‘Ban on diesel vehicles will spur CNG growth’

By: |
Chennai | Published: December 19, 2015 12:03:00 AM

As about 25% of the diesel sales are derived from cars and UVs, the ban could have an impact on diesel consumption, says Icra report

The recent orders delivered by the National Green Tribunal (NGT) and the Supreme Court imposing conditions on the use of diesel vehicles in New Delhi could spur growth in CNG sales and dampen growth of diesel per se, said an Icra report on Friday.

While the manner in which the auto industry responds to latest set of challenges remains to be seen, the ban on diesel car sales and conversion of all taxis to CNG in Delhi would boost CNG consumption growth in the near term.

Additionally as about 25% of the diesel sales are derived from cars and UVs, the ban could have an impact on the diesel consumption.

This will be a setback for the OMCs as typically diesel accounts for about 40% of overall sales of petroleum products, wherein marketing margin has been on an improving trend of late and was expected to further increase in the medium term. Nevertheless, the impact on OMCs because of lower diesel sales will be partly offset by CNG margin, as some part of CNG gets retailed through their outlet, the report added.

The aforementioned measures could spur growth in CNG volumes as a large number of taxis plying in NCR are to be mandatorily converted to CNG. It is estimated that about 30,000 non-CNG cabs are operating in Delhi-NCR which would be replaced/converted to CNG. With a demand of 15-20 kg/day the additional volumes could be about 5 lakh kg/day, which is significant in relation to IGL’s CNG sales of 22 lakh kg/day.

Moreover, the Delhi government has decided to restrict only even numbered vehicles to ply on even numbered dates and odd numbered vehicles to ply on odd numbered dates from January 1, 2016 for a trial period of 15 days.

As a result, the need to strengthen the public transport system is clearly an imperative which may result in expansion of the Delhi Transport Corporation bus (average consumption of 70 kg/day of CNG per bus) fleet over the next 1-2 years, the Icra report pointed out.

The apex court decision will add a fresh lease of life to the CNG business in Delhi-NCR, which has of late been slowing down due to the reducing price differential vs liquid fuels (MS & HSD) especially on the private vehicle front.

Mandatory conversion, weakening sentiments towards diesel vehicles and reducing gas prices, however, could arrest this drift and give a fillip to the CGD sector.

With the alarming levels of pollution being brought in sharp focus, the Union government could implement other measures to encourage use of CNG over other fuels such as fast track clearance of CNG stations, rapid roll out of CGD in areas adjoining Delhi such as Gurgaon, Faridabad, faster roll out of CGD in other cities which could provide impetus to the CGD sector, the report said.

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