Beyond CBG: How Digestate Can Become a Second Revenue Stream

When people discuss a Compressed Biogas (CBG) project, the conversation almost always revolves around one product: the gas. How much CBG can the plant produce, what will it sell for, how much feedstock is needed, what is the project cost, how fast can it reach commercial operation.

But there is another material leaving the plant every single day — the digestate, the slurry left after organic feedstock has passed through anaerobic digestion. In India's policy framework, this digestate can be processed and marketed as Fermented Organic Manure (FOM) or Liquid Fermented Organic Manure (LFOM), and the government now actively supports its sale. For a CBG developer, that changes what digestate is: not waste leaving the digester, but a regulated agricultural product and a potential second revenue stream.

This guide explains how the digestate business actually works, what the government provides, and why most CBG project models get this part wrong.

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What Exactly Is Digestate?

A CBG plant uses anaerobic digestion to break down organic material in the absence of oxygen, producing biogas that is then purified and compressed into CBG. But not all of the original feedstock disappears. The material remaining after digestion is commonly referred to as digestate or digested slurry, and depending on plant design and feedstock, it can contain a solid fraction, a liquid fraction, or both.

After appropriate processing and compliance with the applicable fertiliser standards, these streams can enter the market as Fermented Organic Manure (FOM) — the solid form — or Liquid Fermented Organic Manure (LFOM) — the liquid form. The Ministry of New and Renewable Energy describes digested slurry from biogas plants as a source of manure that can supplement or reduce the use of chemical fertilisers.

The important distinction is that raw digestate and a marketable FOM or LFOM product are not the same thing. Between the digester outlet and the agricultural customer sit several steps: processing, quality control, testing, regulatory registration, and marketing. A CBG developer has to think about all of them.

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Why the Government Now Treats Digestate as a Product

The Government of India has explicitly recognised this co-product as part of the CBG ecosystem. The Ministry of Petroleum and Natural Gas notes that bio-manure produced from CBG plants was included as Fermented Organic Manure under the Fertiliser Control Order in 2020. More recently, the government created a market-development mechanism specifically for FOM, LFOM, and PROM produced from GOBARdhan and CBG plants.

The traction is measurable. As of 4 March 2026, the Ministry of Chemicals and Fertilizers reported that 120 CBG and biogas plants had registered on the Integrated Fertilizer Management System (iFMS) portal for the sale of these organic fertilisers, and 44 MoUs had been signed between Fertilizer Marketing Companies (FMCs) and CBG operators. Between February 2025 and January 2026, 24 FMCs conducted 15,690 Kisan Sangoshthis and awareness camps demonstrating the use of these organic inputs to farmers.

This is the signal that matters for investors: FOM is moving beyond being treated as a waste by-product and is being drawn into formal fertiliser procurement and distribution channels.

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Understanding the ₹1,500/MT MDA Correctly

The single most important government support mechanism for digestate is Market Development Assistance (MDA). The government provides ₹1,500 per metric tonne of MDA for FOM, LFOM, and PROM produced under the GOBARdhan framework.

This figure must be understood correctly, because it is the most commonly misread number in CBG project models.

₹1,500/MT is not the selling price of FOM. It is Market Development Assistance.

A developer should never build a model that assumes "my FOM is worth ₹1,500/tonne." That would be wrong. The ₹1,500/MT is government assistance under the MDA mechanism, subject to eligibility and compliance conditions. The actual commercial price at which a specific FOM product sells depends on its specifications, location, packaging, logistics, the buyer, competing fertilisers, and contractual arrangements — and that price should come from an actual buyer quotation, tender, or contract, never from an assumed national average.

To qualify for MDA, two conditions must both be met: the plant must be registered on the unified GOBARdhan portal, and the organic fertiliser must comply with Fertiliser Control Order (FCO) specifications. Skip either one and MDA eligibility disappears.

The scheme is already disbursing funds. Government records indicate ₹111.72 crore was released under the MDA mechanism through 28 February 2026 — this is real money flowing to registered plants, not a paper policy.

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The Ecosystem Is Already Forming

The digestate market is not a future hypothetical. Government data shows measurable traction across registration, marketing agreements, and farmer outreach as of early 2026.

Institutional demand is also emerging. In 2026, Hindustan Urvarak & Rasayan Limited (HURL) issued an Expression of Interest for empanelment of manufacturers to supply Fermented Organic Manure, adding FOM to its product portfolio with pre-qualified manufacturers eligible for future tenders. This does not mean every CBG plant automatically has a buyer — but it demonstrates that FOM is now being considered within formal fertiliser procurement, which is exactly the distinction that matters for a project's bankability.

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The Hidden Cost Nobody Models: Water and Transport

This is the most important point for a CBG investor evaluating digestate economics.

A liquid organic-manure product (LFOM) contains a large proportion of water. When an operator transports LFOM, they are not just transporting nutrients — they are transporting the entire liquid product, water content included. That makes logistics economics completely different from a concentrated solid product. The same principle applies to FOM if it retains significant moisture, and the 2025 FCO framework specifies moisture ranges for both.

This is why the digestate business should never be evaluated on selling price alone. The correct evaluation is:

Realised price − processing − packaging − loading − transportation − distribution − compliance costs = contribution margin

A product that looks attractive at the plant gate can become unattractive after transport. This leads to the single most important commercial question in the digestate business: where is the customer located relative to the plant? A digestate business should be designed around a customer radius, not just a production quantity. Two plants producing identical FOM volumes can have completely different economics if one sits near agricultural demand and the other does not.

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What the FCO Requires

A CBG operator cannot simply collect digestate, put a label on it, and sell it as fertiliser. The Fertiliser Control Order framework governs FOM and LFOM, and the government's 2025 amendment introduced detailed specifications and analytical procedures covering parameters including moisture, organic carbon, pH, electrical conductivity, heavy metals (cadmium, copper, chromium, lead, nickel, zinc, mercury, arsenic), and pathogenicity.

A buyer does not simply need to know the product came from a CBG plant — they need a product that meets the applicable specification. This means the operator needs a proper quality-control system aligned with current FCO requirements, with testing carried out at government-notified or NABL-accredited laboratories.

One practical warning: do not design a digestate business around an old FCO specification copied from a five-year-old project report. Regulatory specifications change, and the 2025 amendment moved the framework toward more clearly defined FOM and LFOM specifications. Always use the latest applicable notification.

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The Digestate Business Is a Supply-Chain Business

Producing FOM is only half the job. The other half is moving it from the plant to the customer. The complete chain runs from the CBG plant to digestate collection, then solid-liquid separation and processing, then quality testing, then an FCO-compliant product, then packaging or bulk handling, then storage, then a distributor, fertiliser company, or institutional buyer, and finally to the farmer.

That means a CBG developer needs to answer a specific set of questions before financial closure: who will buy the product, how far away are the buyers, will it be sold in bulk or bags, who pays transportation, who performs quality testing, who handles registration and licensing, what happens during the agricultural off-season, how much storage is required, and can the plant maintain consistent quality. These questions belong in the original CBG business model, not in a post-commissioning scramble.

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Two Routes to Market

Government policy explicitly envisages two main routes for selling FOM.

The first is through Fertilizer Marketing Companies. FMCs have been encouraged to enter MoUs with CBG operators, and as of March 2026, 44 such MoUs had been signed. This lets a plant work through established fertiliser-marketing channels rather than building an entire retail network from scratch. But a potential route to market is not guaranteed offtake — a project still needs an actual commercial plan.

The second is direct farmer sales, which offers greater control over the customer relationship but requires the CBG company to take on local distribution, packaging, product education, application guidance, dealer relationships, seasonal demand management, credit, and quality-complaint handling. This effectively turns part of the CBG company into an agricultural-input distribution business — a different organisation from one whose main job is producing gas.

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Don't Confuse FOM With Chemical Fertiliser

This matters for both farmers and investors. FOM is an organic manure product under the applicable regulatory framework. It should not be treated as a one-for-one replacement for urea, DAP, or other chemical fertilisers — the nutrient profile and agronomic role are different.

The government has promoted FOM and LFOM as organic fertilisers associated with GOBARdhan and highlighted their role in supporting soil health. But correct agronomic application depends on soil condition, crop, nutrient requirement, product analysis, application method, timing, and local agricultural recommendations. A responsible CBG company sells the product based on tested composition and proper application guidance, rather than claiming FOM can replace every kilogram of conventional fertiliser.

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A Practical Digestate Economics Framework

Instead of inventing a national "average FOM price," a CBG operator should build the digestate model from the ground up:

FOM revenue equals quantity sold multiplied by the realised selling price (from an actual quotation). Add eligible MDA, calculated as eligible quantity multiplied by the applicable ₹1,500/MT. Then subtract processing cost, testing and compliance, packaging, storage, loading and handling, transportation, and distribution or marketing. What remains is the digestate contribution.

Two numbers must stay separate in this model. Net contribution is not ₹1,500/tonne, and net contribution is not the FOM selling price. A proper model shows the selling price, the MDA, and the full delivery cost as three distinct lines — which is the only way to see the real margin.

Critically, do not assume 100% of digestate becomes saleable FOM. A mass balance tells you how much digestate a plant produces, but water management, separation, processing, recirculation, rejected material, quality-control requirements, storage losses, and internal process use all mean the saleable quantity is lower. The exact conversion must come from the plant's technology provider and detailed process design — never from a generic "X tonnes of biomass produces Y tonnes of FOM" assumption.

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The Digestate Offtake Plan

Before financial closure, a CBG plant should prepare a Digestate Offtake Plan answering questions across six areas. On product: FOM, LFOM, or both, and at what specification. On quantity: what the mass balance predicts and how much converts to saleable product. On quality: which parameters get tested, at which lab, how often. On market: who the buyers are, their annual requirement, their procurement radius. On logistics: average transport distance, bulk or bags, storage location. On commercials: the price the buyer has actually offered, who pays freight, whether a long-term offtake agreement exists, and whether MDA applies.

And every plant should have a contingency for the question every developer should answer before commissioning: what happens if the digestate does not sell. A robust strategy includes a primary buyer, a secondary buyer, temporary storage capacity, and an alternative permitted utilisation route — because agricultural demand is seasonal and logistics can become difficult in certain periods.

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Two Businesses, One Plant

The clearest way to evaluate a CBG project is not as "CBG revenue plus digestate revenue," but as two connected businesses sharing the same feedstock and plant.

Business one is renewable gas: feedstock, digestion, biogas, purification, CBG, offtake. Business two is organic fertiliser: feedstock, digestion, digestate, processing, testing, FOM or LFOM, distribution, agricultural market. Both use the same feedstock, both depend on the same plant, both generate logistics requirements, and both need reliable customers. The digestate strategy influences overall project economics even though CBG remains the primary energy product.

This is also where digestate becomes a strategic differentiator. Two plants may sell essentially identical gas, but one may simply dispose of its digestate while the other processes it consistently, tests it, obtains regulatory approvals, develops a recognised FOM product, builds FMC relationships, and secures long-term offtake. The second plant has built an additional commercial ecosystem around the same CBG project — the difference between treating digestate as waste management and treating it as a product business.

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The Honest Bottom Line

Policy support does not automatically create project profitability. There is no government source establishing a universal FOM selling price or a universal profit per tonne for every CBG plant, and it would be just as wrong to claim every plant will make large money from FOM as it would be to ignore the opportunity entirely. The economics depend on feedstock, digestate characteristics, processing technology, product form, plant location, market distance, buyer, quality, packaging, transportation, regulatory compliance, actual realised price, and MDA eligibility.

The government has done its part: it created a regulatory category for FOM and LFOM, established the ₹1,500/MT MDA mechanism, encouraged fertiliser marketing companies to work with CBG operators, and linked registration and FCO compliance to MDA eligibility through GOBARdhan. The real question for every developer is whether they can consistently produce a compliant digestate-derived product, find a buyer, move it economically, and receive a commercially viable realised price.

That question should be answered before the plant is built — because CBG is not only a gas business. It is a feedstock-to-energy-and-fertiliser business, and the digestate is part of the equation.

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Planning the Digestate Side of Your CBG Project?

If you are structuring a CBG project and want the digestate business modelled properly — including mass balance, FOM/LFOM processing strategy, FCO compliance, MDA eligibility, and offtake planning — Peltra Energy offers project-specific consultation.

Visit pelletrates.com/consultation to discuss your project. Consultation covers digestate offtake planning, feedstock and product mass balance, and subsidy navigation — starting at ₹10,000.

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