Excise Waiver on CBG-CNG Blend to Unlock Rs 1 Lakh Crore Investment

The industry body said the move, announced in the recent Union Budget 2026, is a major step towards boosting clean energy and supporting India's 2070 Net Zero target.

According to the IBA, the excise duty exemption on compressed biogas (CBG) blended with CNG will improve the financial viability of projects and attract large-scale private investment.

The association said that if city gas distribution networks achieve even a 5 per cent blending level of biogas across the country over the next five years, it would require around 2.5 to 3 million metric tonnes per annum (MMTPA) of CBG.

This alone could generate investments of Rs 45,000 crore to Rs 55,000 crore.

The IBA added that if the government provides a clear and stable policy framework along with predictable pricing, the blending level could rise to 7-8 per cent by 2032.

In that case, the total investment potential could nearly double to about Rs 1 lakh crore.

The association said the excise waiver corrects a long-standing imbalance, as CBG, despite being a renewable and environmentally friendly fuel, was earlier taxed in the same way as CNG.

Removing the excise component on the biogas portion of blended fuel will make it more cost-effective.

For city gas distribution companies, this means lower average fuel costs. Consumers could benefit from stable or even lower gas prices, while producers would get assured sales and more reliable revenue streams.

The IBA noted that this policy change could speed up private investment, improve energy security and support rural development.

India's potential to produce CBG is estimated at around 60 million tonnes per year, using organic waste such as paddy straw, press mud, municipal solid waste and cattle dung.

The excise waiver is expected to improve the internal rate of return for typical 4.8 to 10 tonnes per day plants, depending on feedstock and logistics.

This improvement could help many projects that were earlier financially unviable to secure funding.

CBG can reduce greenhouse gas emissions by 70 to 90 per cent over its lifecycle, especially when produced from agricultural waste.

The IBA said that a 10 per cent blending level could cut carbon emissions by 12 to 15 million tonnes of CO2-equivalent every year, making the policy a significant boost for India's climate goals.

- IANS