Why India’s Green Fuel Push Is Falling Short

India Lags On Biogas, Hydrogen Targets Amid Supply Crunch

By Amritha Pillay

What?

An auto-component manufacturer is assessing possibilities to get gas produced from biomass.

A transformer supplier is thankful to have an order book of green transformers to execute, as those based on mineral oil have taken a hit.

Alternative fuels are back in focus, capturing both client interest and government policy attention.

Reliance Industries, in its latest annual report, said it aimed to build integrated compressed biogas (CBG) hubs capable of producing 1 million tonnes annually over the next five years.

For now, however, its operating capacity stands at just 270 tonnes per day across 35 plants. Adani Total Gas reported daily production of 7.5 tonnes.

The broader industry reflects a similar gap between ambition and execution.

India, as of January, had 132 CBG plants producing 920 tonnes per day.

Half of India’s crude and a quarter of its natural gas pass through the Strait of Hormuz.

The current blockade has forced Indian businesses to scout for alternative fuels, hoping this supply crunch will finally give cheaper, homegrown alternatives their time to shine.

Several viable paths exist — including ethanol, biogas, green hydrogen, syngas, and its more processed form, Dimethyl Ether (DME).

While the groundwork for each had been laid well before the US administration's geopolitical manoeuvres in West Asia, none besides ethanol has made significant progress.

Why? 

The alternative fuel sector holds immense promise, but it is severely bottlenecked by challenges, including a lack of scale, commercial unviability, and fragmented supply chains.

For compressed biogas and biofuels, the biggest hurdle is feedstock management. There is no reliable infrastructure connecting rural biomass suppliers with urban buyers, making raw materials scarce and expensive.  

“The progress on CBG so far has not been very inspiring for several reasons. Primarily, due to challenges in getting the right structure where the supplier and buyer of feedstock can connect. Further, there is a market and price for the gas produced, but the price remains an issue for the fertiliser products,” Gaurav Kumar Kedia, who serves as the Chairman of the Indian Biogas Association (IBA), told The Core. 

Alternatives such as green hydrogen and green ammonia are yet to prove themselves against the usual challenges of a new industry. 

Despite the record level of price discovery last September, industry experts back then had listed the cost of machinery and the necessity of transmission lines for green power (needed to make green hydrogen) as weak links that needed to be addressed. 

Coal gasification, despite several attempts, has been unable to see major investments, with some noting the need for better blending directive policies and development of proven technology. 

Over the last month, there has been an increased emphasis seen across alternatives because of the West Asia crisis, and some of this optimism is already being translated into policy announcements. 

Can it prepare India for a better energy future?

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$1.05 billion

That's the size of the fuel stabilisation fund India approved on Wednesday to help keep jet fuel prices in check for airlines hit by rising costs from the Iran war, according to Reuters. The government will provide interest-free advances to oil marketing companies to cover under-recoveries, the gap between market-linked jet fuel prices and the moderated rates charged to airlines.

Context: The fund comes as airlines worldwide face a sustained squeeze from rising fuel prices driven by the Iran war. When hostilities began, Air India suspended all services to the UAE, Saudi Arabia, Qatar and Israel, while IndiGo cancelled Middle East services and scrapped long-haul flights to London, Amsterdam and Manchester.

As costs continued to mount, the Federation of Indian Airlines, representing Air India, IndiGo and SpiceJet, had written to India's Civil Aviation Ministry, warning that the industry was under extreme stress and on the verge of closing down or stopping operations.

Catch Up Quick: Shares of IndiGo reversed course to trade up 1% following the announcement. The government said the measure will help protect and sustain domestic and international air connectivity. Globally, jet fuel can account for up to 40% of airline operating costs.

RBI Denies Gold Sale

India's central bank has dismissed reports of gold sales as "not correct," citing its latest Monthly Bulletin showing physical gold stocks unchanged at 880.52 metric tons through April.

In a press release on Wednesday, the Reserve Bank of India reaffirmed that the figure remains steady "as on date.”

Context: The denial follows a Bloomberg Economics estimate from June 2, stating that the RBI likely sold approximately $12 billion in gold reserves over two weeks through May 22, while purchasing $7.5 billion in foreign-currency assets. Data also showed the RBI now holds around 77% of its gold domestically, up from 66% in September.

Setup: Government data separately showed gold's share in India's foreign exchange reserves climbed to 16.7% by March 31, up from roughly 14% in late September, reflecting the metal's growing weight in India's reserve portfolio.

US Targets India Tariffs

The US Trade Representative's office has proposed an additional 12.5% tariff on Indian imports, citing India's failure to prohibit goods made with forced labour. The proposal, part of a Section 301 investigation, places India among 54 nations lacking such import prohibitions, while USTR Jamieson Greer warned of an "unlevel playing field" for American workers.

Catch Up Quick: The announcement came mid-way through three days of bilateral trade talks in New Delhi. India's commerce ministry clarified the tariffs were not final, noting public comments would be sought before any decision, with a hearing scheduled for July 7.

Trade analyst Ajay Srivastava said in a note on Wednesday that the finding could be challenged, since the probe concerned India's own import policies rather than its exports. He urged New Delhi to treat the Section 301 action separately from ongoing bilateral trade agreement negotiations.

Setting: The bigger challenge, however, lies within. The Core earlier reported how India's own protectionism is stifling export growth. Shallow FTAs, punitive input duties, and an outdated cotton-heavy textile structure have kept India's manufacturing export share stagnant at 2%, while Bangladesh's garment exports surged past $40 billion. Structural reform, not just diplomatic manoeuvring in Washington, is the real fix India needs.

Inflation Hits Plates

The cost of home-cooked vegetarian and non-vegetarian thalis increased 5% and 7% year-on-year, respectively, in May 2026, according to Crisil Intelligence's latest Roti Rice Rate report. Crisil attributed the rise primarily to higher tomato prices, which jumped 57% on-year, as well as increased LPG and vegetable oil costs linked to ongoing global supply disruptions.

Context: While lower onion, potato and pulse prices continued to provide some relief in May, sharp increases in tomato prices, LPG and edible oils more than offset those gains. Specifically, the West Asia conflict has disrupted energy and commodity supply chains, pushing up LPG and edible oil prices and adding fresh inflationary pressures even as domestic food supplies remain relatively stable. 

Setup: Crisil also noted that the cost of a non-vegetarian thali rose faster because broiler chicken prices increased an estimated 9% on-year amid heat-related supply disruptions.

Drone Orders Take Flight

India could place military drone orders worth more than $2 billion or Rs 19,000 crore, potentially marking the country's largest-ever drone procurement programme, according to a Reuters report. 

Catch Up Quick: The planned purchases come amid growing recognition of drones' battlefield importance following last year’s India-Pakistan tensions and lessons from conflicts in Ukraine and West Asia. Industry executives expect domestic manufacturers to receive a significant share of the contracts, reflecting New Delhi's push to strengthen indigenous defence production.

Pivot: The announcement comes as India's drone manufacturing ecosystem expands rapidly. As The Core previously reported, Indian MSMEs and drone startups are increasingly moving beyond supplying individual components and assembling drones to developing complete platforms and building domestic supply chains. The sector has attracted investment and policy support, although many manufacturers still rely on imported electronics, sensors and batteries from China.

Markets Speculate on Incentives for Foreign Portfolio Investors

On Episode 892 of The Core Report, financial journalist Govindraj Ethiraj talks to Rajani Sinha, Chief Economist at CareEdge Ratings. We also feature an excerpt from our Special Edition interview featuring Aoifinn Devitt, Managing Director - Global Wealth at Moneta.

• Markets speculate on incentives for foreign portfolio investors

• Tariff wars are back, should India give into pressure tactics?

• What the RBI is balancing as it takes a call on interest rates

• Why global investors are chasing AI stocks, a view from the other side