India’s ambitious compressed biogas (CBG) programme is facing a reality check, with only around 206 plants being operational against more than 3,600 project approvals and a target of 5,000 units set for 2024, under the Sustainable Alternative Towards Affordable Transportation (STAT) scheme. The wide gap between announced capacity and actual production of CBG is despite the policy focus on reducing dependence on imported LNG and fossil fuels, and exposes structural bottlenecks in the scheme launched in 2018.
The SATAT initiative had also targeted production of 15 million metric tonnes per annum (MMTPA) of compressed biogas from agricultural residue, cattle dung and municipal waste. However, industry estimates suggest actual production remains only a fraction of the target, with just 30,000 tonnes of the gas sold last year. This is despite India having one of the world’s largest cattle populations and massive agri-residue availability. Fragmented biomass supply chains, weak project economics, financing constraints, poor pipeline connectivity and uncertain gas offtake continue to slow large-scale adoption.
“In India the CBG growth has been muted, not really due to feedstock availability as we have enough potential across agri-waste, animal and municipal waste, but more due to quality and calorific content of the input and also volume aggregation in one place,” said Manas Majumdar, Partner & Leader – Oil & Gas, Fuels & Resources at PwC India.
Supply Chain Bottlenecks
Some experts said India’s biggest challenge lies not in availability of biomass but in aggregating and transporting feedstock economically from fragmented rural regions. “Feedstock aggregation remains a key challenge due to the fragmented and seasonal nature of biomass and limited development of organized supply chains, storage and pricing mechanisms,” said Sushil Mishra, Director, Crisil Intelligence.
Industry stakeholders said inconsistent feedstock supply, biomass price volatility and weak offtake for fermented organic manure generated as a byproduct continue to affect plant utilisation and project viability. A R Shukla, President of the Indian Biogas Association (IBA), said agri-residue based plants continue to struggle with biomass supply chain management and disposal of organic manure. “The main reason for lagging in agri-residue based plants remains the biomass supply chain management and offtake of organic manure,” Shukla said.
The sector is also facing financing hurdles despite biogas projects being categorised under priority sector lending. “Low IRR, lack of viability gap funding, lack of pipeline connectivity, disposal of byproducts and lack of raw material aggregation facilities are some of the reasons,” said Prashant Vashisht, Senior Vice President and Co-Group Head, Corporate Ratings at ICRA. Analysts said low internal rate of return (IRR), uncertain revenue visibility and operational risks have made banks cautious about financing projects, resulting in severe working capital stress for developers.
Another major challenge remains integration of biogas into India’s mainstream gas ecosystem. Most biomass sources are located in remote rural areas while city gas distribution (CGD) infrastructure is concentrated around urban centres, increasing transportation and pipeline costs. “Connecting these plants to the CGD or pipeline infrastructure incurs heavy investment costs,” Shukla said.
Policy Mandates
Recent policy measures such as CNG-CBG synchronisation mandates and direct pipeline infrastructure schemes may gradually improve offtake visibility, though large-scale results are yet to emerge. “The biggest challenge of offtake is being tackled one step at a time by making policy changes and mandates as needed,” a senior analyst said. “Similar policy mandates for use of biogas in certain end-use segments can be a game changer,” the analyst added.
The concerns come even as Bharat Petroleum Corporation Ltd (BPCL) reported achieving 7.15% CBG blending across its CGD network in April 2026, significantly above the current mandatory blending target of 3% and its highest-ever monthly blending performance. BPCL said the achievement reflected efforts towards strengthening domestic gas sourcing and scaling up integration of greener fuels into India’s gas ecosystem.
Experts said biogas continues to remain overshadowed by solar power, electric vehicles and green hydrogen despite offering major rural economy, waste management and energy security benefits. “Biogas sector continues to be underestimated in India’s energy transition story despite its circular economy benefits, energy security offering and a strong alternative to fossil fuels dependence,” the senior analyst said.
Industry bodies are now pushing for a unified National Biogas Mission, performance-linked incentives, viability gap funding, green certificates and mandatory phased blending targets to improve economics and attract private investment. As per estimates, India can unlock nearly 60 MMTPA of CBG potential if structural bottlenecks around feedstock aggregation, financing, logistics and pipeline connectivity are addressed.