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ImageUnion CBG (Compressed Bio Gas) scheme

Annexure -I

Nature of Facility

Union CBG (Compressed Bio Gas) under SATAT scheme


The scheme will be operational on pan India

Objectives of the Scheme

Ø To provide Sustainable Alternative Towards Affordable Transportation.( SATAT)

Ø For efficient municipal solid waste management and to tackle the problem of polluted urban air due to farm-stubble burning and carbon emissions.

Ø Usage of CBG (Compressed Bio Gas) to bring down dependency on crude oil imports.

Ø Enhancing farmer’s income, rural employment and entrepreneurship.

Eligible Entities (EE)/ Borrowers

Ø Entrepreneurs/ Technology Providers/ Sole Proprietorship/ Partnership/Limited Liability Partnership/ Companies/ Cooperative Societies /PACS/FPOs/SHGs /other constitution of borrowers permissible by Ministry of Petroleum and Natural Gas who have been awarded Letter of Intents (LOIs) by Oil Marketing Companies (OMCs) and Gas Marketing Companies (GMC) for supply of Compressed Bio- Gas under SATAT Scheme.

Ø Obtaining LOI from OMCs and GMCs is a pre-condition for applying for the loan.

Ø As per EoI, the minimum designed capacity of a single CBG plant is 2.0 Tonnes per Day of CBG.


Ø To part-finance setting up of Compressed Bio-Gas (CBG) plants under sole banking arrangement with our bank.

Type of Facility

Working Capital & Term Loan. 

Note: As per the Scheme CBG plant owner need to submit Rs 5 lacs BG after receiving LoI for fresh CBG plant and Rs 1 lac BG in case of existing CBG plant. The said BG requirement is to be considered under total project cost.

Quantum of Loan and Margin Money/ Beneficiary Contribution

v The project under the SATAT scheme shall be eligible for loan up to 75% of the estimated/ actual project cost on submission of viable projects by eligible beneficiaries.

v For Working capital: Minimum 25%

v However, aggregate sanctioned limit up to Rs.100 Cr per borrower from the banking system can be classified under Priority Sector-Agriculture- Ancillary activities.

v Assessment of the credit facilities will be done as per Banks’ extant guidelines.

Capital Subsidy

Ø The Ministry of New and Renewable Energy (MNRE) has notified Central Financial Assistance (CFA) of Rs. 4 crores per 4,800kg of CBG per day generated from 12,000 cubic meters of biogas per day, with a maximum of Rs.10 crore per project.

Ø The entire CFA will be released to the developer’s loan account in the lending financial institution/banks for the purpose of offsetting the loan amount only after successful commissioning of the project, after achievement of COD.

Ø Operating units shall ensure that Capital Subsidy received for the Project, if any, should get credited to the Term loan account.

Ø The detailed guidelines for claiming Central Financial Assistance (CFA) is provided as Annexure-II.

Convergence with Union Agri. Infrastructure loan Scheme (UAILS)

Ø CBG plant is included as eligible project of Agriculture Infrastructure Fund under building community farming assets subject to condition that CBG plants may be established by eligible beneficiaries of AIF like PACS, Marketing Co-operative Societies, FPOs, SHGs, Multipurpose Cooperative Societies, Agri-Entrepreneurs, Startups and projects promoted by Central/ State/ Local governments or their agencies under PPP and can avail the benefits under UAILS scheme.

Mode of Disbursement

Ø Disbursement of Term loan amount along with margin will be made directly to supplier through NEFT/RTGS & obtain original bills & receipts & other disbursement norms to be followed.

Ø Term loan disbursement in stages depending on schedule of implementation & end use verification should be done at every stage of disbursements. Relative invoices / bills for assets financed if any should be obtained and held on record.

Ø Working capital shall be released only after commencement of Commercial operations of the project. It should be ensured that margin stipulated in Project cost has been brought in by the borrower.

Rate of Interest

Ø Rate of Interest linked to MCLR and is as per Bank’s guidelines on Rate of Interest on Advances applicable for amalgamated entity and updated from time to time.

Service Charges

Ø Processing charges, Documentation charges, Inspection charges, Mortgage charges etc., as per extant guidelines on Service charges applicable to advances.

Delegated Authority

Ø As per extant guidelines on Delegated Authority.

Credit Rating Norms

Ø As per extant guidelines on rating.

Credit Guarantee Coverage

Ø Benefit of credit guarantee coverage for loans offered under this Scheme shall be provided to the borrower under the Credit Guarantee Trust for Micro & Small Enterprises through the National Credit Guarantee Trustee Company under their usual terms & conditions


Primary Security

v Hypothecation of entire project assets created out of Bank finance.

v Hypothecation of Stocks and Receivables.

v Mortgage of land and building for which credit facilities has been extended / project has been established out of Bank Finance.

v Exclusive charge over the Commercial Agreement, Escrow account, DSRA/ISRA etc.

v Branch to explore the possibility of having tripartite agreement among the CBG plant owner, OMC/GMC and the bank for assuring regular payment and for safeguarding bank’s interest.

Note: An Escrow account shall be maintained by the CBG Plant owner in which all sales proceeds received from the OMCs from sale of CBG and Bio-manure will be credited. Payment will be made as per usual waterfall mechanism. The proceeds in the Escrow account shall be appropriated first towards Bank’s term loan repayment.

Collateral Security:

In cases where mortgage ability of lease-hold land is not possible, equivalent amount of collateral to be obtained.

v For extending credit facilities with collateral security for this product, guidelines issued by credit policy & MSME dept Circular No. 1396/2018 dt 15.11.2018 & 1297/2018 dt 31.08.2018 regarding Credit Guarantee Fund Scheme for Micro And Small Enterprises (CGTMSE) & updation on CGTMSE guidelines from time to time to be adhered.

Note: “Hybrid Security” model to be adopted by the branches wherein the branches will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of ₹200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE.

Personal Guarantee

v Personal guarantee of the Proprietor, Partners of the Firm, Directors of the company and of all mortgagor of collateral security to be obtained.

v Corporate guarantee of the Parent company in case of SPV / Joint Ventures.

Debt / Interest

Service Reserve Account (DSRA/ISRA)

v Equivalent to 3 months Principal installment and interest amount. The DSRA/ISRA should be created/built-up latest by end of moratorium.

v DSRA/ISRA is a part of project cost – to be included in project cost for the purpose of calculation of MPBF.

Repayment period (including Moratorium)

Ø Term loan is repayable maximum in 10 to 15 years but not to exceed with tenor of offtake agreement. (Including the moratorium period of minimum 6 months and maximum 24 months.

Ø Repayment frequency can be fixed Monthly/Quarterly based on the cash flow of the project and as per agreement with OMCs.

Ø Date of commencement of commercial operations (DCCO) has to be clearly documented and recorded.

Ø Interest during moratorium period has to be serviced.

Ø As per current guidelines under SATAT scheme, maximum timeline for commercial supply is 2 years from LOI (Letter of Intent) and branch must ensure that the construction to be completed within the said time to avoid any further breach of LOI. 

Ø Maximum 24 months is the moratorium allowed in the proposed scheme inclusive of construction/project implementation period. 

Ø However, the same timeline can be extended for 3 months after genuine request from CBG plant owner.

Ø Operating unit should also examine availability of tail period at the time of analyzing the financial model and commercial viability of the project.

Security documents

Ø As applicable to project finance as per Bank’s guidelines on loan documentation.

Implementation Period

As per the guidelines issued by Ministry of Petroleum and Natural Gas / Ministry of New and Renewable Energy from time to time.


Ø Assets created by bank finance will be comprehensively insured with bank clause to their full value.

Ø Comprehensive Insurance policy including fire and transit insurance for moving cascades to be obtained and the same should be assigned in favour of Bank.

Due Diligence

Thorough due diligence of Borrower, Guarantor, Supplier & Land Record should be carried out as per extant guidelines on Due Diligence.

Post-sanction monitoring

Post-sanction inspection & periodical follow-up inspection to be undertaken and report should be prepared and keep on record.

Pre-disbursement Conditions

Ø Branch should ensure regarding execution of Commercial Agreement between Seller and Buyer ( In this case Borrower and OMCs respectively) duly incorporating the important clauses like offtake commitment, tenor of offtake agreement, price fixation modalities, Creation of Charge on Commercial Agreement, Termination clause, Substitution rights and Project completion time etc. The agreement should be vetted and got approval from our bank’s legal department.

Ø Branch should ensure the applicant obtained necessary statutory clearances and approvals from competent authorities. (Indicative list)

ü Central Pollution Control Board

ü Petroleum and explosives safety organization

ü Factory related licenses

ü NOC from local authorities.

Ø Above mentioned Agreements /clearances / approvals should be obtained before disbursement of first installment.

Ø At least 50% of the promoter contribution should be brought in upfront by way of pure equity. Bank’s extant guidelines on verification of source of funding of equity to be ensured. Balance equity to be brought in stages in a pre-defined manner.

Ø 100% Land acquisition (through outright purchase) should be ensured with own funds of the applicant to set up the unit. In case of lease hold land, the period of lease should be more than tenor of bank loan and having transferable & substitution rights. Further land should have clearance for Commercial activities with mortgageable rights and SARFAESI compliant. Non-agricultural land conversion should be ensured.

Ø As per general practice, the plants which are running on Agro waste (like Paddy Stubble) procure the entire raw material required for a year during the season to ensure that there is no shortage of raw material. Sources of raw material shall be mitigated through command area model and support from farmer association. While funding the project, the operating unit shall examine this in detail considering the plant specific location/requirement, additional storage space & price implication.

Ø In case of municipal waste, binding agreement has to be signed with Corporations to ensure regular supply.

Ø In case Binding Agreement with Municipal Corporation is not available, additional collateral could be explored as a risk mitigation. In such cases, the amount and percentage of collateral security shall be left to the discretion of sanctioning authority as the issue depends on case-to-case : 

Ø Branch officials should visit the official website of MPNG and other initiatives/resources made available by MPNG for reference to necessary approvals/clearances and other important information like checking the project report with respect to revenue generation from CBG production, what quantity of feedstock needed for production of 1 ton of CBG etc. 

Technical parameters

1. Credentials of equipment vendor, technology being used, performance etc are important aspect to be examined before lending decision. 

2. Our Technical Officer (TO) is required to visit and conduct technical inspection and, record the observations and submit technical inspection report.

3. If required, services of Lenders Independent Engineers (LIE) may be utilized.

4. The project should comply with technical specification, standards and certifications by MNRE.

5. The technical specifications as mentioned in EOI (Expression of Interest) are required to be complied by the promoters.

Other Terms and Conditions

Ø The business model has been framed by the OMCs (Oil Marketing Companies) and the same has been incorporated in the Letter of Intents (LOI) issued to the entrepreneurs. OMCs will be nodal agencies and will be issuing LOIs and will also facilitate LOI holders in design, construction, and commissioning of these plants as also off take/marketing the CBG produced, and bio manure produced from these plants.

Ø The LOI holder may face cost overrun due to delay in project implementation, entire cost overrun should be met by promoters and an undertaking in this regard to be obtained from the borrower.

Ø Branch should ensure credentials of equipment vendor, technology being used, performance etc., since there are few vendors /suppliers available.

Ø The project should comply with technical specification, standards and certification by MNRE.

Ø Techno Economic Viability (TEV) and Legal Entity Identifier (LEI) is applicable in eligible cases as per extant loan policy

Ø Since the non-availability of firm commitment from the buyers with upfront agreed pricing will lead to threat on the viability of the project, branch should ensure that supply plan would be in place for entire tenor of the loan. The detailed supply plan will be appended to the commercial agreement.

Ø Since it is the responsibility of LOI holders to make available CBG from the plant to the designated retail outlet of OMCs through vehicle with trailer mounted cascades which shall be arranged and operated by LOI holder, comprehensive insurance including fire insurance and transit insurance policy shall be obtained and adequacy of insurance should be ensured. All statutory clearance like Fire, Safety etc. should be in place.

Ø In case the LOI holders are not able to supply adequate quantum of CBG as per terms of LOI to OMCs, the OMCs may issue termination notice. In such cases branches shall advise the OMC by way of a separate letter to assist the branch in short listing suitable buyers for substitution of existing borrower.

Ø The appraising official should thoroughly acquaint with operations and process flow of CBG unit.

Ø KYC norms & due diligence should be carried out by branch officials as per the extant guidelines.

Ø Pre-sanction inspection should be carried out by Branch officials to verify technical feasibility of the project.

Ø Post disbursement inspection should be carried out to verify end use of funds.

Ø Price of the equipment to be cross checked from site of the company.

Ø All statutory approvals to be held as per the Scheme guidelines.

Ø All other Bank’s usual Terms and Conditions and extant guidelines are to be complied while sanctioning/dealing with the accounts under this scheme.

For more details please contact our nearest branch