CNG's Steady Growth Amidst India's Electric Vehicle Surge

Compressed Natural Gas (CNG) is poised for continued growth as an automotive fuel in India, even as electric vehicle (EV) adoption accelerates across major states, according to a recent analysis by Nomura. The report underscores that state governments, notably Delhi and Mumbai, are expected to foster aggressive EV policies aimed at curbing escalating air pollution.

While these initiatives may exert pressure on CNG proliferation, analysts maintain that both fuel types could coexist harmoniously in the years ahead. The report notes, "CNG as an auto fuel could grow alongside EVs...EV policies by states to continue pressuring CNG growth." Already stringent in its environmental measures, Delhi has banned diesel vehicles older than a decade and is contemplating restrictions on CNG vehicles as part of its clean energy agenda.

Mumbai, with its typically superior air quality due to its coastal location, may focus its EV policies more on reducing liquid fuel usage like petrol and diesel, rather than targeting CNG in the short term. The report suggests this could serve as a policy tailwind facilitating the adoption of both CNG and EVs in Mumbai.

Further, the ongoing High Court-supervised committee on EV adoption in Maharashtra has seen involvement from Mahanagar Gas Limited (MGL), a principal CNG supplier. During a recent investor briefing, MGL's management conveyed optimism that CNG could gain from upcoming state EV policies, which might encourage a multi-fuel transition rather than a sole focus on electric vehicles.

The report also identifies a significant development for gas suppliers: the potential inclusion of natural gas under the Goods and Services Tax (GST) regime. Currently, natural gas is taxed under a mix of state VAT, central excise duty, and central sales tax. Incorporating it into GST would streamline the tax structure, eliminating these layered taxes and potentially reducing the overall tax burden for businesses.

(With inputs from agencies.)