Biogas could be LPG hedge in India's dairy belt

If all the 40 million cattle-rearing households were to shift to biogas, the displacement potential is up to ~4 million tonnes of LPG every year. Even if 10 million of them make this transition, it could save up to Rs 2,000 crore annually

The Pradhan Mantri Ujjwala Yojana (PMUY) gave India near-universal LPG access, but the current energy supply crisis risks pushing households back to kerosene and biomass.

The Rs 993 hike in 19 kg commercial LPG cylinder prices this month shows how quickly global volatility can reach LPG users. It is worth remembering that while 60% of India's LPG, which runs 33 crore kitchens, is directly imported. The remaining 40% is produced domestically, but it depends on crude oil, 89% of which India imports. About 95% of our primary cooking fuel is, thus, exposed to global markets. The government stabilises prices by absorbing these shocks. In FY2026, household LPG sales of 29 million tonnes resulted in Rs 60,000 crore in under-recoveries. The question now is how to build resilience into a kitchen economy exposed to remote geopolitical shocks. That is where biogas deserves more attention.

As the world's largest milk producer, India has cattle dung feedstock in abundance across dairy-dense corridors of Gujarat, Punjab, Rajasthan, Maharashtra, Tamil Nadu, and Uttar Pradesh. A recent study by the Council on Energy, Environment and Water estimates that India is home to ~40 million cattle-rearing households with three or more animals. At standard conversion parameters, a household with three cattle can generate enough biogas to displace roughly 100 kg of LPG annually — about seven cylinders — after accounting for seasonal variation. This is sufficient to meet the annual cooking energy needs of a typical rural household. Operating a pre-fabricated household-scale biogas plant requires a daily feedstock of cattle dung mixed with water, which can be prepared in under an hour. If all these households were to shift to biogas, the displacement potential is up to ~4 million tonnes of LPG every year. Even if a fourth of these households make this transition, it could save up to Rs 2,000 crore annually, and that’s a meaningful dent in the import bill.

Despite such potential, fewer than 1% of rural households use it as a primary cooking fuel. Biogas was first identified as an alternative fuel during the 1970s oil crisis. A key reason for low adoption was legacy concerns about poor construction quality and maintenance of traditional brick-and-mortar systems. LPG was also prioritised over other clean cooking technologies as cylinders are easier to distribute and have a relatively lower upfront cost. Modern innovations in prefabricated systems now address many of these issues, offering easier installation and reliable performance. Recent field evaluations also report high user satisfaction levels with these technologies. The main barrier today is the upfront capital cost. Bridging this gap requires reimagining how subsidies are designed and public funds are deployed.

First, the LPG subsidy for eligible households should be redirected to partially cover the capital cost of biogas systems. For a typical PMUY household in FY2026, the State provided Rs 300 per cylinder as a direct subsidy and absorbed another Rs 295 as under-recovery, amounting to Rs ~600 per refill. This spending stabilises prices and prevents backsliding to polluting fuels like firewood, but continues to underwrite an imported fuel with supply risks. The import bill also grows every time a PMUY household moves toward LPG cooking. The same Rs 600 per cylinder for seven cylinders a year comes to Rs 21,000 per household over five years, enough to cover 50% of the cost of a small, prefabricated biogas unit that will run for up to 20 years.

Second, build a standardised financing architecture for viability gap funding informed by models that have worked on the ground. For example, in a programme implemented across dairy-intensive regions, households pay 10% upfront, programme support covers 50%, and the remaining 40% is recovered over time through deductions from monthly milk payments, or, in some cases, through slurry sold back to the co-operative. These models demonstrate that adoption is viable when financing is structured appropriately.

Finally, India must look beyond LPG and electric cooking, given its energy landscape. Biogas has the potential to be a mainstream clean cooking alternative rather than a niche solution. It also brings co-benefits around methane mitigation and organic manure for soil enrichment. It is a mature, proven technology held back by financing and deployment design. What has changed is the cost of inaction.

In an uncertain energy landscape, biogas can emerge as a permanent Made-in-India asset, a truly atmanirbhar cooking fuel pipeline for millions of households in India’s dairy clusters.

(Abhishek Kar is a Fellow at the Council on Energy, Environment and Water. Bigsna Gill is Programme Director, Social Alpha Innovation Foundation)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.