Tensions in West Asia continue to keep global energy markets on edge. India imports nearly 85% of its crude oil needs, much of it from West Asia, and supplies faced disruptions due to the Israel-U.S.-Iran war. While the government has diversified its crude oil suppliers, around 90% of India’s LPG imports still transit through the Strait of Hormuz, making any instability in the region a potential risk to India’s energy security.
Over the years, India has pushed several initiatives to promote alternate fuels like compressed biogas to reduce dependence on imported fuel, tackle agricultural waste and support rural incomes. But despite ambitious targets and policy support, progress has remained limited.
The search for an alternative fuel
Biogas is a mixture of methane, CO2 and small quantities of other gases produced by anaerobic digestion of organic matter. It can be processed and compressed to get Compressed Biogas (CBG). It is chemically identical to CNG; renewable, carbon-neutral and can be produced from waste. It can be used directly to produce electricity, heating or as an energy source for cooking.
India has also been trying to blend biogas into its gas supply for at least a decade. The push gathered pace in 2018, when the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative was launched with a target of establishing 5,000 plants by 2023. Only 132 are completed as of June 3, 2026.
The Centre launched the GOBARdhan (Galvanising Organic Bio-Agro Resources Dhan) scheme to increase CBG production. Under this ‘waste to wealth’ programme, the government offered grants of up to ₹50 lakh per district for community biogas plants. ₹564 crore was earmarked for the purchase of biomass collection machinery, while ₹994 crore was allocated to build pipelines connecting biogas plants directly to the gas grid.
However, progress on the ground has remained limited. The lack of infrastructure, poor private investment, difficulties in accessing formal credit and high upfront cost of technologies have stalled progress. Financial support from the government can make biogas projects economically viable. Other incentives, like accelerated depreciation and tax holidays, would also help attract private players.
Impact on cultivation patterns
The development of biogas has been uneven across the world, with Europe, China and the United States accounting for 90% of global production.
Germany is one of the largest producers in Europe, along with France, Denmark and the U.K. The fillip for the sector came in 2000, when Germany introduced the Renewable Energy Sources Act to incentivise production. Over the years, it introduced schemes to guarantee income to producers, gave bonuses to help operators increase their income and encouraged small-scale biogas plants. However, the country’s push for biogas triggered a “corn mania”, with maize cultivation rising sharply because it was highly profitable for farmers. Maize slowly started to replace other food crops. Over a decade later, the government was forced to step in and control this by introducing a cap on the use of maize in biogas plants.
This danger hits close to home. The Economic Survey 2026 noted that maize cultivation in India has increased sharply, potentially affecting crop diversity and food security. It noted that while the national maize yield increased from approximately 2.56 tonnes per hectare in FY16 to roughly 3.78 tonnes per hectare by FY25, the yields for soybeans, sunflower, rapeseed, peanuts and millets, among other crops, have either stagnated or declined.
While this trend could be attributed to technological advancements, ethanol pricing can be an important factor.
The government fixes administered per-litre ethanol prices based on the feedstock used. The price for maize-based ethanol is higher, while the price for rice-based ethanol is lower. The price for molasses-based ethanol is fixed between the two. Between FY22 and FY25, the administered price of maize-based ethanol grew at a compound annual growth rate (CAGR) of 11.7%, making maize more lucrative for farmers.
While maize’s area under cultivation and production jumped between FY22 and FY25, pulses output declined, while oilseeds and other cereals registered only modest growth. This shift is visible in States like Maharashtra and Karnataka, where maize is competing with pulses, oilseeds, soyabean, millets and cotton for land, water and labour.
India imports large quantities of pulses and edible oils to meet demand. Yet, instead of focusing on increasing production, the government’s policy might inadvertently disincentivise farmers from cultivating them. Over time, this could increase India’s dependence on imports and expose domestic food prices to greater volatility during supply shocks.
Denmark, which is targeting to use only biomethane in its gas system by 2030, offers a solution. The government discouraged the use of crops as feedstock, and the primary source is livestock manure and agricultural waste.
Government’s action plan
In 2023, the National Biofuels Coordination Committee approved a mandatory blending obligation. Gas distributors have been mandated to blend CBG into their supply from FY26. It would start at 1% and rise to 5% by FY29. In her Budget speech in February 2024, Finance Minister Nirmala Sitharaman said the phased blending of CBG in CNG for transport and Piped Natural Gas for domestic purposes “will be mandated.”
To meet these targets, the government is ramping up the establishment of plants. In August 2025, while responding to a query in the Lok Sabha, Minister of State Shripad Yesso Naik said, “A total 36 number of medium size biogas plants have been installed under the Biogas Programme of MNRE during the last three years.”
The question is whether the government can replicate India’s ethanol blending programme with CBG. In 2014, just 1.5% of petrol was blended with ethanol. By December 2025, it had hit 20%, five years ahead of the original 2030 target.
Published – July 14, 2026 07:00 am IST
