Rising CNG prices are unlikely to impact the sales of CNG-powered passenger vehicles (PVs) and commercial vehicles (CVs) owing to their lower running costs in comparison to petrol and diesel models. Moreover, the network of CNG stations is growing, according to industry executives and experts. The price of CNG was increased by Rs 2 per kg in the national capital on May 21, taking it to Rs 75.61 per kg.
It was the 13th hike announced by Indraprastha Gas (IGL), the company retailing CNG in the capital and adjoining cities, since March 7, resulting in a cumulative rise of Rs 19.60 per kg.
Shashank Srivastava, senior executive director – marketing and sales, Maruti Suzuki India, told FE that even though the CNG prices have increased, the running cost for CNG vehicles remains very competitive in relation to those for petrol and diesel.
“It is about Rs 2 per km against almost Rs 5 per km for petrol and diesel and still about 30% cheaper than petrol and diesel. As long as the price gap between diesel or gasoline and CNG remains, people will prefer CNG vehicles,” Srivastava said.
Maruti, which sells nine CNG models, currently has 130,000 pending bookings for such vehicles.
The share of CNG models in the industry-wide PV volumes was around 8% in FY22 and 6% in FY21, while their contribution to the CV volumes was nearly 14% in FY22 and less than 10% in FY21, according to Crisil Research.
Tata Motors witnessed a sharp rise in the demand for CNG-powered trucks in FY22, with the share of CNG models increasing in SCV (small commercial vehicle) cargo segment from approximately 7% to 29%, and in I&LCV (intermediate & light commercial vehicle) segment from less than 20% to more than 40%.
“The shift in the fuel mix was on account of increasing differential between CNG and diesel fuel prices, driving the operating economics in favour of CNG vehicles in addition to the improving availability of CNG fuelling stations across the country,” a Tata Motors spokesperson said.
The spokesperson noted that while the CNG price fluctuation may have a short-term impact on the fuel mix, the company expects the growth in CNG salience to continue in the mid-term.
This is due to the increasing availability of CNG stations, rising products with CNG powertrain, total cost of ownership (TCO) advantage over diesel and the restriction on the entry of diesel vehicles in certain cities.
Sanjeev Kumar, head – MHCV, Ashok Leyland, said that the price differential between diesel and CNG is crucial to the operating economics of our customers.
“We estimate that as long as the differential is more than Rs 20, CNG will continue to be preferred by truck owners from a purely economics point of view, especially in states around Delhi-NCR as they need to pay NGT tax of Rs 1,500 every time they enter Delhi,” Kumar said.
However, he added that with lower differential customers may shift to diesel, especially in northern and western markets.
The Union government cut excise duty on petrol by Rs 8 per litre to Rs 19.1 per litre and that on diesel by Rs 6 per litre to Rs 15.8 per litre on May 21. While petrol now costs Rs 96.72 per litre in the national capital, diesel costs Rs 89.62 per litre.
“CNG distribution network is well established in the north as well as west. However, it is getting established in the south and east and these markets will grow in terms of CNG volumes especially for trucks. Intra-city buses will continue to be on CNG,” Kumar said.
Pushan Sharma, director, Crisil Research, said the rising CNG prices will not impact PV and CV volumes to a large extent as petrol and diesel prices too are on the higher side, maintaining running cost viability for CNG models by Rs 1-2 per km compared with diesel.
