The Indian Biogas Association (IBA) has put forward a significant proposal for the upcoming Union Budget 2026, seeking a major financial push to accelerate the country's green energy transition. The industry body has recommended the establishment of a dedicated Rs 10,000 crore fund to provide capital subsidies to the biogas sector.
Key Subsidy Revisions and Fiscal Support Demands
In its detailed budget recommendations, the IBA has called for a substantial increase in the financial assistance provided to compressed biogas (CBG) plants. The association has urged the government to raise the capital subsidy by 50 per cent, from the current Rs 4 crore to Rs 6 crore for every 4.8 tonnes per day (TPD) of production capacity.
Furthermore, the IBA has proposed that the upper limit of subsidy per project be increased to Rs 25 crore, a significant jump from the existing cap of Rs 10 crore. The association argues that this revision is critical as the capital expenditure for setting up CBG plants has surged by over 50% since the Central Financial Assistance (CFA) scheme was introduced in 2014.
These recommendations are slated to be formally presented to the Ministry of New & Renewable Energy and the Ministry of Finance. The IBA emphasizes that the biogas and CBG sector is now a fast-maturing pillar of green growth but requires deeper fiscal support, faster implementation, and easier finance access to unlock private investment and create rural income opportunities.
Fertiliser Blending and Carbon Monetisation Proposals
Moving beyond direct subsidies, the IBA has made a novel proposal linked to India's massive fertiliser subsidy. Pointing to the government's annual Rs 2 lakh crore chemical fertiliser subsidy, the association stated it does little to improve soil organic content.
The IBA suggests redirecting even 10% (Rs 20,000-25,000 crore) of this subsidy towards incentives for fermented organic manure (FOM) or carbon-based farming. It has specifically proposed a mandated blending of FOM with chemical fertilisers—at least 5% by 2028, increasing to 10% by 2030—under an Organic-Chemical Fertilizer Blending Programme.
On the carbon finance front, the industry body pushed for a Green Certificate mechanism. This would allow biogas and CBG producers to sell carbon credits in domestic and international markets. IBA estimates that carbon credits could add a premium of Rs 10-12 per kg of methane produced, even at the lowest market price.
With around 1,000 CBG plants expected by 2030, the market value of CBG-based green certificates could reach approximately Rs 4,000 crore, providing a crucial new revenue stream for producers and helping India meet its climate targets.
Call for Systemic Reforms and Increased Allocation
The association highlighted that the current three-year allocation of Rs 1,450 crore for Market Development Assistance (MDA) for organic manure from CBG plants is "abysmally low" and merely a starting point, especially when compared to subsidies for chemical fertilisers.
To kick-start the carbon economy, the IBA also suggested introducing 'cap and trade' practices for carbon-intensive entities and subsidising part of a proposed carbon pricing mechanism. The overarching goal is to position the biogas sector as a central player in India's green growth story, requiring a cohesive policy and financial framework from the upcoming budget.
