Budget boost: Excise relief on biogas-blended CNG to aid gas retailers

New Delhi: Gas retailers are likely to benefit from lower costs and improved margins following the government move to exempt excise duty on biogas blended with compressed natural gas (CNG) in the FY27 budget, according to industry executives.

Biogas attracts 5% GST, while natural gas is outside the GST framework. Currently, both pure CNG and biogas-blended CNG attract 14% excise duty.

The budget has proposed to “exempt the value of biogas/compressed biogas (CBG) contained in blended CNG, along with the appropriate GST paid on it, from the value of such blended CNG for the purpose of calculating central excise duty.”


As a result, the excise duty applicable to the biogas component in blended CNG will effectively be zero, reducing overall costs for CNG retailers, Sanjay Kumar, director, marketing, at state-run gas marketer GAIL, told ET. He, however, noted that the impact is likely to be limited as the average share of CBG in CNG is around 1% nationally.

Blending ratios vary across regions, with CNG outlets located closer to biogas production centres recording higher blends.

A second gas industry executive, who didn’t wish to be named, said companies may not cut retail prices immediately, potentially boosting margins in the short term. India currently sells about 250,000 kg of CBG per day under its CNG blending programme.

The budget also earmarked Rs 9,200 crore for new Ujjwala gas connections next fiscal year, compared with Rs 12,736 crore this fiscal year. It however didn’t set any target for fresh additions.

The budget also didn’t make any allocation for filling strategic petroleum reserves, following an 85% cut in the Rs 5,600-crore provision for FY26 in the revised estimates. The strategic reserves are partly empty, and allocations made in some earlier budgets haven’t been allowed to be utilised.

The budget also deferred by two years its plan to impose an additional duty of Rs 2 per litre on unblended diesel to April 2028.