Context: Recently, the Ministry of Petroleum and Natural Gas has stated that the financing for Compressed Bio-Gas plants to be brought under Priority Sector Lending.
Key Points

• The Government is in the process of including Compressed Bio-Gas under Priority Sector Lending.
• Initiative will help in providing environment friendly gaseous fuel from natural sources and provide ease in the financing of CBG Plants.
• The Central Financial Assistance or Subsidy for setting up CBG plants has been extended to 2020-21 to promote new projects.
• Bio-manure, an important by-product of CBG Plants, is also in the process of being included in Fertilizer Control Order 1985.
• This will make it easier to market and provide an opportunity for organic farming across the country as the 5000 CBG Plants are expected to produce 50 MMT Bio-manure.

SATAT scheme

• The ‘SATAT’ (Sustainable Alternative Towards Affordable Transportation) scheme on CBG was launched in October 2018.
• It is aimed at promoting Compressed Bio-Gas (CBG) as an alternative, green transport fuel for efficient management of biomass and organic waste.
• The CBG produced under SATAT can be sold to automobiles as clean fuel, and to domestic, industrial and commercial consumers which are using LPG and other fuels.
• It envisages targeting production of 15 MMT of CBG from 5000 plants by 2023.
• Oil Marketing Companies have been offered long term pricing on CBG to make projects bankable and have agreed to execute long term agreements on CBG.

Significance

• Harnessing biofuels to generate alternative energy, including Compressed Biogas or CBG, ethanol, 2G ethanol, and biodiesel will help achieve our PM Modi’s vision of reducing import dependence of oil and ensuring sustainable energy future in the country.
• The Government of India has been promoting Biofuels including CBG to increase the green-energy mix, reduce import dependence, create employment especially in semi-urban & rural areas and reduce pollution.
• Usage of CBG shall assist in achieving climate change goals of India as per the Paris Agreement 2015.
• This shall also be in line with schemes of Government of India like Swachh Bharat, Atma Nirbhar Bharat and Make in India.

About Biogas 

• It is a renewable, as well as a clean, source of energy.
• The gas generated through bio-digestion is non-polluting and it reduces greenhouse emissions.
• After purification, it is compressed and called CBG, which has pure methane content of over 95%.
• Compressed Bio-Gas is exactly similar to the commercially available natural gas in its composition and energy potential.
• With calorific value (~52,000 KJ/kg) and other properties similar to CNG, Compressed Bio-Gas can be used as an alternative, renewable automotive fuel.

About Priority Sector Lending (PSL)

• Priority Sector Lending is an important role given by the Reserve Bank of India (RBI) to the Commercial Banks for providing a specified portion of the bank lending to few specific sectors.

Priority Sector includes the following categories: Agriculture, Micro, Small and Medium Enterprises(MSME), Export Credit, Education, Housing, Social Infrastructure and Renewable Energy
Others

• This is essentially meant for an all-round development of the economy as opposed to focusing only on the financial sector.

Targets and Sub-targets for banks under Priority Sector Lending (PSL)

• Domestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and foreign banks with 20 branches and above are included for PSL.
• 40% of the total net bank credit should go to priority sector advances.
• 10% of the priority sector advances or 10% of the total net bank credit, whichever is higher should go to weaker section.
• 18% of the total net bank credit should go to agricultural advances.
• Within the 18 target for agriculture, a target of 8 per cent of Adjusted Net Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers.
• 7.5 of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher should go to Micro enterprises.

Priority Sector Lending Certificates (PSLCs)

• Priority Sector Lending Certificates (PSLCs) are a mechanism to enable banks to achieve the priority sector lending target and sub-targets by purchase of these instruments in the event of shortfall.
• This also incentivizes surplus banks as it allows them to sell their excess achievement over targets thereby enhancing lending to the categories under priority sector.