There is a business in India where your three largest customers are legally required to buy your product — and they face quarterly financial penalties if they do not.
That business is a Compressed Biogas (CBG) plant operating under the SATAT scheme in 2026.
If you have been watching the CBG space and waiting for the right moment, this is it. Three policy changes in the past 12 months have fundamentally re-engineered the economics of the SATAT scheme — a Budget 2026 excise duty exemption that eliminates double taxation, a mandatory CBG blending obligation that transformed voluntary demand into legal obligation, and an upward revision in OMC procurement pricing. Together, they have created a window that serious investors should not ignore.
This guide covers everything you need to know — what SATAT is, what has changed in 2026, exactly how to register and get your Letter of Intent (LOI) from IOCL/BPCL/HPCL, how much you earn, and how to stack every available subsidy for maximum project viability.
What Is the SATAT Scheme — And Why Does It Matter?
SATAT — Sustainable Alternative Towards Affordable Transportation — was launched on October 1, 2018, with the aim of establishing an ecosystem for the production of Compressed Biogas from various waste and biomass sources and for promoting its use along with natural gas, under the Ministry of Petroleum and Natural Gas. [1]
The model is elegant in its simplicity. Under the SATAT scheme, entrepreneurs set up a CBG plant, produce and supply CBG to OMCs for sale as industrial and automotive fuels. The PSU OMCs — IOCL, BPCL, and HPCL — invite Expression of Interest from potential entrepreneurs to set up the plants. [2]
CBG has over 95% pure methane content. It is similar to commercially available natural gas in its energy potential and composition. [2] This means every kilogram of CBG you produce can replace an equivalent unit of imported compressed natural gas — directly serving India’s energy security goals while generating commercial returns for plant operators.
CBG is a biofuel produced using feedstock such as paddy straw, municipal solid waste, press mud from the sugar industry, and cattle dung or poultry litter. [1] Virtually any organic waste stream becomes a revenue-generating input for your plant.
The scheme’s vision is ambitious. The SATAT scheme plans to set up 5,000 CBG plants across the country in a phased manner. These plants are expected to produce 15 million tonnes of CBG every year — about 40% of the current CNG consumption of 44 million tonnes per annum. The scheme is expected to generate direct employment for about 75,000 people and produce around 50 million tonnes of bio-manure for crops at an investment of approximately ₹1.7 lakh crore. [2]
What Has Changed in 2026 — The Three Game-Changers
For most of its early history, SATAT moved slowly. As of July 2025, 108 CBG plants had been commissioned, with 1,094 active Letters of Intent issued [3] — far short of the 5,000-plant target. That underperformance had a clear set of causes: feedstock logistics were hard to manage, financing was uncertain, and the demand side was voluntary rather than mandatory.
All three of those problems have been directly addressed in 2025-26.
Game-Changer 1 — The CBG Blending Obligation (CBO) Is Now Mandatory
The National Biofuels Coordination Committee has approved the introduction of a phase-wise mandatory blending of CBG in CNG (Transport) and PNG (Domestic) segments of the CGD sector. The mandatory blending obligation starts from FY 2025-26. The CBO will be 1%, 3%, and 4% of total CNG/PNG consumption for FY 2025-26, 2026-27, and 2027-28 respectively. From 2028-29 onwards, the CBO will be 5%. [1]
This is the single most important policy shift for CBG investors. City Gas Distribution companies — the entities that supply CNG to vehicles and PNG to homes — are now legally obligated to blend CBG into their supply. They cannot opt out. When you are dealing with India’s natural gas consumption of around 165 million metric standard cubic meters per day, even 1% translates to massive volumes. As that obligation scales to 5% by 2028-29, OMC procurement orders will multiply correspondingly.
Game-Changer 2 — Budget 2026-27 Excise Duty Exemption
In a major boost to the sector, Budget 2026-27 has completely exempted central excise duty on the biogas/CBG portion of blended CNG. This resolves the long-standing double-taxation issue, making CBG highly profitable and attractive to City Gas Distribution companies. [12] Previously, the excise structure made CGD companies reluctant to pay full market rates for CBG. That barrier is now removed.
Game-Changer 3 — CBG Pricing Revised Upward
The latest pricing revision as of May 15, 2025 has linked the CBG procurement price to 85% of the average CNG retail price across GAIL-associated CGD companies — increased from 80%. Transportation support has also been introduced: ₹1.5 per kg for distances between 50 and 75 km, and ₹2.5 per kg for distances beyond 75 km, addressing a long-standing demand from producers. [4]
How Much Will You Earn — CBG Revenue Explained
Before you commit capital, you need to understand your revenue model clearly. A CBG plant is not a single-product business — it is a multi-stream income generator.
Stream 1 — OMC Procurement Price for CBG
As of 2025, the procurement price from OMCs generally ranges between ₹62 to ₹72 per kg. These rates are designed to ensure that producers can cover their CapEx and OpEx and generate a return on investment. The procurement price is determined by factors like calorific value, which ranges between 40–48 MJ/kg. OMCs generally offer a 5-year purchase agreement with an option to extend. [5]
OMCs execute a commercial agreement of 15 years with the CBG plant owner, to be extended on mutual consent. [7] That is 15 years of contracted revenue from buyers who have a legal obligation to purchase your product.
Stream 2 — Fermented Organic Manure (FOM)
Every CBG plant produces large volumes of digestate as a by-product of the anaerobic digestion process. To ensure promotion of organic farming in India and enhance revenue from sale of by-products of CBG plants such as Fermented Organic Manure and Liquified Fermented Organic Manure, the Ministry of Agriculture has included them in the Fertilizer Control Order, facilitating their marketing throughout India. The Government of India has also introduced the Market Development Assistance scheme in the form of ₹1,500 per MT to support marketing of organic fertilizers produced as by-products from biogas/CBG plants set up under the GOBARdhan initiative. [1]
Gross margins of CBG projects significantly improve if the by-product fermented organic manure is being marketed and carbon credits are availed. [6]
Stream 3 — Carbon Credits
Apart from marketing CBG, entrepreneurs can market other by-products like bio-manure and carbon dioxide, thus enhancing the return on their investments. [8] CBG projects qualify for carbon credit registration under Voluntary Carbon Market standards like VCS or Gold Standard. The voluntary carbon market has strong demand right now as corporations worldwide chase net-zero commitments. CBG projects generate high-quality carbon credits because they represent genuine emission reductions with clear additionality. Early registration positions your project for credit issuance as soon as operations begin — the verification process takes 12–18 months from documentation to first credit issuance.
Smart operators treat their CBG plant as a three-revenue-stream business — CBG sales to OMCs, FOM sales to farmers, and carbon credit monetization — rather than just a gas seller.
Step-by-Step: How to Register Under SATAT and Get Your LOI
This is the section most investors need most. Here is the complete, sequential process.
Step 1 — Prepare Your Detailed Project Report (DPR)
The DPR is the foundation of everything — your LOI application, bank financing, and MNRE subsidy all require it. It must cover your feedstock source and guaranteed volume, plant capacity in tonnes per day (minimum 2 TPD for commercial viability), production projections, capital cost breakdown, revenue model with by-product income, land details, and environmental compliance plan.
Step 2 — Register on the GOBARdhan Portal
CBG plant developers need to register their plant on the GOBARdhan portal (gobardhan.co.in) to obtain a registration number. This registration is essential to avail benefits and support from various ministries. [4] This is the mandatory first step before any LOI or subsidy application can proceed.
Step 3 — Apply for LOI from Your Chosen OMC
The Expression of Interest is available on the website of IndianOil (iocletenders.nic.in) and other OMCs. [1] For HPCL, applications go through the procurement section at hindustanpetroleum.com, and BPCL has its equivalent portal.
Your application must include: registered entity documents, land title deed or lease agreement, feedstock availability proof or supply agreement, your DPR or project summary, financial statements or bank guarantee, and environmental clearance application. Processing usually takes 60–90 days with complete documentation.
Step 4 — Understand What the LOI Unlocks
A key pre-condition for project developers to avail financing under SATAT is to have been awarded a Letter of Intent by OMCs like IOCL, BPCL, HPCL, and GAIL for the production and supply of CBG. This LOI serves as an offtake guarantee, providing crucial bankability to the projects. [4]
In practice, the LOI is what converts your project from a business plan into a financeable asset. No LOI — no bank loan. With an LOI, you can approach SBI, IREDA, NABARD, and other PSU lenders with a credible revenue guarantee.
Step 5 — Negotiate and Sign the 15-Year Commercial Agreement
After LOI approval, you negotiate the specifics: CBG quantity to be supplied, pricing formula (linked to 85% of CNG retail price), delivery point, cascade logistics, quality parameters (methane purity standards), and payment cycle. The agreement runs for 15 years and is extendable.
Step 6 — Obtain Regulatory Clearances (Run in Parallel)
State Pollution Control Boards evaluate your environmental impact — water usage, effluent treatment, and air emissions. CBG plants generally get streamlined clearances since you are processing waste into clean fuel. However, comprehensive EIA reports are mandatory for plants over 10 TPD. You need 1–2 acres minimum for small plants, up to 8–10 acres for large facilities. Get no-objection certificates from local authorities, gram panchayats, and revenue departments before starting construction.
Additional clearances include a Factory License under the Factories Act, Fire NOC, and PESO (Petroleum and Explosives Safety Organisation) approval for CBG storage and dispensing infrastructure.
The Full Subsidy Stack — How to Claim Up to ₹10 Crore Per Project
Stacking every available subsidy is what separates a good CBG investment from an exceptional one.
MNRE Central Financial Assistance (CFA) — The Primary Subsidy
The Ministry of New and Renewable Energy notified Central Financial Assistance of ₹4 crore per 4,800 kg of CBG per day generated from 12,000 cubic metres of biogas per day, with a maximum of ₹10 crore per project. [1] For projects in the North-East, hilly states, or those set up by Gaushalas using cattle dung, a special category bonus of 20% higher CFA is available. [12]
Biomass Aggregation Machinery (BAM) Subsidy
The BAM scheme was launched with an outlay of ₹5.64 billion for the period 2023-24 to 2026-27, targeting one of the biggest challenges in the CBG value chain — feedstock availability. CBG plants with a minimum capacity of 2 TPD that use over 50% biomass as feedstock are eligible to receive CFA of ₹90 lakh. [3] Applications are submitted quarterly through bam.eil.co.in — Engineers India Limited is the designated project management agency.
Direct Pipeline Infrastructure (DPI) Scheme
The Direct Pipeline Infrastructure scheme provides central financial assistance of up to ₹28.75 crore per project for a maximum 75 km pipeline. [3] For CBG plants located near CGD networks, this scheme effectively eliminates your gas transmission infrastructure cost — a massive capital saving and a route to higher net realisations through direct CGD injection.
RBI Priority Sector Lending
The Reserve Bank of India categorised CBG plants under priority sector for lending and the State Bank of India has already developed a specific loan product to finance CBG projects. Other banks are also adopting similar policies. [1] RBI has also notified that loans to start-ups up to ₹50 crore for setting up CBG plants are included under priority sector lending. [9]
Agriculture Infrastructure Fund (AIF) Interest Subvention
Under AIF, interest subvention at 3% per year for a period of 7 years on bank term loans up to ₹2 crore is available for CBG projects. [7] This directly reduces your cost of capital for the initial years when your plant is ramping up to full production.
State-Level Incentives
Individual states have also come forward to promote CBG initiatives. Haryana, Punjab, Uttar Pradesh, and several other states have formed State Level Committees for implementation and monitoring of the SATAT scheme. [1] Many of these states offer additional capital subsidies, stamp duty exemptions, and power tariff concessions on top of central scheme benefits.
The Gap Is Your Opportunity
Here is the counter-intuitive insight that serious investors need to understand: as of July 2025, only 108 CBG plants had been commissioned against the SATAT target of 5,000 plants. [3] That is not a cautionary statistic — it is the most compelling investment signal available.
Demand is now mandatory and growing. Supply is at approximately 2% of the target. The CBO will scale from 1% to 5% of India’s total CNG/PNG consumption by 2028-29 — representing enormous incremental procurement volumes from OMCs who have no choice but to buy CBG to meet their legal obligations. Every additional commissioned plant that enters the market in the next 2–3 years is entering an undersupplied market with guaranteed, price-linked buyers.
With approximately 47% of India’s natural gas currently imported, CBG offers a domestic, renewable alternative to compressed natural gas — reducing fossil fuel dependency. India generates vast quantities of agricultural waste, animal dung, municipal solid waste, and sugar industry by-products, ensuring a steady raw material supply. [10]
The investment case writes itself. Legally mandated demand. Abundant, low-cost feedstock. Government-backed pricing. Up to ₹10 crore in subsidies. 15-year revenue agreements with India’s largest public sector companies. And a market that is structurally undersupplied for the foreseeable future.
How Advance Biofuel Helps You Execute
Understanding the opportunity and executing it are two different challenges. A CBG plant involves biological, chemical, and mechanical systems that need to work in harmony from Day 1.
Advance Biofuel (Biotexus Energy Pvt. Ltd., Ahmedabad) has more than 12 years of experience designing and commissioning compressed biogas plants across India. Our turnkey delivery covers biogas digester engineering, biogas upgrading and CO₂ removal, compression systems, quality testing infrastructure, Fermented Organic Manure handling, Zero Liquid Discharge compliance, and full CPCB-compliant plant configuration. We also support clients through DPR preparation, MNRE subsidy documentation, and OMC LOI application — the three documents that determine whether your project gets financed and sanctioned.
We also have an in-depth blog covering the CBG blending mandate in detail — read it here: CBG Blending Mandate 2026: Why You Must Start Your Biogas Plant Now →
Conclusion: The Mandate Is in Place. The Buyers Are Ready. The Window Is Now.
SATAT in 2026 is a fundamentally different proposition from SATAT in 2018. The voluntary phase is over. The demand is mandatory. The pricing has been improved. The subsidy stack is deeper than it has ever been. And the CGD companies who must buy your CBG face regulatory penalties if they do not.
For entrepreneurs in agriculture, dairy, or waste management sectors, CBG plants convert waste into revenue while addressing India’s clean energy and environmental priorities. As feedstock aggregation improves and distribution infrastructure expands, CBG production becomes a commercially viable component of India’s renewable energy transition. [11]
The 108 commissioned plants against a 5,000-plant target is not a story of failure. It is a story of a market with enormous unmet supply — and a government that has just made it mandatory for that supply to be purchased once it exists.
Your window to enter with full subsidy access, early OMC contract terms, and low competition for feedstock supply is open right now — in 2026.
Ready to take the first step? Contact Advance Biofuel for a free consultation on your CBG plant project — from DPR to commissioning.
Frequently Asked Questions
What is the SATAT scheme and who manages it?
What is the current CBG purchase price from OMCs in 2026?
What is the Compressed Biogas Obligation and why does it matter?
How much subsidy can I get for a CBG plant under SATAT?
How long does it take to get an LOI from IOCL/BPCL/HPCL?
Can I earn from by-products beyond CBG sales?
Reference
[1] https://iocl.com/pages/satat-overview
[2] https://cleartax.in/s/satat-initiative
[3] https://reglobal.org/indian-cbg-sector-gains-momentum-but-challenges-remain/
[4] https://www.skillcouncils.com/tender-filling-details.php?tid=34
[5] https://www.biofics.co.in/blog/cbg-selling-price-in-india-omc-procurement-rates-state-wise-pricing-market-insights.html
[6] https://areas.org.in/pdf/CSE%E2%80%99s%20Report%20on%20Compressed%20Biogas%20Landscape%20in%20Uttar%20Pradesh.pdf
[7] https://kipfinancial.com/bio-cng-plant/
[8] https://www.hindustanpetroleum.com/pages/satat
[9] https://www.ireda.in/images/HTMLfiles/20_Compressed%20Biogas%20SATAT.pdf
[10] https://www.pmfias.com/compressed-biogas-sector/
[11] https://www.pelletrates.com/policies-and-schemes/news/cbg-plant-india-setup-guide-subsidies-process
[12] https://aimindia.in/satat-scheme/
