NITI Aayog bats for incentives for LNG-fuelled commercial vehicles

NITI Aayog has proposed a range of financial and non-financial incentives, expanding the scope of the Production Linked Incentive Scheme to include LNG-powered vehicles and creating a demand pool to encourage the use of liquefied natural gas (LNG) in medium and heavy commercial vehicles.

It said in its report, prepared jointly with the embassy, that this will help reduce carbon dioxide emissions and contribute to achieving the national goal of a gas-based economy by increasing the share of natural gas in the primary energy mix to 15% by 2030.

NITI Aayog

According to NITI Aayog, India's rapidly expanding truck market, which is expected to quadruple from 4 million trucks in 2022 to nearly 17 million trucks in 2050, offers tremendous scope to reduce emissions and encourage investments for growth.

In its report on “LNG as a transportation fuel in the medium and heavy commercial vehicle sector,” the government research center proposed setting up a demand aggregator for the purchase of LNG trucks, similar to Energy Efficiency Services (EESL) in the electric vehicle sector.

“This can generate initial demand for the LNG project and provide sustainability for LNG retail outlets,”it said.

Proposing a series of tax incentives, the Aayog called for reducing VAT on the sale of LNG for heavy vehicles to 5% and bringing the retail price of LNG within the ambit of 5% GST. "It will be possible to achieve the required harmonization of tax rates across states, thereby effectively reducing the operating costs of these vehicles," it said.

According to Aayog, the GST reduction scheme may be limited to the first 5,000 LNG trucks sold. “In addition, accelerated depreciation of LNG vehicles can be provided along with duty relief, accounting for more than 10% of the total cost of ownership,” the report states.

Talking about making LNG vehicles eligible for PLI benefits, the report says there is a need to include LNG-powered vehicles in the list of advanced automotive technology vehicles eligible for the Production Linked Incentive (PLI) program. “This will provide a major boost to OEMs to manufacture and produce additional LNG-powered vehicles,” it said.

“Access to priority lanes, preferential right of way, eco-marking, and colored license plates could be some of the non-financial incentives to encourage the use of LNG vehicles and extend the useful life of LNG trucks to another five years post 15 years,” it said, citing similar initiatives in China, Spain, Italy, and the Netherlands.

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