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Reference Date | Version |
July 27, 2024 | 1.0 |
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Keywords |
Compressed Biogas (CBG), Energy Security, Sustainability, Circular Economy, Policy Support, Biogas. |
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Legislation(s)/Policies |
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Jurisdiction |
India |
Compressed Biogas (CBG) projects involve the interplay of laws and regulations pertaining to environment, energy and land. Appropriate legal advice should be sought for the purposes of ensuring compliance, mitigation of risks and optimizing project operations and returns.
Introduction
Presently, natural gas accounts for 6.7% of India’s total energy basket. The “2030 Vision” Natural Gas Infrastructure in India Report by Industry Group for Petroleum & Natural Gas Regulatory Board, commissioned by the Petroleum & Natural Gas Regulatory Board, published in May 2013, initially targeted achieving at least 20% share of natural gas in the primary energy mix by 2030. The Union Petroleum Minister subsequently revised the target at the launch of the ‘Gas4India’ campaign in September 2016 to 15% by 2030. As per the Petroleum Planning & Analysis Cell, India’s total natural gas consumption (net production plus LNG imports) in the financial year 2023-24 was 67512 million metric standard cubic meters (mmscm), of which 31795 mmscm was obtained through LNG imports and the balance 35717 mmscm through net production. A review of the trends of production of natural gas through the financial years 2020-21 to 2023-2024 depicts that natural gas production in the country has yet to surge, nor has there been a decline in LNG imports. Arguably, the need to enhance the generation, distribution, and consumption of natural gas to meet the increasing energy requirements for India’s growing economy is evident. Keeping in mind the twin goals of energy security and sustainability, it is imperative to encourage the indigenous generation of natural gas, keeping in mind circularity. In this regard, Compressed Biogas (CBG) plants may emerge as a crucial component in realising the vision of a circular economy emphasized by the Hon’ble Prime Minister of India during the launch of Mission Lifestyle for Environment at the 6th UN Climate Change Conference of the Parties in Glasgow in 2021.
Biodegradable organic waste or biomass such as agricultural residue, cattle dung, sugarcane press mud, municipal solid waste and sewage treatment plant waste, etc. produce biogas through the process of anaerobic decomposition. The biogas is then purified to remove hydrogen sulfide (H2S), carbon dioxide (CO2), and water vapor and thereafter compressed as CBG.
India has an abundance of biodegradable organic waste, and therefore, commercial production of CBG may be expected to contribute to the natural gas energy mix targets set for 2030.
This article examines the initiatives undertaken at both Centre and State levels to promote indigenous generation, distribution and consumption of CBG across the value chain and factors that impede the growth of CBG promotion within the country.
CBG- law making power
The Constitution of India is the basic law of the land and provides the basis for the law-making power vested in the Parliament and State Legislatures.
Parliament has the exclusive power to make laws in respect of matters enumerated in List I (Union List) of Schedule VII of the Constitution of India and any other matter not enumerated in List II (State List) or List III (Concurrent List) of Schedule VII of the Constitution of India.
State Legislatures have exclusive powers to make laws in respect of matters enumerated in said List II (State List).
Parliament and the State Legislatures have powers to make laws in respect of matters enumerated in said List III (Concurrent List). In case a law made by the State Legislature is repugnant to a law made by the Centre in respect of these matters, the law made by the Centre in respect of these matters shall, to the extent of the repugnancy, prevail over provisions of the law made the State Legislatures.
‘Biogas’ is not specifically provided under any of the Lists in Schedule VII. The ‘biogas’ value chain touches on several matters covered under various entries of the lists mentioned above.
Below is an indicative list of entries that may relate to ‘biogas’:
(i) Union List:
14. Entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries.
36. Currency, coinage and legal tender; foreign exchange.
37. Foreign loans.
41. Trade and commerce with foreign countries; import and export across customs frontiers; definition of customs frontiers.
(ii) State List:
5. Local Government, that is to say, the constitution and powers of municipal corporations, improvement trusts, districts boards, mining settlement authorities and other local authorities for the purpose of local self government or village administration.
6. Public health and sanitation; hospitals and dispensaries.
14. Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases.
(iii) Concurrent List:
17A. Forests.
20. Economic and social planning.
33. Trade and commerce in, and the production, supply and distribution of,—
(a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products;
(c) cattle fodder, including oilcakes and other concentrates;
CBG Actions at the Central and State levels
Centre Initiatives:
In the past decade or so, several Policy changes and initiatives have been undertaken at the central level to promote biofuels’ investments and growth, including CBG. Some key highlights have been the announcement of ethanol blending obligations and the announcement of setting up 500 waste-to-wealth plants under the GOBARdhan Scheme. On the international stage, the Indian Government, at the G20 summit in 2023, launched the Global Biofuels Alliance with the leaders of Singapore, Bangladesh, Italy, the United States, Brazil, Argentina, Mauritius and the UAE for the purposes of exchanging knowledge and technologies. Certain key initiatives of the Government towards the promotion of CBG are as follows:
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Central Policy/Scheme |
Details of the Policy / Scheme |
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National Policy on Biofuels (2018) |
The Ministry of Petroleum and Natural Gas (MoPNG) launched this Policy with the goal of promoting biofuels. The Policy was amended in June 2022, resulting in the target of a 20% ethanol blending in petrol by Ethanol Supply Year (ESY) 2025-26. An indicative target of 5% biodiesel blending in diesel or direct sale of biodiesel is being aimed at by 2023. |
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Galvanizing Organic Bio- Agro Resources (GOBARdhan) Scheme |
The Scheme is an umbrella initiative of the Government of India that aims to convert waste to wealth to realize the vision of a circular economy. The Ministry of Jal Shakti is the nodal Ministry for the Scheme. The Scheme includes a number of initiatives aimed at facilitating the conversion of organic waste, such as cattle dung and agricultural residue, into biogas, CBG, and bio-CNG. The partnering ministries and departments of this Scheme are:
This Scheme is being implemented in collaboration with State Governments and the private sector, including entrepreneurs and societies. Any plant or project that produces CBG/biogas (with a daily output exceeding 10 cubic meters) and bio-slurry as primary outputs is eligible to participate in this Scheme. |
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Sustainable Alternative Towards Affordable Transport (SATAT) Scheme |
MoPNG has set up this initiative with the goal of creating an ecosystem for producing CBG from different waste and biomass sources to reduce the import dependency in oil and gas sector by adopting a five pronged strategy which includes, increasing domestic production, adopting biofuels & renewables, energy efficiency norms, improvement in refinery processes and demand substitution. The Scheme envisages:
Under this Scheme, CBO promotes the production and consumption of CBG in the country through the introduction of phase-wise mandatory blending of CBG in the CNG (transport) and PNG (domestic) segments of the city gas distribution sector. CBO will be voluntary until FY 2024-2025, and mandatory blending obligations will start in FY 2025-26.The initiative aims to attract around Rs. 37,500 crore investment and facilitate the establishment of 750 CBG projects by 2028-29. Pursuant to this Scheme, the MoPNG has approved the Scheme for the Development of Pipeline Infrastructure for the injection of CBG in the city gas distribution network by providing financial assistance for creating CBG-city gas distribution grid connectivity for 100 CBG projects, which will create an ecosystem for the offtake of CBG with reduced logistics costs. |
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National Bioenergy Programme (Waste-to-Energy) |
This Programme provides a framework for central financial assistance to project developers and service charges to implementing/inspection agencies in respect of the successful commissioning of Waste to Energy plants for the generation of CBG. Central financial assistance is provided for Waste to Energy plants based on the performance of the project for at least three consecutive months. Financial assistance available under the Programme for setting up BioCNG/enriched biogas/ CBG plants is as follows:
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Agro Infrastructure Fund (AIF) |
AIF is a financing mechanism established by the Department of Agriculture & Farmers Welfare to develop post-harvest management infrastructure and community farm assets.
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Master Directions- Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2020 |
The Master Directions describe the eligible categories under the priority sector, which include Renewable Energy and Agriculture. With respect to Renewable Energy, the Master Directions provide for bank loans up to a limit of Rs. 30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities, viz., street lighting systems and remote village electrification etc., to be eligible eligible for Priority Sector classification. The lending to the agriculture sector includes Farm Credit (Agriculture and Allied Activities), lending for Agriculture Infrastructure and Ancillary Activities. Agriculture infrastructure is subject to an aggregate sanctioned limit of Rs. 100 crore per borrower from the banking system. The list of eligible activities under Agriculture infrastructure includes construction of oil extraction/ processing units for production of bio-fuels, their storage and distribution infrastructure along with loans to entrepreneurs for setting up CBG plants. |
State Initiatives
Implementing the various Schemes launched by the Centre concerning bioenergy and biogas depends mainly on several factors with respect to the concerned States. Such factors may include feedstock availability and characteristics, utilization patterns for the feedstock, end-use products, and the socioeconomic factors associated with such a State. In this regard, it may be relevant to assess the policies of 3 States – Uttar Pradesh, Gujarat and Haryana, which seem have performed better as compared to other States, for reasons such as feedstock availability, supportive policies, and a focus on renewable energy
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Uttar Pradesh Uttar Pradesh Bio Energy Policy, 2022 The Policy acknowledges waste supply as a significant challenge in bioenergy enterprises; therefore, the Policy proposes an aggregator model to form long-term associations between bioenergy entrepreneurs, waste aggregators, and farmers. The Policy envisions the formation of at least 1 farmer producer company in each block to collect biomass and supply it to CBG plants, as well as execute long-term supply contracts of agricultural waste between them and letter of interest holders. Initiatives: Financial incentives-
Subsidy benefits –
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Gujarat Gujarat Waste-to-Energy Policy, 2022 The objectives of this Policy are as listed below: a. To help improve efficiency and effectiveness of collection and disposal of Municipal Solid Waste (MSW), thereby contributing to ‘Swachh Bharat Mission’. b. To facilitate and promote disposal of MSW in a more environment friendly manner. c. To facilitate and promote utilization of MSW as a renewable resource for generation of electricity. d. To reduce the requirement of lands for disposal of MSW, thereby saving precious public resource for alternative purpose. e. To promote investment, employment generation & skill enhancement in Renewable Energy Sector. f. To lay down a rational framework for the smooth implementation of Policy. Initiatives: Urban Development Department (UDD) shall prescribe standard operating procedure/ guidelines, web portal service help desk, etc for undertaking various activities, viz., identification of potential eligible sites, preparation of detailed project reports, tendering, preparation of request for proposal document, concession agreements, land lease agreements, etc. Financial assistance –
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Haryana Haryana Bio-energy Policy, 2018 The objectives of this Policy are listed below:
Initiatives Land and clearances –
Tariff determination & electricity connection supply –
Assistance –
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Implementation
In order to gain a better understanding of the CBG landscape in India, it is imperative to examine the initially set targets along with the on-the-ground reality. According to statistics published on the GOBARdhan portal, a total of 694 CBG plants have been registered so far. However, at the functional level, only 99 CBG plants are operational. The table below, curated using the statistics available on the GOBARdhan portal, demonstrates the actual number of functional CBG plants in Uttar Pradesh, Gujarat and Haryana.
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State |
Registered CBG plants |
Functional CBG plants |
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Uttar Pradesh |
130 |
15 |
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Guajarat |
44 |
18 |
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Haryana |
53 |
10 |
Under the SATAT Scheme, CBG sales (from September 2019 up until April 2023) is presented in the table below. Combining the data from the table with the statistics available on the SATAT site and MNRE (22,097 + 16,271), only 38,368 metric tonnes of CBG have been produced so far. Thus, the natural gas development industry falls behind SATAT’s aim of 15 MMT of CBG production from 5000 units by 2023. The Scheme has also introduced mandatory blending obligations; however, the blending obligations are voluntary in nature until FY 2024-2025 and are scheduled to start in FY 2025-26.
(Source: Petroleum Planning & Analysis Cell, Snapshot of India’s Oil & Gas data – Apr, 2023)
According to statistics on the GOBARdhan portal, 1,309 biogas plants with a 5 cubic meter/day plant capacity and above have been registered under the program. However, only 842 of these plants are operational. The table below is based on the data available on the GOBARdhan portal and looks at the existing biogas plants in the States of Uttar Pradesh, Gujarat, and Haryana.
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State |
Registered biogas plants |
Functional biogas plants |
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Uttar Pradesh |
131 |
105 |
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Guajarat |
53 |
41 |
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Haryana |
36 |
15 |
Despite intensive promotion through initiatives, Schemes and Policies, the CBG industry has not achieved the anticipated success. Although there are positive Policy enablers and enormous potential for CBG production, the operating state of CBG facilities is still limited. The figures show a significant difference between stated aims and actual implementation, demonstrating flaws in implementing CBG policies at both the central and State levels.
Viewpoint
The generation of biomass will not abate, and the need to address energy security and sustainability is grave. Thus, it is important to find a way to string the bio-gas value chain together to make it a success in India.
Challenges include:
- Unpredictability in terms of long-term feedstock supply and the concerns relating to the quality.
- Issues in feedstock collection and the segregation of feedstock collected.
- Monetary support is not being spread across the entire value chain.
- Lack of technology transfer to ensure biogas is produced and converted efficiently.
- The economic viability and optimal end-use of biogas vary across regions. It is crucial to create a robust market for biogas and its byproducts.
The various Schemes and programmes are indeed in the right direction and integration across the value chain, such as:
- CBG will be included in the list of greenhouse gas mitigation activities for trading carbon credits under the bilateral/cooperative approaches under the mechanism specified under Article 6.2 of the Paris Agreement. This will help CBG plant owners generate extra revenue, thereby making these projects economically viable.
- Assistance in marketing and sale of organic manure produced from CBG plants, inter-alia promoting organic farming.
- The introduction of a tipping fee ensures that more waste is being transported, although segregation continues to be a challenge.
- The India-German Green and Sustainable Development Partnership Agreement was signed in 2022 for technology collaboration towards meeting the Nationally Determined Contributions under the Paris Agreement by India and Germany.
While these initiatives are certainly in the right direction and the importance of CBG is growing, the need for a properly coordinated value chain continues to hinder the biogas sector from realising its full potential. Therefore, initiatives must be spread out across the value chain to accommodate the interests of multiple stakeholders and address issues of information and Policy inconsistency.
Legal Support for Green Credit Implementation
Founded in 2003 by Divjyot Singh and Suniti Kaur, Alaya Legal takes pride in its boutique practice, encompassing Litigation & Arbitration, Corporate and Commercial, Energy & Sustainability and Information Technology (IT) and Artificial Intelligence (AI). The firm offers tailored solutions to its clients to align with their growth objectives, by leveraging their expertise and experience in these sectors.
Our dedicated team of environment and energy lawyers are well placed to assist CBG project developers throughout the project lifecycle by offering tailored legal solutions in relation to structuring, financing, regulatory compliance, contractual arrangements to navigate the evolving landscape of the CBG sector. Please feel free to contact us for more information on how our legal firm in the NCR region can help.
Sources:
1This information was given by the Minister of State in the Ministry of Petroleum and Natural Gas, in a written reply in Rajya Sabha on December 18, 2023. available at: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1987803#:~:text=Presently%20in%20India%20the%20share,the%20Government%20in%20this%20direction
Ashwini Panwar (Mr), Priyanshi Aggarwal (Ms) and Riddhi Rahi (Ms)
Associate at Alaya Legal
Associate at Alaya Legal
