Biomass fuels are used by the majority of resource poor households in low-income countries. Though biomass fuels, such as dung-briquette and firewood are apparently cheaper than the modern fuels indoor pollution from burning biomass fuels incurs high health costs. But, the health costs of these conventional fuels, mostly being indirect, are poorly understood. To address this gap, this study develops probit regression models using survey data generated through interviews from households using either dung-briquette or biogas as the primary source of fuel for cooking. The study investigates factors affecting the use of dung-briquette, assesses its impact on human health, and estimates the associated household health costs. Analysis suggests significant effects of dung-briquette on asthma and eye diseases. Despite of the perception of it being a cheap fuel, the annual health cost per household due to burning dung-briquette (US$ 16.94) is 61.3% higher than the annual cost of biogas (US$ 10.38), an alternative cleaner fuel for rural households. For reducing the use of dung-briquette and its indirect health costs, the study recommends three interventions: (1) educate women and aboriginal people, in particular, and make them aware of the benefits of switching to biogas; (2) facilitate tree planting in communal as well as private lands; and (3) create rural employment and income generation opportunities.