Context: 

NITI Aayog and the Netherlands embassy released a report titled ‘LNG as a Transportation Fuel in Medium and Heavy Commercial Vehicle’ at the India Energy Week 2024.

Liquefied Natural Gas As a Transportation Fuel in Medium and Heavy Commercial Vehicle Report

• The report was released as the first outcome of the cooperation between NITI Aayog and the Embassy of the Kingdom of the Netherlands in the field of energy transition under the Statement of Intent (SoI) partnership since 2020. 
• Focus: To leverage LNG as a fuel source and customise its use in the medium and commercial vehicle segment.
• Target: The report lists strategies  to achieve  a 15% gas share in the primary energy supply and also the goal of Net Zero by 2070. 

Advantage of Using Liquefied Natural Gas As Transport Fuel 

• Reduce oil Import bill:  A  switch to Liquefied Natural Gas from diesel (10 percent of new diesel vehicles switched to LNG by 2032) could result in the reduction in oil import bill by $1.5 billion by the year 2032
• Reduce tank-to-wheel emissions
• Air pollution: The HDV sector alone contributes up to 66 percent of the particulate matter from the road transport sector, therefore switching to Liquefied Natural Gas will improve air pollution in cities.

Challenges In Adoption of LNG As a Transport Fuel in India

• Initial cost: The high initial cost of Liquefied Natural Gas-based vehicles compared to traditional diesel trucks is a significant challenge for the adoption of LNG in the HDV segment with an estimated price difference of around Rs 11-12 lakh posing a barrier for fleet operators.
• Availability of LNG vehicles and plans of OEMs: To bridge the gap between infrastructure development and vehicle scarcity, State Transport Undertakings (STUs) can play a significant role in employing LNG HDVs in its fleet
• Availability of Liquefied Natural Gas retail outlets:  The establishment of LNG refuelling infrastructure is crucial for the successful adoption of LNG as a transportation fuel with a plan to install 50 LNG retail outlets along the Golden Quadrilateral in the pipeline.
• Retro-fitment of LNG trucks: Conversion of  trucks is not a long-term solution as most HDVs stop going to the secondary market once they are over six years old. 
• Financing of LNG trucks:  Financing companies have  different risk perceptions regarding the financing of LNG-based HDVs. 

Suggestions From the Report

• A dedicated agency: To set  up a demand aggregator company for buying Liquefied Natural Gas trucks, similar to Energy Efficiency Services (EESL) in the electric vehicle sector.
• Non fiscal Incentives: Priority lane access can be provided  for LNG vehicles with pilots conducted in major cities and roads.
• Incentives for adoption: Heavy-duty trucks running on LNG can be allowed to enter cities to incentivise alternative fuel adoptions, while diesel trucks can be banned or levied with entry charges. 
  • Example:  Delhi  implements  the environmental compensation charge (ECC) for all diesel heavy-duty trucks.
• Tax incentives: VAT on the sale of Liquefied Natural Gas to heavy-duty vehicles (HDV)  and the retail LNG price needs to be reduced to 5 per cent under the ambit GST bracket, to achieve the required tax rate harmonisation across states, thus effectively bringing down the LNG HDV operating cost.

News Source: PIB