OPINION: 1,000 LNG stations: A dream too big?
On November 19, 2020, the Union Minister for Petroleum and Natural Gas, Dharmendra Pradhan, laid the foundation for India’s first 50 liquefied natural gas (LNG) fuel stations. Planned along the National Highways and Golden Quadrilateral, the stations will connect the four metros cities of Delhi, Mumbai, Chennai, and Kolkata. This announcement finally settles the multi-year long debate of whether the infrastructure should come first or if demand must be established with vehicles already on the ground. The government has also announced an investment of Rs 10,000 crore to set up 1,000 LNG stations—through investments from both private and public sector companies—in the next three years. Now the question is: will demand grow fast enough to keep these investments viable and encourage product development of LNG-fueled vehicles? As a supercooled natural gas, LNG is a favorable option for long-haul buses and trucks due to its higher energy density than compressed natural gas (CNG) and its ability to achieve a 600-800 kilometers run on a single fill. Plus, it is 30 to 40 percent cheaper than diesel. So why are we not seeing more LNG-fueled vehicles on the road? The problem of demand creation for LNG as a fuel remains unsolved. Historically, the adoption of new transportation technology has not been driven by pure economics and there are several roadblocks to large-scale adoption. Learning from CNG growth in India Looking back 20 years ago, Delhi considered the adoption of CNG as a fuel, even in light of concerns related to performance and additional adoption costs. Ashok Leyland and Telco received type approval from Automotive Research Association of India (ARAI) for their CNG engine. Telco estimated the cost to retrofit was about INR 7.3 lakh per bus (plus taxes), while Ashok Leyland quoted INR 6.4 lakh per bus (plus taxes) [1] . Since the adoption of CNG was mandatory, the scale at which CNG vehicles were manufactured helped bring costs down. Yet the initial costs to retrofit existing vehicles or purchase new technology vehicles were still high enough to be a deterrent in 2000. And we still face this challenge for adoption of LNG. Today it costs about Rs 10 lakh more to retrofit or purchase an LNG truck compared to a diesel truck. Even in an established CNG market, demand growth was not always purely driven by fuel price and policy measures were required. We see similar trends with electric vehicles where the government reduced taxes/levies to overcome the prohibitive initial cost of a vehicle. Figure 1 below shows that policy mandates—including environment compensation charges—had a greater impact on CNG adoption in Delhi/NCR in 2013-2016. OPINION: 1,000 LNG stations: A dream too big? How trucking industry can adopt LNG vehicles Although large-scale infrastructure planning for the initial 50 LNG fuel stations is moving ahead, the native development of LNG trucks by original equipment manufacturers (OEMs) lags behind and is also competing with Bharat Stage VI (BSVI) and electric vehicles (EVs). Only four LNG-based passenger vehicles were registered in India in 2019 and 2020 [2]. Since LNG-fueled vehicles are expensive (the additional cost is recovered through fuel cost savings), a minimum utilization assurance is needed. This is a key ask by fleet operators who are already taking technology and other associated risks with the adoption of a new vehicle type. In general, since fleet operators look at a payback of four years for a diesel truck to ensure recovery of the additional costs, the utilization assurance should be around 90,000 kilometers (for a 28-ton weight carrying capacity vehicle). What we see in the trucking industry is not supporting this economic hypothesis. Some fleet operators shared that they are only getting 60,000-70,000 kilometers per year for vehicles expected to run more than 90,000 kilometers. Figure 2 shows that year-over-year sales growth of heavy goods vehicles has been on the decline since 2018. Then the impact from COVID-19 led to extremely low utilization and sales of vehicles in 2020, with agriculture and essential services being the remaining source of demand. OPINION: 1,000 LNG stations: A dream too big? Measures to create sustainable demand We must take meaningful measures to create sustainable demand and meet the government’s goal of developing 1,000 LNG stations in the next three years. Providing subsidies to maintain the price differential between diesel and LNG trucks is not a sustainable solution and, in this case, to maintain the existing tax differential between diesel and LNG retail price is a minimum ask by every LNG retail player. However, support from government owned organizations (like oil marketing companies) can take lead for conversion to LNG based trucks and even using LNG-fueled vehicles to deliver LNG to stations may present more viable options. a) Using LNG heavy duty vehicles by Oil Marketing Companies (OMCs): An initial step could be that government owned OMCs start utilizing LNG vehicles as a part of their fleet for transporting petroleum products. Adopting a model similar to EV adoption by Energy Efficiency Services Limited (EESL) where more than 1,514 e-cars have been deployed or are under deployment for government organizations—may offer some insights for model adoption in the trucking industry. LNG trucks can be either leased or outright purchased to replace the existing diesel vehicles leased by government organizations [3]. Oil marketing companies and other public sector undertakings have trucking requirements that can be mapped to the initial set of planned 50 LNG stations. b) Use of LNG as a fuel in vehicles transporting LNG: Another area which makes sense is to initiate the use of LNG as a transportation fuel in trucks that transport LNG to CGDs or LNG retail outlets. With more than 50 LNG retail stations planned and multiple CGDs looking at hub and spoke models, the accessibility and availability of fuel for these categories of vehicles should not be a challenge. Exploring these models and more robust policies that promote the adoption of LNG vehicles over diesel will set the wheels of market establishment in motion. Conclusion The Government of India is leaving no stone
Malaysia postpones biodiesel mandate rollout to 2022 – state media
Malaysia will delay the nationwide rollout of its B20 palm oil biodiesel mandate to early 2022 to prioritise an economy that has been battered by the COVID-19 pandemic, state news agency Bernama reported late Thursday. The mandate to manufacture biofuel with a 20% palm oil component – known as B20 – for the transport sector was first rolled out in January last year, and was set to be fully implemented across the country by mid-June 2021. “Nationwide we are giving priority for the government’s post COVID-19 economic recovery plan, which is more crucial,” Plantation Industries and Commodities Ministry secretary general Ravi Muthayah was quoted as saying. “We have limited resources and must identify priorities,” he said. Rival and top producer Indonesia has also pushed back plans to raise the bio-content of palm oil-based biodiesel to 40% and instead raised export levies to finance its B30 programme after the pandemic triggered a collapse in crude oil prices. A rally in Malaysia’s benchmark crude palm oil prices to its highest in nearly a decade has also widened its premium over crude oil, making palm a less sustainable option for biodiesel feedstock.
69% people want reduction in excise duty on petrol and diesel: Survey
A survey has said that 69 per cent respondents want the government to cut excise duty on petrol and diesel to bring down the fuel prices that have touched record highs. As central excise is one of the two major components of the prices of fuel, moderation in the duty will provide succour to people who are facing the heat of economic slowdown and income disruption due to the COVID-19 pandemic, according to the survey conducted by Local Circles, a community social media platform. “The aggregate percentage of responses from 69 per cent citizens want the government to reduce excise duty on petrol and diesel. Of which, the majority of citizens want the prices to be reduced by 20 per cent or by Rs 6 or more for both petrol and diesel,” it said. If done, it will reduce the price of petrol to Rs 78 per litre and diesel to Rs 68 per litre in Delhi and similarly across India where the impact to the citizens is even higher, it said, adding, Delhi has one of the lowest prices of diesel and petrol in the country. The survey had 9,326 responses from citizens residing in 201 districts of India. Of this 71 per cent respondents were men while 29 per cent respondents were women. Petrol price on Thursday scaled to an all-time high of Rs 84.20 per litre in the national capital after state-owned fuel retailers hiked rates for the second day in a row. Petrol price on Thursday was hiked by 23 paise per litre and diesel by 26 paise a litre, according to a price notification from oil marketing companies. In Delhi, petrol now costs Rs 84.20 per litre and diesel is priced at Rs 74.38. In Mumbai, petrol comes for Rs 90.83 a litre and diesel for Rs 81.07. Of the Rs 84 per litre that commoners pay at the pump, the actual value of the petrol is only Rs 26 while the rest are taxes, duty and dealer’s commission, the survey said. The central government charges Rs 32.98 (125 per cent of the base price) as excise and the Delhi government levies Rs 19 (72 per cent of the base price) per litre on petrol Value-added Tax (VAT), it said, adding, similar levies in commission and taxes are applied on diesel.