The city gas network ensures uninterrupted supply of eco-friendly cooking fuel in form of piped natural gas and transportation fuel to vehicle in the form of compressed natural gas (CNG), thus benefiting public health at large. Now, a natural gas vehicle (NGV) is an alternative fuel vehicle that uses CNG or liquefied natural gas (LNG). However, NGVs are not synonymous with autogas vehicles powered by liquefied petroleum gas, mainly propane, which is a fuel with a fundamentally different composition. India stands third in NGV’s population across the globe despite the fact that NGV’s share in its total vehicular population is just 1.50 per cent. This indicates that there is huge potential for growth of NGV population in the country.

NGV population across countries (2018)

Source: IANGV

Country-wise NGV’s share in total vehicular population (2018)

Source: IANGV

However, there are a number of barriers, including technological, cost, and consumer acceptance, faced by the NGV market in India. The energy/fuel storage limitations represent a primary obstacle for NGVs. Compared to petrol and diesel tanks, NGVs tanks are heavy and costly. CNG tanks require up to six times more space, reducing the space for passenger and/or cargo. Besides, CNG vehicles take about twice as long to fill up as compared to liquid-powered passenger vehicle. The limited fuel storage reduces range of the vehicles and exacerbates concerns about adequate numbers of refuelling stations. NGVs also have higher capital costs than traditional petrol-powered vehicles. Further, the refuelling infrastructure is sparse in the country. Building a new CNG refuelling station is an expensive affair in terms of capital investment. Consequently, there are approximately 2,000 natural gas refuelling stations as compared about 70,000 petrol and diesel outlets. The gas pipeline network availability in the country is also limited to few regions. The lack of central level gas planning for gas infrastructure has led to development of pipeline and distribution of network only in prospective regions of country. Besides, there have been delays in project implementation due to clearances obtained from forest, environment and other statutory bodies. Another major barrier for the NGVs is the high conversion cost, ranging from Rs 25,000 in private cars to approximately Rs. 300,000 in buses and light commercial vehicles. The limited variants of dedicated CNG vehicles hamper their potential sales. Besides, the consumers are not completely aware of the potential benefits of NGVs, leading to its lower acceptance.

Of late, the government has been pushing the adoption of electric vehicles (EVs) in the country, which has turn out to be a threat for NGV market. India has witnessed a sharp rise in EV sales by 130 per cent to about 759,000 units during 2018-19. During the same year, the CNG vehicles grew by a negligible margin as compared to EVs. NITI Aayog, which is leading the policymaking effort for accelerated penetration of EVs in the country, has reportedly proposed that only EVs will be sold after the year 2030.

Comparison of EV and CNG vehicles

Besides, there are a number of bureaucratic hurdles which have acted as a barrier for the growth of NGVs in India. The lead time for land allotments for setting up CNG stations is extremely high, ranging from 1 to 2 years. There is scarcity of land for setting up CNG stations, especially in metro cities. Further, the lead time for obtaining approvals for one green field CNG station is over a year. There is also a reluctance in acceptance of new technology by statuary bodies of roadways and railways. The clearances from National Highway Authority of India if the CNG station is located on any National Highway in accordance with Control of National Highway (Land & Traffic) Act 2002/Highway Administration Rules 2004 further delays the implementation. Another bureaucratic process is the issuance of completion cum occupancy certificate by the respective body after completion of work.

The way forward

Building up an adequate gas pipeline network by extending it to all major cities and equipping major highways with CNG/ liquefied to compressed natural gas stations will go a long way in boosting the NGV market in India.
The government should provide fiscal incentives by extending soft or subsidised loan for conversion kits, and grant financial assistance to state transport authorities for investment in large scale conversion. The evolution of new and better technologies such as Type 4 cylinders, mobile refuelling, LNG, gas engine technology, refuelling time etc. will further benefit the NGV segment. The government could provide taxation benefits such as concession rate on excise duty or other taxes on manufacturing of CNG vehicles to attract investment on NGVs. Further, it could cover CNG in Goods and Services Tax (GST) for uniform taxation. Until the CNG comes under the purview of GST, the states can maintain uniform minimum possible value-added tax rates. Finally, there is a need to evolve a uniform pricing mechanism for transport sector across the country. The government should mandate the use of NGVs for public transport for the cities having CNG station network. It should also put in place a time bound mechanism for grant of permissions for opening of refuelling stations.

Ranjan Dwivedi is managing director at Central U.P. Gas Limited (CUGL). He has close to four decades of experience in the fertilisers and natural gas business. Prior to his current role, he worked in GAIL’s marketing department and was responsible for gas transportation, contracts, regulatory affairs (PNGRB) and Jaipur Zonal office as marketing head. He joined GAIL (India) Limited in 1998 and looked after LLDPE plant operation at UPPC Pata.