After ethanol in petrol, it’s now Bio-CNG’s turn: Govt’s Rs 23,731 crore push could change what powers your CNG car in the years ahead

India’s clean-fuel push is moving beyond ethanol-blended petrol. The government is now giving a major push to Compressed Biogas (CBG), also commonly referred to as Bio-CNG, with a new national scheme aimed at turning agricultural waste, cattle dung and other organic waste into a usable clean fuel.

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved GOBARdhan, the National Circular Bioenergy Scheme, with a total outlay of Rs 23,731 crore. The scheme will be implemented from FY 2026-27 to FY 2035-36 and aims to increase India's domestic CBG production nearly ten-fold.

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But what exactly is Bio-CNG or CBG? And could it eventually become a bigger part of the fuel used by CNG vehicles?

What is Bio-CNG or CBG?

Compressed Biogas, or CBG, is a renewable gas produced from organic waste. Feedstocks can include agricultural residue, cattle dung, press mud, municipal organic waste and other forms of biomass.

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Organic waste is processed through anaerobic digestion, producing biogas. The gas is then purified to remove impurities and concentrated to obtain methane-rich biogas. It can subsequently be compressed for use as CBG.

In simple terms, CBG is essentially a renewable alternative to conventional natural gas, produced from waste rather than extracted from underground fossil-fuel reserves.

The government says CBG is chemically equivalent to natural gas and can therefore be integrated into the existing gas ecosystem.

Is CBG the same as CNG?

Not exactly, but they are very closely related.

CNG stands for Compressed Natural Gas, which is primarily methane obtained from natural gas reserves. CBG stands for Compressed Biogas, where the methane comes from decomposed organic material.

Once purified and compressed to the required standards, CBG has properties similar to natural gas and can be used in applications where natural gas is used.

That means CBG can potentially be supplied through the existing gas ecosystem and used as a transport fuel.

Why is the government pushing CBG now?

India's demand for natural gas is growing across transport, households, industries and commercial establishments.

At the same time, the country produces enormous quantities of agricultural residue, cattle dung and other organic waste.

The GOBARdhan scheme aims to bring these two challenges together, turning waste into energy while reducing dependence on imported fossil fuels.

The government expects the scheme to create a circular economy in which waste becomes a source of fuel, manure, employment and rural income.

What will GOBARdhan do?

The Rs 23,731-crore scheme brings several measures under one framework to accelerate India's CBG industry.

The government has identified six key growth engines for the sector.

Assured CBG offtake

One of the biggest challenges for CBG producers is having a reliable market for the gas they produce.

Under GOBARdhan, City Gas Distribution entities will support CBG procurement to meet the notified CBG obligation.

The obligation is set at 3% in FY 2026-27, 4% in FY 2027-28 and 5% from FY 2028-29 onwards for the CNG transport and PNG domestic segments.

This is expected to give CBG producers greater certainty about demand and encourage investment in new plants.

Stable CBG pricing

The scheme also introduces a stable administered CBG price of Rs 2,110 per Metric Million British Thermal Unit (MMBTU) under a government-backed pricing framework.

The pricing framework has a minimum 10-year horizon, providing producers with greater revenue visibility.

The government believes this will make CBG projects more commercially viable and encourage companies to expand production capacity.

Capital assistance for CBG plants

Eligible greenfield CBG projects will receive capital assistance of up to Rs 2 crore per tonne per day (TPD) of installed CBG capacity.

The support will not be limited to the main plant machinery. It will also cover critical parts of the value chain, including feedstock aggregation and organic manure processing.

Brownfield projects that expand their existing CBG production capacity will also be eligible.

Pipeline network for Bio-CNG

Getting CBG from a plant to the consumer is another important part of the equation.

GOBARdhan will support pipeline infrastructure connecting CBG plants with trunk pipelines and City Gas Distribution networks.

The government expects better connectivity to reduce evacuation costs, improve reliability and allow CBG plants to reach larger markets.

Credit support for CBG projects

Financing can be a major hurdle for smaller developers and MSMEs.

The scheme therefore proposes a dedicated Credit Guarantee mechanism for eligible MSME-based CBG projects.

By sharing part of the lending risk, the mechanism is expected to improve access to institutional credit and potentially reduce collateral requirements.

The government says this could also encourage participation from women entrepreneurs, cooperatives, rural entrepreneurs and first-time developers.

CBG Challenge Fund to boost local projects

GOBARdhan will also create a CBG Ecosystem Challenge Fund to strengthen the industry at the district level.

The fund will support areas such as feedstock mapping, aggregation infrastructure, district-level CBG planning, technology adoption, process improvements and organic manure value addition.

The idea is to develop local ecosystems around CBG plants rather than treating each plant as an isolated project.

How does CBG help farmers?

One of the biggest potential benefits of Bio-CNG lies beyond the fuel itself.

Agricultural residue and cattle dung that might otherwise have limited economic value can become feedstock for CBG plants.

This can create income opportunities across the supply chain, from farmers and feedstock aggregators to transporters, plant operators and organic manure producers.

The government also expects CBG production to strengthen the market for organic manure, including Fermented Organic Manure (FOM) and Liquid Fermented Organic Manure (LFOM).

What does CBG mean for CNG car owners?

For people driving CNG cars, the important point is that CBG is not a completely different type of gas that requires a separate category of vehicle.

Because purified CBG is chemically equivalent to natural gas, it can be integrated into the country's gas ecosystem.

However, GOBARdhan does not mean that existing CNG cars will suddenly switch to 100% Bio-CNG. Instead, the scheme is designed to increase the amount of domestically produced renewable gas entering the wider gas system.

In other words, the big change is happening on the fuel-production side, with more renewable gas potentially becoming part of India's overall CNG and gas supply chain.

CBG vs CNG: what is the difference?

The easiest way to understand the distinction is by looking at where the gas comes from.

CNG: Natural gas extracted from underground fossil-fuel reserves.

CBG: Biogas produced from organic waste and purified to obtain methane-rich gas.

Both can be compressed and used as gaseous fuels, but CBG has an important additional advantage, its feedstock is renewable organic waste.

India already has a CBG foundation

The government says GOBARdhan is not starting India's CBG journey from scratch.

Several initiatives have already been introduced, including the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative, the Market Development Assistance scheme for organic manure, the Biomass Aggregation Machinery scheme, the Development of Pipeline Infrastructure scheme and Central Financial Assistance for CBG plants under the National Bioenergy Programme.

According to the government, these initiatives have helped enable the commissioning of more than 200 CBG plants and have established production, offtake and organic manure value chains.

GOBARdhan is now intended to take this sector from that foundation to a much larger national scale.