NITI Aayog report bats for incentives to promote LNG as transportation fuel

Government think tank NITI Aayog has pitched for providing fiscal and non-fiscal incentives to promote liquified natural gas (LNG) as a transportation fuel in medium and heavy commercial vehicles.

In a report titled LNG as a Transportation Fuel in Medium and Heavy Commercial Vehicle', the Aayog said the government's think-tank suggested setting up a demand aggregator company for buying LNG trucks, similar to Energy Efficiency Services (EESL) in the electric vehicle sector.

According to the Aayog, India's rapidly expanding trucking market, which is expected to more than quadruple, from 4 million trucks in 2022 to roughly 17 million trucks by 2050, offers immense scope for lowering emissions and encouraging investments for growth.

The Aayog suggested that priority lane access, for LNG vehicles can be provided as non-fiscal incentives to promote LNG.

"Major cities and roadways need to be recognised, and such priority lane access can be tested first in major cities and roads," it said.

The Aayog also recommended that heavy-duty trucks running on LNG can be allowed to enter cities to incentivise alternative fuel adoptions, while diesel trucks can be banned and/or levied with entry charges as has been done in Delhi by implementing the environmental compensation charge (ECC) for all diesel heavy-duty trucks.

The report noted that by reducing the VAT on sale of LNG to heavy-duty vehicles (HDV) to 5 per cent and by bringing the retail LNG price under the ambit of the 5 per cent GST bracket, it will be possible to achieve the required tax rate harmonisation across states, thus effectively bringing down the LNG HDV operating costs.

"Once the cost of LNG HDVs is reduced through aggregator model and ecosystem is established, private sector participation can come in all elements of the business model," it added.

The push for emissions reduction has gained significant momentum in the recent years and India has shown strong climate leadership at global forums.