The growth in the NGV sector will be driven by factors such as attractive total cost of ownership, mature local vehicle and component manufacturing ecosystem, and increasing gas network.

By Shardul Sharma

The Indian natural gas vehicle (NGV) sector is poised for strong growth in the coming years with the number of NGVs on road expected to reach 33mn by 2030, according to Ashim Sharma, senior partner & group head business performance improvement consulting (auto, engineering & logistics) at Nomura Research Institute Consulting and Solutions India.

The growth in the NGV sector will be driven by factors such as attractive total cost of ownership, mature local vehicle and component manufacturing ecosystem, and vast and increasing gas network. In a recent interview with Gas Pathways, Sharma said that the NGV sector has a great future in India.

Sharma added that natural gas adoption in India's automotive industry has been a silent revolution and the phenomenal growth of NGVs across segments is testament to the important role natural gas would play in the energy transition process.

“In India, you have a strong component manufacturing industry, you have a mature vehicle manufacturing industry, and a vast and expanding gas network. And there have been the recent gas price reforms. So, the building blocks are there in place while some issues that are still there can be easily fixed,” he said.

The Indian government in April this year revised the pricing guidelines for locally produced gas. The government's decision is based on the recommendations of an expert panel chaired by economist Kirit Parikh, which submitted its report in November last year. This has led to significant reductions in end-customer prices for regulated natural gas.

As per the new formula, the price of the gas produced domestically will be 10% of the monthly average of the Indian crude basket and notified on a monthly basis. The gas price will, however, have a floor of $4/mn Btu and a cap of $6.5/mn Btu. 

Despite the promising outlook for the industry, there are still certain challenges and issues that need to be tackled. Sharma said that different tax rates on CNG in different states hinder development of gas dispensing infrastructure. Also, clearances from authorities need to be faster when it comes to setting up of refuelling stations.

When it comes to CNG cars, the biggest compromise buyers have to make is in terms of the boot space. CNG cars have less boot space than petrol cars. This is because CNG tanks take up more space than petrol tanks. Sharma said that till now lack of boot space in CNG vehicles was an issue but vehicle manufacturers are now addressing this problem.

Tata Motors recently launched it ‘twin cylinder’ technology. As in, they have two smaller cylinders instead of one large cylinder for the CNG. At the Auto Expo 2023 Tata Motors launched the Altroz CNG and Punch CNG which offer the same 60-litre CNG fuel capacity but in two tanks of 30 litres each. With the spare wheel under the boot and this twin cylinder setup, the Altroz CNG and Punch CNG, both offer a 150-litre boot space, which is significantly larger that the cars with one 60-litre tank.

Indian NGV sector going from “strength to strength”

According to a recently report by Nomura Research Institute Consulting and Solutions India the NGV ecosystem has moved from “strength to strength” over the last few years.

The Indian NGV sector is currently dominated by CNG vehicles. The CNG vehicle registrations in FY23 were 736,494, significantly higher than 462,776 in FY19. Similarly, the number of CNG stations in India in FY23 stood at 5,710 versus 1,730 in FY19. The total cost of ownership of NGVs has further improved by about 7% vis-a-vis diesel and petrol variants post the gas price reforms. Maruti Suzuki’s stable of CNG models has expanded beyond the small car and commercial taxi market and now crosses segments to crossovers, premium hatchbacks, and large SUVs, the report stated.

The expanding footprint of city gas distribution network is creating a supportive environment for NGV adoption. Last week, India launched the 12th city gas distribution (CGD) bidding round, covering 92 districts in five states and two union territories. This round is expected to bring access to natural gas to almost the entire country, except for Mizoram, Andaman & Nicobar, and Lakshadweep.

CGD sector in India has four distinct segments: CNG predominantly used as auto-fuel, and piped natural gas (PNG) used in domestic, commercial and industrial segments. 

Nomura believes that NGV sales will get a further support with introduction of LNG as a transport fuel and increased support for bio-CNG and compressed biogas (CBG). India is exploring the use of LNG as a transport fuel, with associated infrastructure and compliant vehicles under development.

According to the Nomura report, LNG offers an exciting opportunity to reduce emissions in the long-haul trucking fleet and in heavy mining and moving equipment, which is currently primarily running on diesel supplies.

Furthermore, the Indian government is working on a policy to introduce mandatory blending of CBG beginning in 2025. The Indian ministry of petroleum and natural gas is targeting a blending requirement of 5% by 2027. The Indian government will provide 50% of overall cost of connecting CBG plants to city gas distribution networks through pipelines, according to the Nomura report.

“Through retro-fitment, dual-fuel vehicles, and other emerging technologies, NGVs have the opportunity to capture a large proportion of the ICE market that will exist in 2030. We expect about 33mn NGVs on road in India by FY30,” Sharma said.

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