Union Budget 2025 | IBA seeks blanket corporate tax holidays for compressed biogas production

New Delhi: Indian Biogas Association (IBA) has urged the finance ministry to create blanket corporate tax holidays for compressed biogas (CBG) production in the forthcoming General Budget to attract investment in the sector to promote this renewable energy source.

Earlier this month, in a letter to Finance Minister Nirmala Sitharaman, IBA said that this will act as an incentive for businesses, which are willing to invest in and scale up CBG production, contributing to cleaner energy generation.

"It is proposed that the government create blanket corporate tax holidays for CBG production. In particular, a complete tax waiver should be introduced for CBG producers, which provides tax relief in the initial years of operation," the industry body said.

The finance minister is slated to present the Budget in Parliament on February 1.

It pointed out that in FY2024-25, with around 100 functional commercial CBG plants in India at their full capacity utilisation, the total CBG sales were approximately Rs 1,200 crore.

This means that with a complete tax waiver, the government would lose an estimated Rs 100 crore in tax revenue, it noted.

This is a short-term loss, but it will help the renewable energy industry flourish in the long run. This move will help India meet its renewable energy goals, draw in private investment, and generate new employment, it suggested.

The tax breaks, in this case, will also enable CBG producers to offer their products at competitive prices, which in turn boost the adoption of CBG in India's energy mix, the industry body said.

Additionally, IBA suggested that it will promote the usage of agricultural residues like paddy straw and crop wastes in biogas production rather than their burning, thereby reducing pollution.

This change in policy will make a significant contribution to India's shift towards a greener energy standpoint, it added.

Noting that Haryana offers Rs 1,000 per acre to farmers who refrain from burning paddy to combat air pollution, the association said the country should be able to scale up and roll out this scheme gradually.

States with high agricultural residue, such as Punjab, Haryana, Uttar Pradesh, and Bihar, should be the first to implement the phased style strategy, and thereafter, it can be expanded to other parts of the country.

These policies will encourage agricultural waste collection and transport to biogas plants and lessen the indiscriminate burning of residues to help achieve clean energy growth, according to IBA.

To encourage biogas generation, this will also help farmers gain additional income, thus aiding the economy and supporting the target of reducing emissions, it noted.

To foster the growth of the biogas and compressed biogas (CBG) producers, IBA proposed to develop a framework that would allow biogas plant promoters to sell carbon credits on international and domestic platforms.

This would not only assist the Indian government in meeting its climate change targets, but it would also create new revenue streams for the producers, it explained.

It also suggested that legislation regarding renewable energy and green certificates' tokenisation and trading should be expedited to maximise clean energy projects' profitability.

It also proposed that the central government should consider implementing either cap and trade practices (buy green certificates if the allocated GHG quota is overshot) for carbon-intensive entities and also subsidise a portion of the proposed carbon premium price to at least kick-start the process.

In addition, the certification and trading process should be practically simple to ensure that the export possibilities of these business aspects can be fully exploited.

It is prudent that the government puts in place measures in the form of grants to cover the transportation of feedstock, such as crop residues like paddy straw, from the farms and local aggregators to the biogas plants.