LNG vehicles have a driving range of 600-1000 kms in a single fill, giving it an edge vs its more well-known equivalent Compressed Natural Gas (CNG). LNG trucks had seen an impressive push in China, Europe and US and now India also seems to be catching on.
While the global race to decarbonize transportation is in full swing, heavy-duty trucking presents a special challenge. Heavy duty trucks constitute only 1 per cent of total global vehicles, but it accounts for ~23 per cent of global transport emissions1.Decarbonization technologies for this hard-to-abate sector like electric battery and hydrogen are also at a nascent stage and fleet substitution is going to be a long-drawn process. In this scenario, one viable solution could be Liquified Natural Gas (LNG). LNG vehicles have 30 per cent lower CO2 emissions, 90 per cent lower NOX and PM emissions and 100 per cent lower SOX emissions vs diesel2 and is practically theft-free due to its cryogenic nature. Moreover, existing diesel vehicles can be retrofitted to use LNG.
LNG vehicles have a driving range of 600-1000 kms in a single fill, giving it an edge vs its more well-known equivalent Compressed Natural Gas (CNG). LNG trucks had seen an impressive push in China, Europe and US and now India also seems to be catching on.Inter-city road transport represents a whopping ~65 per cent of the 1600 crore Indian logistics market, with ~2.5 lac trucks sold annually in the country. Decarbonizing this long-haul transportation sector will be crucial for India to achieve its Net Zero ambitions. Multiple corporates like Dalmia Cements, Nestle, Ultratech etc. have started inducting LNG trucks in their fleet to meet their ESG targets. However, such initiatives are few and far in between, with most being pilots.
For example, recently MSRTC released a tender for conversion of 5000 diesel buses into LNG, but it had floated a similar tender back in 2021 which had got scrapped. When we speak to stakeholders, there is widespread concern about the lack of infrastructure, volatile LNG prices and overall nascent ecosystem. Four key elements need to come together to drive adoption of LNG in long-haul transportation in India:
Government policy will be a key driver: Like any nascent technology, LNG needs policy support to break the initial adoption barriers. In 2021, GoI released the draft LNG policy with ambitious targets (1000 LNG stations and 10 per cent share of LNG vehicles in long-haul heavy-duty trucks) and few strategies to promote use of LNG in transportation such as dedicated highways/lanes, promotion of research and partnerships etc. However, it lacked concrete measures like mandates or any financial incentives/dis-incentives to manufacture/use LNG vehicles and set up LNG infrastructure or a definite time-bound action plan. The policy is also yet to be finalized. For LNG adoption, it will be critical to first have clear Government policy on the topic with associated incentives / penalties. For example, In Germany LNG trucks are subsidized at purchase and exempted from road tax.
- OEMs speeding up investment in LNG trucks: In September, 2022 Blue Energy Motors launched India’s first LNG-fueled truck which they have supplied to companies like Dalmia. Ashok Leyland also obtained ARAI certification for their LNG truck around the same time, though the vehicle is yet to be commercially launched. Tata Motors launched its first LNG bus in 2016, but limited traction has happened since. With the Government promoting various kinds of fuel (biofuels, hydrogen, electric etc), most auto OEMs have taken a wait and watch approach. Hence, as policy becomes clear with aligned incentives, OEMs should also start to speed-up the development and manufacturing of LNG truck variants. There is significant scope here for Indian OEMs to also partner with global pioneers in LNG trucks such as Iveco to fast-track time to market.
- Accelerate infrastructure set-up: For a transporter, supply and service infrastructure availability is of prime importance. Some players like the OMCs, GAIL and its subsidiaries, BLNG, etc are setting up almost 50-70 LNG retail outlets across the country, mostly driven by Govt directive. However, the same needs to be increased manifold (considering stations being set up are initially mostly small-sized which can only serve around 40-50 trucks per day) to cover major highways and transport hubs to enable LNG corridors and avoid station idling. It is equally vital that the stations are set up along with retrofitting and servicing facilities to offer a holistic solution to the transporters and logistics companies.
- Ensuring LNG supply security at reasonable rates: While LNG trucks have a higher upfront cost, the total cost of ownership is today positive due to lower running cost, driven by lower LNG prices and better mileage vs diesel. However, with domestic gas production remaining almost stagnant, India is heavily reliant on imported LNG. Hence, it will be critical to build supply resilience to weather out global fluctuations in LNG prices (e.g. the unprecedented rise in spot gas prices post the Russia-Ukraine war) and keep LNG retail prices attractive compared to diesel. This will require key players like GAIL and OMCs to collaborate to build storage capacity, negotiate long term sourcing contracts, navigate LNG trading and exploit opportunistic plays.
The potential for LNG is endless, but today it is stuck in a chicken-and-egg problem with supply side players like OEMs and fuel retail companies first trying to ensure demand and demand side players like transporters, logistics service providers and corporates being skeptical about vehicle availability, serviceability, and operability. It is time for some pioneering companies to step forward and break this cycle.