At present, energy and fertilizer requirements of many of the developing countries are largely met by locally available, non-commercial sources, such as firewood and farm wastes. Extensive use of firewood is one of the factors that can lead to deforestation. When organic farm wastes are burnt, soil nutrients, which should return to soil, are lost and this can severely affect agricultural production. The problem of efficient utilization of these locally available resources, therefore, needs to be studied in a systematic manner. As an option for efficient utilization of local resources, bio-gas plants are considered, taking India as a case study. In these plants, animal dung and agricultural byproducts are utilized to obtain both methane and fertilizer through anaerobic fermentation. This is an example of appropriate technology for rural environments, which requires low investment, which does not need highly skilled labor and which can be operated with local materials and self-help in the 576,000 villages of India. The economic benefits to a family using a bio-gas plant and the impact of its widespread acceptance on a national scale are evaluated. It is felt, however, that the scope of such individual family bio-gas plants is likely to be limited for a number of reasons. To realize the potential of bio-gas fully, village plants of about 200 m3 capacity for approx. 100 families are needed. The introduction of such seemingly sensible new technologies has failed in the past for want of appropriate management and organizational structures and, consequently, for want of social participation by persons of various income groups in the successful operation of such community plants. To remedy this, a pricing policy for purchase of farmwastes and distribution of gas and fertilizer has been suggested as an essential tool to ensure that no-one is worse off by the introduction of bio-gas plants and thus to motivate the required participation in the scheme. Given a different organizational set-up, the idea could also be tried out for providing energy and sanitation in urban areas. The impact of full-scale adoption could mean that, by 2000 ad, almost 90% of the rural energy requirements of the domestic sector could be met; at present, this accounts for about 45% of the total energy consumption in India. The consequent reduction in firewood consumption would help to prevent deforestation. In addition, organic manure containing two million tons of additional nitrogen would be available every year to enhance soil nutrients, hence boosting food production and helping to solve the problem of sanitation at the same time.