MNRE aims to clear backlog of ₹200 cr subsidy for CBG plants post monsoon

Business Standard

3 days ago

The Ministry of New and Renewable Energy (MNRE) is working to clear a little over ₹200 crore subsidy backlog for waste to energy projects under the National Bioenergy Programme (NBP). Officials indicated this would be taken up after post-monsoon inspections by biomass pellet developers.
Delays have stemmed from stringent norms, eased last June, and off-take challenges for larger plants.
'There was an issue on our side in releasing the subsidy due to one or two stringent clauses in the earlier guidelines, particularly the requirement for a plant to demonstrate 80 per cent efficiency over three consecutive months. This proved impractical, as without assured off-take, plants could not ramp up to that level and often operated at only 60–70 per cent capacity,' an official said.
MNRE argued that the focus should be on whether the plant has the capacity to run at the required efficiency, which can be demonstrated even in a single day, rather than insisting on sustained performance over three months.
These guidelines were amended on June 27 to focus on demonstrating capacity rather than sustained output, allowing subsidy release based on evidence of investment and functional capability.
'With this change, subsidy disbursement process has resumed, and the backlog of roughly Rs 200 crore is expected to clear within a few months,' the official informed.
'In the last meeting with developers, especially in the pallet bracket side, they pointed out that during the monsoon it is difficult for them to run at peak capacity. So, our inspections would spill over to post monsoon and then it would take a month or so to clear,' the official explained.
Queries sent to the MNRE remained unanswered at press time.
The backlog primarily relates to projects sanctioned over the last three years, as it typically takes 1-1.5 years for a plant to be commissioned. Even after commissioning, the plant doesn't operate at peak capacity immediately—it usually takes 3-6 months for stabilization due to the fermentation process.
'So, while sanctions began three years ago, most plants were commissioned only in the last year or so, which explains the delay in reaching full capacity and claiming subsidies,' the second official said.
This is a back-end subsidy, where the investor has already installed the plant and incurred the full expenditure—either through loan or equity—and the government's role is only to reimburse a portion afterward. Therefore, once there is clear evidence that the investment has been made and the plant is operational, we should facilitate the release of the subsidy without unnecessary delays.
Central financial assistance (CFA) for biogas plants ranges from ₹9,800 to ₹70,400 for small plants (1–25 m³/day), and ₹35,000–₹45,000 per kW for power or ₹17,500–₹22,500 per kW equivalent for thermal use (25–2500 m³/day). SC/ST, north east, islands, and gaushalas get 20 per cent higher CFA.
The NBP, with a total outlay of ₹1,715 crore for FY22–FY26, is being implemented in two phases, with Phase-I allocated ₹858 crore.
Smaller CBG (compressed bio gas) plants, up to 10–12 tonnes per day (TPD), have largely resolved earlier off-take issues and are now operating smoothly, while a few large-sized plants still struggle to fully secure off-take agreements.
Additionally, the challenge of disposing of fermented organic manure (FOM), a by-product of CBG production, has been addressed through the Department of Fertilizers' Market Development Assistance (MDA) scheme, which offers ₹1.5 per kg for FOM, helping stabilize its disposal.
MNRE is trying to address CBG distribution bottlenecks—currently reliant on fuel stations—by enabling grid integration via trunk pipelines and a 1 per cent blending mandate in city gas networks, which will increase gradually each year.
Currently, Compressed Biogas (CBG) can only be sold for vehicular use through fuel stations operated by oil and gas marketing companies, as there is no direct infrastructure yet to inject it into the gas grid.
Until trunk lines are ready, CBG is transported via cascades to fuel stations, limiting off-take to what the oil marketing companies can sell. As the sector is still developing and CBG vehicles are limited, this constrains demand. However, demand is growing steadily, with a 37 per cent increase in CNG vehicle sales last year, and companies like Maruti and Ashok Leyland are investing in their own CBG projects, indicating that the demand side is beginning to stabilize.