‘Tackle CNG vehicle cost, bring it under GST’

India needs to bring CNG under the GST regime and tackle challenges such as high vehicle cost and limited boot space for the growth of the natural gas vehicle market, according to a report by Nomura Research Institute (NRI) Consulting & Solutions India.

The report on ‘natural gas vehicle (NGV) market’ stated that the CNG vehicle market has seen a compounded annual growth rate of 7% to 33.76 lakh units in March 2020 from March 2016, mainly driven by passenger vehicles (cars and taxis). The demand for such vehicles, however, is concentrated in five States/UTs of Maharashtra (30%), Gujarat (29%), Delhi (23%), Uttar Pradesh (9%), and Haryana (5%).

“India has large domestic reserves of natural gas as compared to crude oil. India has explored about 5 TCM of recoverable reserves, of which less than 0.5% is used as fuel in the current CNG fleet,” it said, adding that high vehicle volumes and favourable conditions in the Indian automotive market presented an opportunity to promote widespread adoption of NGVs.

However, high vehicle cost, vehicle weight and limited boot space were some of the challenges that needed to be resolved to promote NGV adoption. The report noted that vehicles-powered by natural gas were 12-18% more expensive compared to petrol variants, 10-15% heavier and have 40-50% lesser boot space due to cylinder installation.

Additionally, the domestic production of natural gas was limited given the size of reserves and investments in exploration and production were needed, it said.

For CNG vehicles, the report said the government and other stakeholders needed to work on attractive financing rates, simplification of land acquisition laws for pipeline and station development, bringing CNG under GST or a uniform pricing policy and tax structure across States, and create a detailed roadmap and implementation plan for realising the full potential of domestic natural gas production.

It also suggested localisation of cryogenic cylinders, which are currently being imported, to further bring down the cost of LNG trucks and set up adequate LNG fuel stations to cater to the demand by long-haul trucks operating in India.

Currently, China leads the world with the largest NGV fleet driven by robust infrastructure, government policies and availability of natural gas, followed by Iran, India, Pakistan, Argentina, Brazil and the U.S.