Finance Minister Nirmala Sitharaman during her Union Budget 2026 announcements, declared that when calculating central excise duty on biogas-blended CNG, the entire biogas value will now be excluded, making blended fuel cheaper without the tax drag on its green component.
Biogas, made from farm waste like crop stalks and garbage, mixes with regular CNG to create a low-carbon fuel that is slowly gaining acceptance in automobile. This full exclusions builds on partial relief from 2023, where only the goods and services tax paid on biogas was deducted from excise—not the full amount.
Central excise duty on standard CNG currently stands at 14% of its value, roughly Rs 14-15 per kilogram, adding significantly to retail prices paid by vehicle owners. Under prior rules, blended CNG still faced duty on the biogas part after offsetting its GST (typically 5%), creating a net tax overlap of about 9% on that portion. The new policy wipes out duty entirely on biogas value, potentially trimming CNG prices by a few rupees per kg.
CNG vehicles, including thousands of commercial trucks, cars and three-wheelers, stand to gain from lower operating costs, encouraging fleet operators to switch from pricier diesel amid strict emission norms. This aligns with India's push for green gas blending, reducing oil import bills and cutting urban pollution from exhausts.