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According to SK Jha, Executive Director & Head of City Gas Distribution at Indian Oil Corporation, during a panel discussion at India Energy Week, the government plans on enacting fiscal incentives for City Gas Distribution (CGD) entities that connect with Compressed Biogas (CBG) plants, in an effort to bolster India's domestic gas supply.
In an effort to strengthen the domestic gas infrastructure, these incentives aim to encourage mutual collaboration between CGD networks and CBG producers. "It will not be incumbent on the CBG plant owners to connect to the CGD network; rather, it will be a mutual decision, significantly benefiting the domestic gas requirement," Jha explained, who is also a director on the Board of Indian Oil Adani Gas Private Limited (IOAGPL).
The initiative comes at a crucial time as India grapples with the challenges of meeting its escalating energy demands while transitioning to cleaner fuel options. The CGD network, a key component of India's energy sector, covers nearly 300 geographical areas and is a major supplier of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG).
"CGD entities, which primarily cater to the Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) markets, report that 60 to 70% of their sales are derived from the domestic sector. Despite this growth, the blend of up to 40% natural gas in their supply has impacted their financial bottom lines due to the limited domestic gas production and the high dependency on imports," Jha said.
The government's proactive stance, including the regular quarterly reviews of the CGD sector and the introduction of policy measures in the recent budget speech by Finance Minister Nirmala Sitharaman, underscores its commitment to energy sustainability. The finance minister's emphasis on CBG blending and wind energy promotion through viability gap funding (VGF) for up to one gigawatt-hour of wind power projects highlights the multifaceted strategy to bolster India's energy reserves.
Launched in 2017 under the 'SATAT' scheme, the CBG program aims to complement the CGD network by supplying additional domestic gas, thereby aiding in the achievement of the government's ambitious target of 5% CBG blending by 2028-29. Despite initial hurdles such as taxation and regulatory challenges, the forthcoming fiscal incentives are expected to pave the way for a seamless integration of CBG into the national gas grid.
This development is poised to mark a significant milestone in India's journey towards energy independence and sustainability, offering a viable solution to the pressing challenges of domestic gas supply while fostering the growth of the CGD and CBG sectors. The government has intended to set up 5,000 CBG plants for production of 15 million metric tonne of CBG per annum by 2023-24 under the SATAT scheme. However, the country has only been able to set up around 55 CBG plants so far.
As per the official data, the active number of Letter of Intent presently is 2,176 against the total number of 4,100 LoIs issued when the scheme was announced. Additionally, to be able to realize the target of 5,000 CBG plants at least by 2030, will require an investment of Rs 1.75 trillion, 3-4% of which will be attributed to the foreign direct investment, according to industry estimates.
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