The recent hike in oil prices in India has led to a sudden increase in demand for CNG/LPG cars. In order to cater to the growing demand for such cars and also to cash in on this opportunity, vehicle manufacturers in the country have launched CNG/LPG variants of their existing models. However, the lack of support infrastructure such as an inadequate number of filling stations can hamper the growth of these cars in the country.

Increase in petrol and diesel prices in India have led to a surge for CNG/LPG vehicles. The spur in demand for CNG/LPG cars in India is mainly due to relatively low CNG prices as compared to petrol and diesel. In addition, the drop in CNG prices last month has also fuelled the demand for such cars. Also, the running cost of CNG fitted cars is lower than gasoline fitted vehicles. The other major reasons for increase in demand for LPG/CNG fitted vehicles is the growing environmental concern and the Government’s proactive measures to implement Euro-II emission norms.

There are over 354,000 CNG vehicles in India and majority of these vehicles are located in Mumbai and Delhi. However, there has been growing demand for these vehicles in tier II cities like Vijayawada, Vadodara, Agartala, Kanpur, Bareli and Lucknow. The demand for CNG vehicles is not just limited to government mandated taxis and other public transport means, as in New Delhi, but an increasing number of private buyers are also opting for this alternative.

Though there is a surge in demand of CNG fitted vehicles, the support infrastructure is relatively weak with only a limited number of gas filling stations in India. Eyeing the prospective demand for CNG stations, the state-run gas transporter Gas Authority of India (GAIL) Ltd is planning to invest US$8 million in setting up CNG stations along highways and has also identified 230 cities for the city gas distribution project.

In the broader perspective, the demand for CNG fitted vehicles in India will increase as there is an ongoing surge in international oil prices. This, in future, is likely to result in a favourable impact on growth of CNG/LPG fitted vehicles in India. With companies like GAIL and Reliance, making huge investments, in the near future this is expected to remove the infrastructural bottlenecks.

For more information see the Renewable Energy: Global Industry Guide