Policy Update
Sakshi
Background:
In October 2018, the Swachhata Hi Seva fortnight saw the launch of the Sustainable Alternative Towards Affordable Transportation (SATAT) Scheme, intending to widen the use of a cleaner and cheaper alternative for automotive fuel, namely, Biogas. Sh. Dharmendra Pradhan, the then Union Minister of Petroleum and Natural Gas , inaugurated this scheme with the intention of boosting distribution of compressed biogas in the market to regulate the prices of a potent biofuel for the transport sector, agricultural industry, and entrepreneurial ventures.
Rooted in upholding the four facets of the Indian energy goals of access, sustainability, efficiency and security, the SATAT scheme planned to establish 5000 Compressed Biogas (CBG) plants in India by 2023 and effectively reduce India’s reliance on imported Compressed Natural Gas and crude oil.
The Objectives of the Scheme:
The multi-pronged objectives of the scheme as detailed by the Ministry of Petroleum and Natural Gas are as follows:
- Provide economical alternatives to crude oil and aid the development of vehicle-users, farmers, and entrepreneurs.
- Consequently, enhance farmer’s income, entrepreneurial spirit, and employment.
- Reduce urban air pollution caused by stubble burning and vehicular carbon emission.
- Repurpose the ‘Fermented Organic Manure’ produced in biogas plants for organic farming.
- Transform municipal waste management
- Reduce India’s dependence on crude oil imports, uplift domestic production, and move towards energy self-sufficiency.
- Make advancements in achieving India’s energy goals by prioritising renewable and clean fuel.
The targets set during the commencement of the scheme include the setting up of 5000 CBG plants nationwide, producing 15 million tonnes of CBG by 2023 and 50 million tonnes of fermented organic manure per annum.
Functioning:
Biogas, the fuel being promoted as part of India’s energy goals, comes from municipal solid waste, agricultural or cattle remains, and residue or sludge from treatment plants. In order to harness biogas as a renewable energy, it has to be treated, purified, and compressed. This requires special facilities in the form of CBG plants.
To set up these plants nationwide, the scheme has collaborated with Oil Marketing Companies (OMCs) that are Public Sector Undertakings (PSUs) like Indian Oil Company, Bharat Petroleum Company, and Hindustan Petroleum Corporation Ltd. to invite investments from independent entrepreneurs. To fund a production plant, the scheme calls for Expressions of Interest from entrepreneurs. The established plants would be able to transport the CBG through pipelines to OMCs, who will further take up the role of dispatch along existing networks of CNG stations.
Funding Structure:
Moreover, The Ministry of New and Renewable Energy has pledged central financial assistance worth ₹ 4 crore for an output of 4800 kg of CBG and 12 cubic metres of biogas. The maximum allocation on a project is that of ₹ 10 crores. Those seeking to take out loans for investment in CBG at any level, will receive quick financing as biogas has been named a ‘priority sector.’ The Reserve Bank of India, along with other financial institutions have developed specific policies for biogas related lending.
Other governmental apparatus deployed for the marketing of CBG includes impetus from the Swachh Bharat Mission-Gramin funded GOBAR-DHAN scheme, which aims to use cattle dung to create CBG. Inversely, the manure from CBG plant by-product will be listed by the Ministry of Agriculture as a fertiliser such that it can be marketed across India. Lastly, agricultural states like Punjab, Uttar Pradesh and Haryana have also initiated state-level committees for the implementation of the SATAT scheme.
Performance
As of August 2024, 72 CBG plants have been set up and 2212 potentially investing entrepreneurs have been sent Letters of Intent for setting up more such plants. The capacity of each plant is about 272 tonnes per day and the plants have produced 22097 tonnes of CBG. Uttar Pradesh accounts for almost 24% of total CBG production in India and has the most plants established. Assistance to CBG plants has been extended to 31st March, 2026 as part of Phase-I of the National Bioenergy Programme. Additional 20% aid is also being provided to special category states (NE Region, Sikkim, Himachal Pradesh and Uttarakhand, Jammu & Kashmir, Ladakh, Lakshadweep, Andaman & Nicobar Islands) under the Waste to Energy Programme.
Impact
With an aim of increasing the use of natural gas in India from 6.7% to 15% by 2030, the domestically produced CBG is an important alternative to crude oil. India, as a developing country also has access to high levels of organic waste to be used as feedstock for CBG plants. However, despite funding incentives and assistance, the production of CBG remains redundant as it is essentially unmarketable without restructuring and dismantling the dependence on crude oil.
For appropriate utilisation of CBG and greater investments in CBG production, a market demand has to be created. Some initiatives have been introduced to that effect. For instance, in November 2023, the CBG blending obligation (CBO) was introduced. Blending CBG to CNG for Transport and PNG for domestic use is to be put into practice to drive up CBG adoption. CBO will remain voluntary for FY 2024-25 but will be mandatory from 2025 onwards, with the blending percentage to be successively increased. More central financial assistance will also be promoted. However, the project requires scaled growth and optimisation. Plants will remain underutilised and stagnant if other areas of CBG use are not created.
Additionally, stakeholders beyond entrepreneurs need to be engaged in various production processes for efficient use of existing CBG and CBG by-products. Farmers, urban solid-waste management bodies and transport sector representatives could benefit from understanding and contributing to CBG production in India.
Emerging Issues
- Limited CBG Marketing: Due to a lack of demand for CBG in the energy market, several problems have begun to emerge. Oil Marketing Companies that receive CBG from plants set up by entrepreneurs only market the fuel based on market needs, leaving plants with excess, unused CBG. As they are unable to offload all the CBG produced, investors not only incur a loss, but also have to dispose CBG and its byproducts. Subsequently, many plants have begun to produce below their capacity. This has disincentivised other investors from stepping into this industry. For a scheme that relies on expressions of interest from entrepreneurs, a more lucrative deal has to be offered.
- Limited Organic Manure Marketing: Farmers, who were also supposed to be inducted into organic farming are unaware of the potential of bioslurry or the fermented organic manure produced as a by-product of CBG plants. There is a high reliance on conventional fertilisers and a lack of knowledge about the use of bioslurry in farming. The unused manure is proving to be a disposal challenge instead of an agricultural aid.
- Lack of Financial Support: While central banks and ministries have pledged support to CBG projects, other financial institutions show hesitation to lend for CBG projects. The interest rates are extremely high due to the risks involved in the industry and the low return on investments. CBG, thereby, becomes more inaccessible
- Lack of Strategic Auxiliary Infrastructure: CBG transportation relies on CNG cascades or pipelines for dissemination. However, most of these pipelines are located away from these plants. The transportation cost is high and production becomes inefficient. The transport of feedstock to the plants is also a challenge. Plants need to be strategically located. Storage and processing are also currently expensive.
- Lack of Skilled Manpower: As a new and emerging industry, there are few technically skilled workers for managing plant operations and optimising production.
More central financial assistance will also be promoted. However, the project requires scaled growth and optimisation. Plants will remain underutilised and stagnant if other areas of CBG use are not created.
Additionally, stakeholders beyond entrepreneurs need to be engaged in various production processes for efficient use of existing CBG and CBG by-products. Farmers, urban solid-waste management bodies and transport sector representatives could benefit from understanding and contributing to CBG production in India.
Way forward
The SATAT scheme is attempting to harness a dynamic fuel for a more sustainable, affordable, and clean energy sphere. The first steps for the growth of CBG production are a crucial material manifestation of India’s energy goals. The success of the scheme now depends on the development of appropriate infrastructure, demand creation, engagement of the private sector and expansion of stakeholders by spreading knowledge and incentivisation. The constant monitoring and optimisation of CBG plants, made dialogic to market demand, is likely to produce substantial changes in India’s energy portfolio.
References
- Home. Satat. (n.d.). https://satat.co.in/satat/#/
- Production of CBG. Press Information Bureau. (n.d.). https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1943293
- Satat scheme. Press Information Bureau. (n.d.). https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1947505
- Satat: HPCL Satat Initiative. SATAT | HPCL SATAT Initiative. (n.d.). https://www.hindustanpetroleum.com/pages/satat
- Targets under Satat scheme. Press Information Bureau. (n.d.-c). https://pib.gov.in/PressReleasePage.aspx?PRID=1881749
- Uttar Pradesh leads the nation in compressed biogas potential, but challenges persist: Say experts at CSE-UPNEDA Joint Symposium. Centre for Science and Environment. (n.d.). https://www.cseindia.org/uttar-pradesh-leads-the-nation-in-compressed-biogas-potential-but-challenges-persist-say-experts-at-cse-upneda-joint-symposium-12244#:~:text=And%20Uttar%20Pradesh%20%E2%80%93%20especially%20its,Delhi%2Dbased%20think%20tank%20Centre
About the Contributor: Sakshi is a research intern at IMPRI. She completed her B.A. in History from St. Stephen’s College and is looking to enter the field of public policy.
Acknowledgments: The author would like to thank Ishita Deb, Dhruv Tapadia and Aasthaba Jadeja for reviewing their article.
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