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New Delhi: Finance Minister Nirmala Sitharaman, in her Union Budget 2026 announcements, declared that when calculating central excise duty on biogas blended CNG, the complete biogas value will now be excluded. This does make blended fuel cheaper without the tax drag on the green component. 

Biogas made from agricultural residue like crop waste and municipal refuse is blended with conventional CNG to form a cleaner, low-carbon fuel, which slowly is finding wider acceptance in the auto sector. In the newest move, this takes a step ahead from the limited relief announced in 2023, when only the GST paid on biogas was adjusted against excise duty, rather than providing a complete exemption.

Currently, standard CNG brings central excise duty of about 14 per cent, which amounts to close to Rs 14-15 per kg and highly influences pump prices. In the earlier framework, mixed  CNG continued to have excise on the biogas component even after adjusting the applicable 5 per cent GST, which made for an effective tax burden of close to 9 per cent on that portion. With the revised policy, excise duty on the biogas value has been completely removed, which might reduce CNG prices by a few rupees per kilogram.

The change is expected to bring benefits to a wide base of CNG users, which includes commercial fleets, passenger cars, and three-wheelers, as it reduces running costs. Lower fuel expenses might also encourage operators to shift away from costlier diesel options as the tightening emission norms follow. 

More broadly, the move supports India’s strategy to expand green gas mixing, reduce dependency on oil imports, and reduce pollution levels in urban areas.