Much hyped CBG yet to take off
Oil ministry officials and even private players like Reliance might be extolling the virtues of CBG as an alternative fuel, but not everyone is convinced.
Prashant Vashisht, senior VP at rating agency ICRA, told participants at a webinar on Indian Gas Utilities - Trends and Outlook on August 28 (2024) that the government's efforts to kick-start the SATAT (Sustainable Alternative Towards Affordable Transportation) programme have had "limited success." Launched on October 1 (2018), the government wanted 5000 plants generating 15m tonnes of CBG by 2023 under SATAT.
However, Vashisht believes only 50-60 plants are operating, even lower than the figure of 72 listed on SATAT's website. "And these tend to be in the hinterland" away from pipeline infrastructure, he added.
Vashisht said "non-remunerative (CBG) pricing" is one major challenge, and another is the short supply of raw materials. "Due to cropping patterns, raw material availability is seasonal," he stressed.
Moreover, land near cities is needed to generate CBG using urban organic waste, which is expensive. Another concern is safely disposing of the slurry or bio-fertiliser produced while CBG is generated.
"Farmers have to agree to use this bio-fertiliser, and this has had limited success," Vashisht said. He believes CBG projects can only succeed with government infrastructure grants and stresses that the 'Internal Rate of Return' is low at between 7% and 9%.
Amid the pessimism, Vashisht offered some hope. He said finance minister Nirmala Sitharaman's 2024-25 budget on July 23 (2024), where she announced steps to help pipeline connectivity for CBG projects, would boost SATAT.
In December 2023, the government mandated 1% blending of CBG with CNG and piped gas in 2025-26, rising to 3% in 2026-27, 4% in 2027-28 and 5% from 2028-29.