India has the potential to produce 62 million metric tonnes (MMT) of compressed biogas annually, a massive opportunity currently underutilized. The government recently approved the ₹23,731 crore GOBARdhan National Circular Bioenergy Scheme to scale this sector. Investors should monitor how mandatory blending obligations for gas distribution companies influence the long-term demand and supply chain stability for this emerging industry.
India holds the potential to generate 62 million metric tonnes (MMT) of compressed biogas (CBG) annually, according to a recent industry analysis. While this renewable energy source offers a significant path to reduce the country’s reliance on imported natural gas, the sector is currently in its early stages, with actual usage sitting below 1 percent of this total potential. To bridge this gap, the Union Cabinet approved the GOBARdhan National Circular Bioenergy Scheme in August 2026, allocating ₹23,731 crore to support the industry over the next decade.
New Policy Backing for the Sector
The government's strategy focuses on creating a reliable market for biogas by enforcing mandatory blending obligations. City gas distribution companies are now required to blend a specific percentage of CBG into their supply. The mandate is set at 3 percent for the current financial year (2026-27), increasing to 4 percent in 2027-28, and reaching 5 percent thereafter. By creating this guaranteed demand, the government aims to encourage investment in production plants that were previously considered risky due to uncertain offtake agreements.
The industry analysis highlights that the raw material, or feedstock, base is vast, totaling 472 MMT. Animal waste acts as the primary contributor, accounting for 41 percent of this potential. Other sources include agricultural residue, such as wheat and paddy straw, as well as municipal solid waste and press mud from sugar mills. For operators, press mud is particularly attractive because it requires minimal pre-treatment and originates from a single, reliable source, unlike crop residue, which is often scattered and only available during specific harvest windows.
The Feedstock and Operational Hurdles
Despite the government's financial outlay and the theoretical potential, investors should be aware of significant operational challenges that could impact profitability. The biogas industry relies heavily on creating dense rural collection clusters to gather waste, which involves high logistics and transport costs. If these collection networks are not efficient, plants may struggle to operate at full capacity.
Furthermore, the sector faces inconsistent feedstock supply and price volatility. For instance, agricultural residue is only available during a short 45-day window, creating storage and sourcing bottlenecks for plant operators. High initial setup costs, or capital spending, also present a barrier, as electricity expenses and the need for specialized machinery can pressure profit margins. Additionally, the current lack of widespread pipeline connectivity limits the ability to transport produced gas to the end consumers, making infrastructure development the most important factor to track in the coming quarters. Success in this sector will depend on how effectively companies can manage these supply chain gaps and scale operations under the new blending mandates.