The Union Cabinet has cleared the ₹23,731 crore GOBARdhan scheme, introducing mandatory compressed biogas blending for gas distributors. Running through FY 2036, the policy aims to reduce natural gas imports by an estimated $5 billion. Investors are evaluating how the mandatory blending requirements will impact the operational costs and procurement strategies of City Gas Distribution (CGD) companies.
The Union Cabinet has officially approved the GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme with a financial outlay of ₹23,731 crore. This long-term initiative, which is set to operate from fiscal year 2026-27 through 2035-36, is designed to transition India toward a circular bioeconomy by converting agricultural residue, cattle dung, and municipal waste into Compressed Biogas (CBG).
For investors and market analysts, the most significant component of this policy is the introduction of a mandatory CBG blending obligation for City Gas Distribution (CGD) entities. Starting in FY 2026-27, these companies will be required to blend 3% of CBG into their total gas supply. This requirement is set to increase to 4% in FY 2027-28 and 5% from FY 2028-29 onwards. This regulatory mandate will shift how CGD companies manage their gas procurement, as they must now secure a consistent supply of CBG to meet these blending targets.
To ensure economic viability for producers, the government has established a fixed administered price of ₹2,110 per MMBTU for CBG, which will remain in effect for 10 years. This price stability is intended to encourage private investment in new biogas plants. Furthermore, the scheme provides capital assistance of up to ₹2 crore per tonne per day (TPD) for greenfield projects, alongside credit guarantee mechanisms, to lower the initial financial barrier for project developers.
The Indian Biogas Association (IBA) estimates that these measures could reduce India's natural gas import bill by $5 billion. By decreasing reliance on imported liquefied natural gas (LNG), the government aims to protect the economy from the volatility of global energy prices and geopolitical risks. Additionally, the production of Fermented Organic Manure as a byproduct of these plants may offer indirect benefits to the agricultural and fertilizer sectors.
However, the scale of this transition presents specific risks. The success of the scheme will rely heavily on the efficient aggregation of feedstock—such as agricultural residue and cattle dung—which are often spread across rural areas. Investors should track whether the infrastructure for connecting these new biogas plants to the existing gas grid develops at the same pace as production capacity. While the government policy provides support, the operational capability of developers to scale up from the current base of approximately 300 plants to the government’s long-term targets remains a key monitorable for the sector.