As the Indian government aims for faster adoption of liquified natural gas (LNG) as transport fuel, the industry has put forth certain demands, including reduction in the Good and Service Tax (GST) on LNG vehicles, price regularisation, and wider distribution.
Similar to electric vehicles (EVs), which attract 5 percent GST, the LNG industry has urged the Ministry of Petroleum and Natural Gas (MoPNG) to slash the tax for LNG vehicles, people aware of the matter told Moneycontrol. LNG vehicles currently face a GST of 28 percent.
“Today, the bottleneck is the high initial capex. Truck operators look at the payback when deciding whether to opt for LNG vehicles instead of diesel trucks,” said an official from a gas distribution company.
To drive the shift away from fossil fuels, the Indian government plans to have a third of the country’s eight million long-haul trucks fuelled by LNG in the next five to seven years. By 2030, the government aims to establish 1,000 LNG stations across the country.
Additionally, the industry has asked the government for a domestic price mechanism to regulate LNG prices, and partially allocate cheaper administered price mechanism (APM) gas for the sector. Currently, LNG prices are indexed to international gas prices as India imports around 50 percent of its requirement.
“They (truck operators) need assurance in terms of prices. It would be a big loss for them if they switch to LNG and one day prices skyrocket in the international market,” said another official from a state-run gas company.
In India, OEMs, including Tata Motors, Ashok Leyland, and Blue Energy are offering LNG trucks, while energy companies such as GAIL and Indian Oil are working towards building the necessary infrastructure. Currently, there are only 20 LNG retail outlets in the country.
In 2024, state-run GAIL committed Rs 650 crore to set up LNG stations along the Golden Quadrilateral, major national highways, and mining hubs— with the aim of capturing 50 percent of the market. Indian Oil, Bharat Petroleum, and Hindustan Petroleum are also setting up LNG outlets.
The heavy-duty vehicle (HDV) segment consumes 35-40 billion litres of diesel annually, or 40-45 percent of the total diesel usage in the country, according to rating agency Crisil Intelligence.
The delivered price of LNG at Rs 50–60 per kg is well below Rs 85–95 per litre for diesel, which improves the cost of operation despite the upfront cost of LNG trucks being 25-35 percent higher, said Sehul Bhatt, Director- Research, Crisil Intelligence.
“However, uptake is constrained by the limited presence of original equipment manufacturers (OEMs) and absence of coordinated policy measures to promote LNG usage in commercial fleets,” said Bhatt.
Despite the ambitious government target for LNG usage in the transport sector, the growth has remained rather slow due to lack of policy intervention and infrastructure gaps.
Bhatt added that transport corridor-led infra rollout with viability gap funding, public-private partnership models to de-risk early investments, and aggregated demand assurance through pooled fleet procurement platforms could unlock scale in the LNG-powered HDV segment.
India aims to increase the share of natural gas in its total energy basket to 30 percent by 2030, compared to 6-7 percent at present.
