Blitz India Business
NEW DELHI: The ₹23,731 crore GOBARdhan scheme has been read everywhere as a capital subsidy for compressed biogas. It is not, principally. The instrument that will move investment is a fixed offtake price and a rising statutory blending obligation — a guaranteed demand curve, written for ten years.
Take the components in the order a project financier would. First, price: an administered rate of ₹2,110 per million British thermal units, underwritten by a framework with a stated minimum horizon of ten years. Second, offtake: city gas distribution entities must blend compressed biogas into the CNG they sell for transport and the piped gas they supply to homes — 3 per cent in FY2026-27, 4 per cent in FY2027-28 and 5 per cent from FY2028-29. Third, capital: up to ₹2 crore per tonne per day of installed capacity for eligible greenfield projects. Fourth, credit: a dedicated guarantee mechanism for MSME promoters, who are precisely the class of borrower a bank refuses on collateral grounds however good the cash flow looks. Only one of those four is a subsidy. The other three are the removal of risk — and risk, not capital cost, is what has kept this sector at demonstration scale for a decade.
Bankable, not merely buildable: a capital grant gets a plant built. A ten-year price and a statutory buyer are what get it financed — and financing, not construction, has been the binding constraint.
A capital grant lowers the cost of the asset. A blending obligation removes the question of whether anyone will buy what the asset makes. Lenders price the second far more generously than the first.
At a Glance
• Scheme: GOBARdhan, national unified scheme for compressed biogas, cleared by the Union Cabinet
• Outlay: ₹23,731 crore, FY2026-27 to FY2035-36
• Administered price: ₹2,110 per MMBTU, framework horizon of at least ten years
• Blending obligation on CGD entities: 3% in FY27, 4% in FY28, 5% from FY29, in CNG (transport) and PNG (domestic)
• Capital assistance: up to ₹2 crore per tonne per day of installed capacity, greenfield projects
• Credit: dedicated credit guarantee mechanism for MSME-based projects
• Also provided: pipeline infrastructure support and a CBG Ecosystem Challenge Fund for district-level feedstock chains
• Stated outcome: domestic CBG output up nearly ten-fold; about 1.5 lakh jobs
The number that should interest anyone modelling this sector is the capital-assistance rate, because it sets the shape of the project pipeline. At up to ₹2 crore per tonne per day, a mid-sized plant rated at 10 TPD carries grant support of up to ₹20 crore — meaningful against typical project cost, but nowhere near the whole of it. That is a deliberate calibration. Set the grant too high and the scheme fills with promoters chasing the grant; set it where it sits, alongside a guaranteed price, and the promoter has to care about running the plant at high utilisation for a decade, because that is where his return now comes from. The blending ladder reinforces the same discipline from the demand side: obligated CGD entities need volumes that arrive reliably, every month, to meet a percentage that ratchets upward. Intermittent suppliers will not get contracts renewed.
The risks that remain are the ones this sector has always had, and they belong to logistics rather than to policy. Biomass is bulky and low-value per tonne, so plant economics are decided inside a radius of a few dozen kilometres; aggregation, baling and storage are the least-developed links in the chain, and the arrival of guaranteed offtake could bid up feedstock prices in districts where several plants are commissioned at once. The scheme anticipates this with a challenge fund directed at district-level feedstock value chains and with pipeline support that determines whether a plant sells locally or into the grid — a distinction worth several percentage points of realisation. For investors, the sensible reading is that GOBARdhan converts compressed biogas from a policy-dependent venture into a contracted-revenue one, with the residual risk sitting in feedstock procurement and utilisation. That is a materially different, and more financeable, risk profile than the sector carried a week ago.