Biogas is indispensable for India’s climate goals, thus the government needs to foster the industry with GST concessions, the Indian Biogas Association requested the Union government.
The Indian Biogas Association (IBA) has urged the government to set up a ‘Biogas Fertiliser Fund’ with an initial provision of Rs 1.4 lakh crore for five years, as it has the potential to benefit five crore farmers and to reduce fossil fuel import bill.
For materializing the envisaged target of 5,000 plants under the SATAT (Sustainable Alternative Towards Affordable Transportation) scheme, creating a ‘Biogas-Fertilizer Fund’ with an initial provision/corpus of Rs 1.4 lakh crore for the first five years period should be a welcome step, IBA said in a statement.
“The government has constantly been talking about doubling the income of farmers by 2022. Close to 50 million farmers will be benefitted from the outlay. Biogas Fertilizer Fund will not only ensure that India imports less fossil fuel but also help farmers with bio-fertiliser,” A R Shukla, President, IBS said.
The IBA has also suggested defining a blending quota for statutory mixing of biomethane (CBG) in the city gas distribution network and natural gas pipeline.
A tentative blending quota of 5 per cent for the first five years, followed by progressively increasing it up to 10 per cent at the end of 10 years.
It also stated that the GST council recently notified the escalation of the GST slab from 5 per cent to 12 per cent for biogas plant-related equipment and their parts.
“This has put the biogas producers in a challenging situation. With the end product, biogas, and its other upgraded forms being slated at a 5 per cent GST slab, the GST rate escalation further aggravates the existing inverted tax structure concerns, which eventually cascades onto an increase in the overall project price,” it pointed out.
Instead, to foster the growth of this industry, which is indispensable for India’s climate goals, a uniform concessional rate of zero per cent uniform GST rate across the value chain of the industry needs to be implemented, it suggested.
The proposed outlay (to set up ‘Biogas Fertiliser Fund’) will support the industry by subsidising the additional cost incurred.
The IBA further explained that now for harnessing the total generation potential of 62.2 million tonnes per annum of Biogas/ Bio-CNG/ CBG/ RNG in India, a separate ‘Biogas-Fertilizer Fund’ is needed to be set-up, which will have an estimated financial corpus requirement of Rs 9.5 lakh crore.
Out of this, Rs 1 lakh crore should be allocated to the ‘Credit Guarantee scheme’/ongoing subsidy, which would allow FIs (financial institutions) to suitably manage risk and take required credit exposure in the industry.
The balance of Rs 8.5 lakh crore should be allocated towards ‘Generation-based Incentive (GBI)’ at the rate of Rs 20 per kg of produced Bio-CNG (as per BIS Standards), for the duration of plant life, typically considered to be 15 years, it stated.
With this investment in the industry, the government is expected to see significant return in the form of savings from reduced crude oil imports, chemical fertiliser subsidy reductions, and fulfilling the GHG (greenhouse gas) emission reduction objective set out in the Nationally Determined Contributions (NDCs).
The net value creation on the aforesaid accounts is expected to be Rs 1.5 lakh crore, resulting in a net surplus to the government’s coffers, it claimed.