While global transportation energy consumption is still dominated by petrol and diesel, Auto LPG has over the past two decades emerged as a viable alternative. In fact, Autogas is today the most popular alternative to petrol and diesel for passenger cars and vans worldwide. Its demand reached around 27 million tonnes in 2019, almost four times than in 2000. The emergence of Auto LPG as the third most popular automotive fuel has not happened by chance. It has been the result of conscious efforts by a number of countries to actively encourage its usage for its environmental benefits as well as inherent practical and cost advantages over conventional and other alternatives. While Russia, Turkey, South Korea, Poland and Italy are the most widespread users of Auto LPG, Japan, Australia, Mexico and the USA are also furthering the trend by promoting eco-friendly fuel.
In India, the usage of Auto LPG has remained much below its potential. India consumed 83.5 million tonnes of diesel and 28.3 million tonnes of petrol in 2018-19 while its consumption of Auto LPG stands at around 0.42 Million Tonnes. In contrast, South Korea consumes almost 4 million tonnes of Auto LPG.
However, a number of factors have in recent times have served to underline the positive potential for Auto LPG in India. The need for an environmental clean-up has never been more pressing. On the other hand, record-high prices of petrol and diesel have forced consumers to seek cheaper alternatives (Auto LPG being almost 40% cheaper than petrol). Even as the government seeks to find a balancing formula between BS-VI today and electric mobility in the future, Auto LPG turns out to be just the right fit at this juncture. That auto LPG is even cleaner than the BS VI-compliant petrol as also cheaper must be instant food for thought for policymakers.
Assured supply-side security
For years, auto LPG had remained on policy margins with the insecurity of supplies and the price volatility being the main roadblocks. However, now that the supply-side security has been firmed up owing to the US’ shale gas discovery and the consequent ramping up of production, there has never been a better time to promote auto LPG as an alternative auto fuel. With the US shoring up its position as the world’s biggest producer of LPG with an output of 76 million tonnes and exports of over 34 million tonnes coupled with price levels coming down to even below $500/t, the problematic legacy issues have been resolved. In fact, even when the imposition of lockdown had precipitated a more than 200% jump in demand for a refill, the fuel retailers had been able to assert confidently that there was no shortage.
Scaling up of LPG infrastructure within the country
In the last few years, riding on the mammoth Ujjwala programme, an extensive LPG infrastructure has been built which is only going to be scaled up further in the future. Not only are there more import terminals, but there are also more bottling plants, distribution channels and retail outlets than ever before.
EV’s viability further complicated by geopolitical/economic disruptions vis-à-vis China
Although EVs have been bandied about as the future of mobility, there is no getting away from the fact that EVs are not yet a feasible alternative in the immediate future. To start with, pricing is one of the biggest deterrents. According to BloombergNEF research, price parity with gasoline-powered vehicles by electric cars won’t be achieved until the early 2030s. Then range anxiety is another hurdle implying that people are also uncertain about the reliability of the vehicle to take them to their destination without the need for recharging. Relatedly, charging is a huge challenge given the country’s very limited charging infrastructure. That the charging infrastructure required for electric two-wheelers and three-wheelers is different from that of four-wheelers makes it even more complicated.
Given the almost total reliance on imports for lithium-ion batteries for EVs, it is impossible to give an instant booster shot to an independent electric vehicle ecosystem within the country. Although the government is contemplating measures such as setting up of gigafactory-type plants and levying import tariffs on lithium ion-cells with a view to spur domestic production, it will take years for the results to show. The economic slowdown has only reduced fiscal space for the government. At the same time, the scarcity of raw material supplies such as lithium and the inordinate dependence on China has been a stark reality. China has been absolutely dominant vis-à-vis the EV supply chain producing around 60% of the world’s lithium through the acquisition of mines and assets across the world. It is said that even today, more than half of the components required for an electric scooter are sourced from China but the geopolitical volatility stemming from China has underlined the fragility of supply chains.
Removal of policy bottlenecks for LPG is the immediate need
Even though there is a compelling case for promoting Auto LPG in India, certain policy bottlenecks have prevented the fuel from going mainstream. The adverse Type Approval norms governing the retro-fitment of LPG/CNG conversion kits need to be reformed and brought in line with the European norms. At the same time, the high rates of GST on conversion kits (28%) and Auto LPG (18%) need to be reduced to make vehicle conversions as well as the fuel cheaper.
Make no mistake! LPG can be a shot in the arm for India’s pollution hit cities. It has almost 50% fewer PM emissions than CNG and petrol, and 80% lower PM than diesel. Until a full-fledged EV ecosystem takes off, Auto LPG must drive the government’s mobility policy forward.
Author: Suyash Gupta, Director General, Indian Auto LPG Coalition
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