1,309 biogas plants with a 5 cubic meter/day plant capacity and above have been registered under the program. However, only 842 of these plants are operational. The table below is based on the data available on the GOBARdhan portal and looks at the existing biogas plants in the States of Uttar Pradesh, Gujarat, and Haryana. 

State  Registered biogas plants  Functional biogas plants 
Uttar Pradesh  131 105
Guajarat 53 41
Haryana  36 15


Despite intensive promotion through initiatives, Schemes and Policies, the CBG industry has not achieved the anticipated success. Although there are positive Policy enablers and enormous potential for CBG production, the operating state of CBG facilities is still limited. The figures show a significant difference between stated aims and actual implementation, demonstrating flaws in implementing CBG policies at both the central and State levels.

Viewpoint 

The generation of biomass will not abate, and the need to address energy security and sustainability is grave. Thus, it is important to find a way to string the bio-gas value chain together to make it a success in India.

Challenges include:

  • Unpredictability in terms of long-term feedstock supply and the concerns relating to the quality. 
  • Issues in feedstock collection and the segregation of feedstock collected. 
  • Monetary support is not being spread across the entire value chain.
  • Lack of technology transfer to ensure biogas is produced and converted efficiently. 
  • The economic viability and optimal end-use of biogas vary across regions. It is crucial to create a robust market for biogas and its byproducts. 

The various Schemes and programmes are indeed in the right direction and integration across the value chain, such as:

  • CBG will be included in the list of greenhouse gas mitigation activities for trading carbon credits under the bilateral/cooperative approaches under the mechanism specified under Article 6.2 of the Paris Agreement. This will help CBG plant owners generate extra revenue, thereby making these projects economically viable. 
  • Assistance in marketing and sale of organic manure produced from CBG plants, inter-alia  promoting organic farming. 
  • The introduction of a tipping fee ensures that more waste is being transported, although segregation continues to be a challenge.
  • The India-German Green and Sustainable Development Partnership Agreement was signed in 2022 for technology collaboration towards meeting the Nationally Determined Contributions under the Paris Agreement by India and Germany. 

While these initiatives are certainly in the right direction and the importance of CBG is growing, the need for a properly coordinated value chain continues to hinder the biogas sector from realising its full potential. Therefore, initiatives must be spread out across the value chain to accommodate the interests of multiple stakeholders and address issues of information and Policy inconsistency. 

Legal Support for Green Credit Implementation

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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