Biogas and India’s energy mix: A long-term bet we are making

Here in Bengaluru, like much of the country, the past few weeks have been a reminder of how fragile import-dependent energy supply chains can be. The Bangalore Hotels Association warned of citywide kitchen shutdowns, PG accommodations changed their menus, and iconic restaurants publicly flagged uncertainty around supply. The commercial LPG shortage has been real and disruptive, even if it may prove temporary. 

But the disruption is not what this piece is about. It is what got us thinking more carefully about a space we have been watching for a while: biogas and its role in India’s long-term energy mix.

India’s dependence on imported gas is not limited to just LPG. Natural gas in its various forms like LPG for cooking, CNG for transport and Piped Natural Gas (PNG) for households is central to how India cooks, moves and runs its industries. Over 50% of it comes from imports. Biogas, produced from organic waste through anaerobic digestion, is a domestic renewable alternative to natural gas. 

Replacing just 20% of natural gas consumption with domestically produced biogas could save India approximately $29 billion in import bills between FY25 and FY30. The strategic case for biogas does not need a crisis to make itself. At Rainmatter, we have been backing companies building across this stack, and we want to lay out how we are thinking about it.

Biogas is not one thing

Biogas is not a single product. It exists on a spectrum, from raw gas produced in a small community digester and piped at low pressure directly to a kitchen, all the way to Compressed Bio Gas (CBG); purified and compressed for use as a transport fuel or grid blend. These are different products with different infrastructure, different economics, and different end uses. Conflating them leads to the wrong conclusions about where to invest and what problems biogas can actually solve.

LPG, for instance, is propane and butane, stored as a liquid under moderate pressure in cylinders. CBG is purified biomethane, essentially identical to CNG. The storage physics, cylinder specifications, and appliance requirements are entirely different. The government’s CBG Blending Obligation already accounts for this. It routes CBG into the CNG/PNG city gas distribution network, not into LPG cylinders, starting at 1% blending in FY26 and rising to 5% from FY29.

We think about biogas in three tiers.

Tier 1: Decentralised biogas – The immediate opportunity

This is the simplest form. Raw or lightly purified biogas is piped at low pressure from a local digester to nearby households or commercial kitchens. No compression. No OMC network. No industrial-scale plant. Burners work much like they do with piped natural gas. The supply chain stays hyperlocal. Nobody talks about this tier much, but it is the one that works right now.

In rural India, the feedstock is cattle dung and crop residue. India has over 5 million small-scale biogas digesters already. In Lambra Kangri village in Punjab’s Hoshiarpur district, a cooperative biogas plant has piped cooking gas to 44 homes for close to a decade. Households pay Rs. 200–300 per month; an LPG cylinder costs Rs. 700 or more. The slurry sells as a biofertilizer. The plant pays for itself.

Akshayakalpa does something different at the farm level. Every partner farm they set up gets a biogas plant built in. Cow dung and urine go into the digester. The methane that comes out runs farm operations and machinery for eight hours a day. The slurry goes back into the soil. No grid dependence, no fossil fuels. They have over 1,750 farmers in this network now, across Karnataka, Tamil Nadu, Andhra Pradesh, and Telangana. This is not a demo project—it is working infrastructure.

In urban India, the feedstock shifts to wet organic waste from bulk generators i.e. apartment complexes, hotels, restaurants, and markets and the model becomes one of decentralized waste-to-energy infrastructure within the city.

Hasiru Dala Innovations has built exactly this kind of model in Bengaluru. Through their JV with Carbon Masters, called Sustainable Impacts, they operate one of the few licensed wet waste processing facilities in the city authorized to handle organic waste from bulk generators. The plant produces biogas supplied directly to hotels, restaurants, and industries as a substitute for LPG and CNG.

Nexus Novus offers another example. Through a JV with Wisebin, a waste management company we have quietly been backing at Rainmatter, they operate India’s first integrated waste management facility associated with an airport, processing 20 to 30 tonnes of waste per day at Kempegowda International Airport in Bengaluru, with organic waste converted into renewable biogas and soon to be made commercially available as Bio CNG. Even large institutional waste generators can become productive nodes in a decentralized biogas network.

Together, these examples point to a model that does not wait for large infrastructure to arrive. It works with the waste streams that communities and cities already generate, reduces landfill dependence, and produces energy locally.

Tier 2: CBG at industrial scale – The medium-term infrastructure bet

Large-scale CBG plants, compressing purified biomethane to 250 bar and supplying it as transport fuel, industrial energy, or a renewable grid blend, represent the right medium-term bet for decarbonizing India’s gas economy. The policy architecture is in place: the SATAT scheme, the CBG blending obligation, and a growing City Gas Distribution (CGD) network that needs renewable content.

India’s current standing makes the opportunity stark. Europe has over 1,300 operational biomethane plants, with Germany alone running more than 200. China is targeting 20 billion cubic meters of bio-natural gas annually by 2030, scaling industrial production aggressively despite most of its existing biogas infrastructure still being small and rural. But India, with the world’s largest biomass and organic waste base, currently has around 100 large-scale CBG plants operational. SATAT launched in 2018 with a target of 5,000 plants. There is significant catching up to do.

The good news is that the private sector is moving. Reliance Industries has committed Rs 65,000 crore to build 500 CBG plants across Andhra Pradesh alone, using Napier grass cultivated on barren land as feedstock, with a national target of 2,000 plants. The first plant, under the Andhra Pradesh plan, broke ground at Kanigiri, Prakasam district, in April 2025. When India’s largest conglomerate makes a bet of this scale on a nascent sector, it signals something about where the puck is going.

The CBG production potential from domestic organic waste alone is estimated at 62 MMT annually, against current output that is less than 1% of that figure. Industry experts estimate that with successful policy implementation, India can realize 15-20% of its total CBG potential (equivalent to 8-12 million metric tonnes per annum) within the next 7-8 years.

The persistent bottleneck, however, is not capital or policy. It is feedstock. A CBG plant is only as good as the biomass reliably flowing into it, and building that supply chain—aggregating, storing, and consistently delivering agricultural residue and organic waste at the right quality and volume—is operationally hard and structurally underinvested. This is where we are glad to introduce Farmwatt, a company we have recently partnered with at Rainmatter and one we are excited to back. Farmwatt is building exactly this infrastructure, converting agricultural biowaste into bioenergy and solving the supply chain problem that sits upstream of every CBG plant in the country. As the blending mandate tightens and more plants come online, the companies building this foundation quietly in the background will prove to be as important as the plants themselves.

Tier 3: CGD expansion – The long-term structural answer

Piped natural gas through the city gas distribution network is the most resilient energy source for urban India. Continuous supply, no cylinder logistics, and structural insulation from import disruptions. The current crisis has made this case in real time. The petroleum ministry has actively urged commercial and domestic users in cities with PNG connectivity to switch off LPG and reduce strain on the supply chain. GAIL has held meetings with city gas distribution companies, advising them to expedite PNG connections wherever possible. This is not a long-term recommendation—it is the immediate crisis response. That says something about where the structural answer lies.

India’s CGD story on paper is exciting. After 12 bidding rounds, authorized geographical areas cover ~98% of the population. PNG connections have grown fourfold in a decade, from ~28 lakh in 2014 to ~1.6 crore today.

But 1.6 crore active PNG households against 33 crore LPG households invites a question: how quickly can physical infrastructure catch up to the authorizations? PNGRB launched National PNG Drive 2.0 in January 2026, a focused three-month campaign targeting 37 new geographical areas and 44 previously unconnected districts, under the banner of “One Nation, One Grid, One Tariff.” The long-term ambition is 12.64 crore PNG connections by 2034. Against that, India currently stands at 1.61 crore. The direction is right. The gap is large.

We are not backing a CGD company. But as the CGD grid expands, the CBG blending mandate means that biogas, including what companies like Farmwatt are helping produce, increasingly flows through that same infrastructure. The CGD network is the long-term architecture within which our Tier 1 and Tier 2 bets eventually operate at scale. The tiers connect.

Hasiru Dala Innovations, through Sustainable Impacts, has secured GAIL clearance for pipeline injection with laying already complete. This positions them to move from supplying commercial kitchens directly into feeding biomethane into the city gas grid. Waste-to-biogas, done well, does not stay neatly in one box.

Why we are betting on this space

India has the biomass, the policy framework, the precedents, and the entrepreneurial talent to build a serious biogas economy. The three tiers are not competing with each other. They are complementary, operating at different timescales and serving different parts of the energy system.

Decentralized biogas at the community and farm scale can work today. CBG at an industrial scale is the medium-term infrastructure bet, and the feedstock supply chain is the critical enabler. CGD expansion is the long-term architecture within which all of this eventually sits.

The disruption of the past few weeks, whatever its duration, has made the strategic case clearer than ever. India cannot afford to leave 62 MMT of domestic biogas potential sitting largely untapped while it imports over half its natural gas requirements. The window to build the foundational infrastructure for this transition is now, and we are glad to be backing founders doing exactly that.