Blending Compressed Bio Gas With Fuel Gas Will Help City Gas Distributors Reduce Costs

The obligatory blending of compressed biogas with transport fuel CNG and domestic fuel PNG will help city gas distributors reduce costs in the long run.

The price of compressed biogas is cheaper at around Rs 53 per kg, excluding 5% GST, compared with Rs 76 per kg for CNG.

Blending CBG with CNG will reduce the cost proportionately and also help India reduce the import of LNG, which is around 50% of India's total requirement.

CGD companies like Mahanagar Gas Ltd., Indraprastha Gas Ltd., Adani Total Gas Ltd., and Torrent Gas Pvt., among others, faced serious volatility in LNG prices that spiked last year to over $40 per million metric British thermal units in the aftermath of the Russia-Ukraine war.

The distribution companies had to import up to 20% of their fuel supply requirement in FY23 since the government could not provide the committed volume from the administered price mechanism fields as it had to increase the share of priority lending to other sectors like power, fertiliser and steel.

The initial impact on the city gas distributors will be insignificant since FY25 is the year of voluntary participation. It will take another four years before the obligatory blending reaches 5% of the total CNG/PNG production before it impacts costs, said Kotak Securities' Sumit Pokharna.

Blending will definitely have significance as far as the achievement of a nation's sustainable development goals is concerned. But for it to have any meaningful impact on CGD firms' costs and finances, the blending should be at least 10-15% of the total fuel supplies, according to Pokharna, vice president at Kotak Securities Ltd.

However, it will definitely boost India's adoption of alternative biofuels such as CBG, he said.

India has been targeting improving the natural gas contribution to 15% of its total energy mix by 2030, and biogas is considered an important alternative to fossil fuel, given the large availability of agriculture residue and organic feedstock in the country.

There is also potential for an investment of $4.4 billion up to FY29 in setting up CBG plants in the country.

Last week, Reliance Industries Ltd. announced plans to set up 100 CBG plants in West Bengal that will use 5.5 million tonnes of agriculture waste and residue. It will also help farmers double their income by growing energy plantations.