India's Straw Season Has Begun. For the First Time, the Government Is Paying Buyers to Want It.
Punjab expects 18.81 million tonnes of paddy straw this harvest. Over the past eight weeks the Centre has put a ₹23,731 crore guaranteed-price scheme behind biogas, coal plants are being fined for burning too little biomass, and brick kilns face a 30% straw-fuel rule from 1 November. Straw has stopped being a waste problem. It is becoming a traded commodity, and the money will go to whoever can collect, store and deliver it.
Recykal Times Desk·24 Sept 2026·8 min read·5 sources
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Editorial image for “India's Straw Season Has Begun. For the First Time, the Government Is Paying Buyers to Want It.”, illustrating recycling industry.
Paddy harvesting in Punjab was expected to begin in the last week of September. For two decades, that date has meant one thing: smoke. Farmers with a narrow window to sow wheat burned the leftover straw because nobody would pay to take it away.
This season, the economics look different. The straw now has four buyers, and every one of them is being pushed into the market by policy:
Biogas plants that now have a government-backed price for their gas until 2036.
Coal power plants that must mix biomass into their fuel and are being fined when they don't.
Brick kilns in Punjab and Haryana that must run on at least 30% paddy-straw fuel from 1 November 2026.
Industrial boilers, which Punjab's own plan sees as the single biggest outlet for straw.
The supply is there. What's missing is the business in the middle.
The numbers at a glance
Indicator
Figure
Paddy straw expected in Punjab this season
18.81 million tonnes from 3.1 million hectares
GOBARdhan scheme outlay
₹23,731 crore, FY27 to FY36
Administered CBG price
₹2,110 per MMBTU, about ₹98 per kg, until 31 March 2036
CBG blending obligation for city gas
3% in FY27, 4% in FY28, 5% from FY29
Biomass co-firing obligation for coal plants
7% from FY26
Fines on coal plants for missing FY25 targets
about ₹61.85 crore on six plants
Brick kiln straw-fuel mandate
30% from 1 November 2026, rising to 50% by 2028
Punjab farm fires
5,114 in 2025, down from 10,909 in 2024
Buyer one: biogas, now with a price guarantee
On 6 August 2026, the Union Cabinet approved GOBARdhan, a ₹23,731 crore national scheme to turn crop residue, cattle dung, press mud and municipal organic waste into compressed biogas (CBG). The operating guidelines, released in the past fortnight, turn that intent into contract terms.
An administered price of ₹2,110 per MMBTU, equal to about ₹98 per kg of CBG at 95% methane content, excluding taxes and compression charges, fixed for at least ten years until 31 March 2036.
Assured offtake of up to 100% of the CBG a plant has for sale, through agreements between the producer, the city gas company and GAIL.
Guaranteed demand: city gas companies must blend CBG into their CNG and piped gas at 3% this year, 4% next year and 5% from FY29.
Capital support of ₹1.25 crore per tonne per day of new CBG capacity, capped at ₹30 crore per project.
The obligations run both ways. Producers face a supply-or-pay obligation of up to 50% of their contracted quantity from the second year. That clause matters for anyone who supplies them: a plant that has promised gas can't afford to run short of straw.
The government's stated aim is a nearly ten-fold rise in domestic CBG output from a base of over 200 commissioned plants. Punjab alone has 6 CBG projects running, 5 more being commissioned this year and 46 in the pipeline, which the state estimates would consume about 2.8 million tonnes of paddy straw a year once running.
Buyer two: coal plants that are being fined
Since FY26, the Ministry of Power's biomass policy requires coal-based power plants to co-fire 7% biomass. The Commission for Air Quality Management (CAQM) has shown it will enforce the rules. In April 2026, it imposed Environmental Compensation of about ₹61.85 crore on six plants within 300 km of Delhi for falling short in FY2024-25.
Usage is climbing. According to figures shared by the Ministry of Power's SAMARTH mission, plants in the NCR region used 2.16 million tonnes of biomass pellets in FY26, up from 1.3 million tonnes the year before. Their average co-firing rate rose from 2.6% to 4.61%, and reached 5.28% in the first months of FY27. Seven of the eleven NCR plants met their FY26 targets.
That's still short of 7%, and the gap is about quality as much as volume. Ordinary pellets soak up monsoon moisture, which is why co-firing dips every July to September. The fix is torrefied pellets, which are roasted to resist water. SAMARTH puts torrefied pellet capacity at about 3,057 tonnes a day against roughly 3,371 tonnes needed for 7% co-firing.
Buyer three: brick kilns, from 1 November
This buyer gets less attention than it deserves. Under a CAQM statutory direction, brick kilns in Punjab and Haryana outside the NCR must use paddy-straw pellets or briquettes for at least 20% of their fuel from November 2025, 30% from 1 November 2026, 40% from November 2027 and 50% from November 2028.
The next step takes effect in five weeks, and it lands in the middle of the harvest. Every kiln in the two states now needs a reliable straw-fuel supplier.
Buyer four: industrial boilers
Punjab's 2026-27 plan to end stubble burning, submitted to CAQM, sees industrial boilers as the largest single outlet, with the potential to absorb about 6 million tonnes of straw. It targets another 2.5 to 3 million tonnes as pellets for power plants and industry.
Add those outlets together and, on paper, more than half of Punjab's straw already has a destination. In practice, straw that isn't collected, dried and stored in time can't be sold, and that's where the opportunity is.
What a tonne of straw is now worth
The CBG price makes it possible to put a number on straw for the first time.
India's largest straw-based CBG plant, Verbio's at Lehragaga in Sangrur, was designed to process about 300 tonnes of paddy straw a day into 33 tonnes of CBG. That's roughly 110 kg of gas per tonne of straw.
At the administered price of about ₹98 per kg, 110 kg of CBG is worth about ₹10,800.
By comparison, farmers in Karnal were being paid ₹250 to ₹300 per quintal for paddy straw in December 2023, or about ₹2,500 to ₹3,000 a tonne.
(This is our own estimate, using the plant's design figures and the administered price. It is gas revenue before the plant's own costs, and excludes income from organic manure.)
The gap between those two numbers covers everything in between: baling, transport, storage, drying, quality control and the plant's processing costs. A guaranteed gas price makes that chain financeable for the first time. Whoever runs the chain efficiently takes the margin.
The missing middle
Punjab's farm fires fell from 49,922 in 2022 to 10,909 in 2024 and 5,114 in 2025, helped by subsidised machinery and more buyers. CAQM has directed Punjab, Haryana and the NCR districts of Uttar Pradesh to implement plans to eliminate paddy stubble burning completely in 2026, including district-level supply chains and storage.
Removing straw from fields is a harvest problem, but buyers need it all year. Straw is bulky, it's generated in a window of a few weeks, and it loses value when it gets wet. The Karnal example shows the trade is already forming: in 2023, farmers there were storing straw in the open, expecting to sell at higher prices when demand peaked in summer and monsoon.
That's a familiar business model to anyone in scrap: aggregate at the source, grade, store and sell to the buyer who pays most, when they need it most.
What this means for you
Scrap dealers and aggregators: You already run the model this market needs: collection networks, yards, weighbridges, grading and logistics. Straw is a seasonal commodity with four policy-backed buyers, and the sellers are farmers who want it off their fields fast. Storage and moisture control are the value-adders.
CXOs and investors: GOBARdhan fixes the price of the output for ten years. The main risk in a CBG project is now feedstock, not revenue. Plants that lock in multi-year straw supply contracts, with storage, will get finance more easily than those that buy on the spot market. Torrefied pellet capacity is still short of what co-firing requires.
Industrial fuel buyers: Brick kilns and boiler operators in Punjab and Haryana are competing for the same straw as subsidised CBG plants. Contract early, before the harvest-season spot market sets prices.
Pellet manufacturers: Coal plants are buying more every year, and they're being fined for falling short. The premium is in torrefied, moisture-resistant pellets that hold up through the monsoon.
What to watch
Farm fire counts in October and November, the first test of CAQM's elimination target.
Brick kiln compliance with the 30% rule from 1 November 2026.
The first GOBARdhan offtake agreements. City gas companies have three months from a producer's request to sign.
Co-firing rates after the monsoon, and whether torrefied pellet supply closes the gap to 7%.
Straw prices through summer 2027, which will show whether storage pays.
The bottom line
For twenty years, India treated paddy straw as a pollution problem to be regulated. In 2026, it has become a commodity with a guaranteed buyer, a government-backed gas price and penalties for anyone who doesn't use enough of it. The farmers have the supply and the plants have the demand. The winners will be the businesses in between, the ones who know how to collect, store and deliver a bulky, seasonal material at the right quality. For India's recycling industry, that describes what it already does.
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