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Archana Chaudhary

MUMBAI, June 13

PUBLIC sector oil companies are reviewing business plans for auto LPG. The companies claim sales of the environment-friendly fuel are suffering due to lack of help from State governments.

"The use of liquefied petroleum gas as a transport fuel requires modifications in the vehicle. Across the world, vehicles have been converted to use LPG only after governments have either made it mandatory or provided tax and other incentives for such conversions. This is absent in India, except in the metros," said a senior BPCL official.

Although oil companies have announced plans to set up 228 auto LPG dispensing stations, officials fear that the cost of setting up the infrastructure — especially in smaller cities such as Pune, Bangalore, Kanpur and Ahmedabad — will be hard to recover unless governments step in.

"This just isn't working. We are looking at a scenario where we will have to invest in setting up infrastructure when there will be no sales. We have to review such investments," the official said.

According to information compiled by HPCL, auto LPG has been slapped with three-tier taxes, which include excise duty, local sales tax and reseller tax. This makes auto LPG less attractive. In spite of the taxes, the fuel is priced at Rs 15.57 per kg and conversion kits cost Rs 23,000 compared to CNG, which is priced at Rs 19.70 per kg and cost Rs 35,000 per kit, in Mumbai.

Also, CNG prices are artificially lowered through subsidies while LPG prices are based on import parity. Even the investment required for setting up dispensing stations stands at Rs 40 lakh for LPG and Rs 130 lakh for CNG.

The Supreme Court had ordered vehicles in Delhi to be converted to compressed natural gas (CNG) and LPG, following reports of unprecedented air pollution levels in the Capital. The Mumbai High Court passed similar orders for phasing out Premier 137D model taxis and three-wheelers, which are older than 10 years.

Although CNG, which received a special mention by the court, saw higher sales, auto LPG remained ignored.

"There is a lot of work that has to be done by the State machinery. This includes introducing legislation asking public transport to convert to auto LPG (like in the case of CNG), ensuring that conversion kits are approved by testing agencies and are available in the market, retro-fitment centres need to be approved by the RTO and lowering of duties and taxes," Mr Subhash V. Sahni, HPCL's General Manager, LPG SBU, told Business Line.

But the most important step, according to officials, would be to ensure that illegal use of auto LPG is reined in. Although official figures are unavailable, oil companies allege that a large number of vehicles in urban and semi-urban India are using domestic LPG in vehicles. But the problem needs to be acknowledged for it to be addressed.

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