GOBARdhan: why biogas needs a reliable buyer

A compressed-biogas plant can have waste arriving at its gate and machinery ready to run, yet still face a difficult question: who will buy the gas every day? For an owner repaying a construction loan, occasional sales are a poor foundation for monthly repayments.

India’s new GOBARdhan operational guidelines, dated 15 September 2026, address that problem through firmer purchase arrangements and an administered producer price. They set out how the scheme approved in August will work. The central idea is to make future gas sales more dependable, so a plant has a stronger case when seeking finance. Whether that becomes a viable business still depends on what happens between collecting waste and receiving payment.

First, turn waste into gas someone can use

Inside a biogas plant, microorganisms break down organic material without oxygen and produce a gas containing methane. Suitable inputs include cattle dung, agricultural residues and organic waste. The raw gas must be cleaned and upgraded to meet the required quality standards; compression allows it to be stored and transported as compressed biogas, or CBG. A qualifying plant can supply it into a gas network or transport it in pressurised containers to an approved delivery point. The petroleum ministry’s CBG overview explains this waste-to-fuel route.

That means several businesses have to work together. Someone collects and delivers the material, the plant processes it, and a gas company takes the output to customers. The plant also has to manage the material left after digestion, which can be processed and used as organic manure. The new pricing framework focuses on gas sales, but collecting waste and managing the material left over also cost money.

Suppose a developer plans a plant near a farming area. A lender assessing the project needs a credible estimate of the cash left after paying for feedstock, electricity, wages and maintenance. Knowing the machine’s maximum output is only a starting point. The lender also needs to know how much output can actually be sold, at what price, and on what payment terms.

What was uncertain under the earlier arrangements?

India already had a programme for expanding CBG. SATAT, launched in October 2018, encouraged entrepreneurs to build plants and supply gas through oil and gas marketing companies. The September guidelines bring SATAT into GOBARdhan from 1 September 2026 while preserving its committed liabilities.

The ministry identifies two weaknesses in the earlier commercial arrangements. Purchase commitments often depended on market conditions and a buyer’s “reasonable endeavours”—an undertaking to try, rather than the firm commitment now required for assured purchases. Producer prices were also linked to the retail selling price of CNG, the compressed natural gas sold to vehicles.

Those two prices can move for different reasons. A CBG plant still has to buy or collect biomass and pay its electricity bill even if fossil-gas prices fall. Linking its income to CNG prices can therefore squeeze its margin without a matching reduction in its own costs. The operational guidelines explicitly identify uncertain demand and that price mismatch as problems the scheme seeks to address.

A firm buyer, with a contract and a connection

“Offtake” means buying and taking delivery of a producer’s output. The framework offers assured offtake of up to all the CBG a producer makes available for sale, subject to technical and operational feasibility. For the city-gas route, this requires a firm agreement between three parties: the producer, the city gas distribution company, and GAIL, the designated operator coordinating procurement and payment.

The producer makes the gas, and the distributor receives it for its network. GAIL coordinates buying the gas, pooling it with domestic natural gas, and supplying it to distributors. GAIL is also responsible for paying the producer. This gives the commercial chain a defined payer as well as a physical buyer.

A plant must be registered, meet the relevant gas-quality rules, and have systems that measure its output and quality. Its request is matched to its own or a neighbouring gas-distribution area. The amount covered cannot exceed the eligible daily contract quantity or the area’s remaining intake capacity. A pipeline that cannot receive more gas is still a constraint, however much a plant could produce.

Existing reasonable-endeavour arrangements can continue separately. A producer seeking the firmer protection must make a new request and obtain a confirmed firm agreement. Registration alone does not convert an earlier arrangement.

The model contract also gives both sides a first-year period without shortfall penalties. From the second contract year, the buyer’s obligation is linked to 90% of the eligible gas the producer nominated for delivery over the year. Nominations are advance declarations of intended supply. The producer’s obligation uses a different base: 50% of the annual contracted quantity. These provisions make reliability a responsibility on both sides; the final agreement determines the applicable remedies and detailed terms. Component I and its model contract set out those conditions.

What does the ₹98-a-kilo figure mean?

The guidelines set an initial administered CBG price of ₹2,110 per MMBtu, excluding applicable taxes and compression charges. An MMBtu is a unit of energy equal to one million British thermal units. The document gives an approximate equivalent of ₹98 per kilogram for CBG containing 95% methane. The conversion depends on the gas composition.

This is the procurement price payable to an eligible producer. The much-discussed ten-year horizon refers to the pricing framework, which runs at least until 31 March 2036. The rate is determined for each 12-month period and can be reviewed and revised, with changes notified prospectively.

A plant must have its eligibility verified to receive that price. For a producer moving to the administered rate, approval takes effect from the next 15-day billing cycle. Ongoing monitoring and compliance matter too: an unresolved failure of the required quantity-monitoring system can interrupt the benefit. The detailed pricing rules therefore connect the headline price to measured, qualifying gas sales.

For the developer and lender, a known pricing process plus a firmer purchase contract can make estimates of future revenue more credible. This reduces uncertainty about sales, though the plant must still keep its costs within that revenue.

Who pays for the stronger producer price?

Part comes from public funds. The guidelines provide government affordability support to GAIL to help fund payments to producers. This support is capped at ₹10 per kilogram procured. The support rate is determined annually or as needed. It helps fund the producer payment; it is not an additional ₹10 automatically paid above the ₹98 figure.

The remaining cost is shared through the domestic gas system. CBG is pooled with other domestic natural gas, spreading its cost over a larger quantity of gas. In its 29 August explanation, the ministry said the new pooling base would be roughly 2.5–3 times the earlier base and expected a negligible effect on individual consumers.

The trade-off is that stronger revenue support for producers creates costs for the public budget and the gas pool. What ultimately reaches a CNG pump or a household piped-gas bill depends on the support actually provided, the gas mix and distributor pricing. The producer price alone cannot tell a household how its bill will change.

The problems a buyer cannot solve

Feedstock has to arrive throughout the year, including outside the harvest season. It needs collection, transport and storage, and its quality affects gas output. In a 2026 study of CBG operations in Punjab, Haryana and Gujarat, the Centre for Science and Environment identified feedstock security, gas connections and weak markets for organic manure among the obstacles. Those findings describe problems predating the September rules.

The administered gas price includes an incentive for selling plant by-products such as organic manure. Producers remain responsible for their sale and environmentally compliant use, and bear the associated expense. A dependable gas customer does not create a dependable manure customer.

Farmers may gain a buyer for residues, and collectors may gain work supplying a plant. Their earnings depend on those separate supply arrangements and costs. The administered gas price belongs to the producer’s transaction with the gas system, not to the farmer’s sale of raw material.

The useful tests now are signed firm contracts, workable connections, regular production and timely payments. Those will show whether the promise of a buyer is becoming cash that keeps plants operating and loans being repaid. Counting machinery installed will tell only part of that story.