India’s city gas distribution (CGD) companies may hit a roadblock sooner or later. Industry insiders fear that the enhanced policy support for the adoption of electric vehicles (EVs) will stymie the growth of the compressed natural gas (CNG) segment, which forms the largest volume of sales for CGD players.

Industry sources believe that the push for EVs would eventually cut short the CNG story in India, prompting companies to rework their long-term investments in expanding the network of CNG stations.

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CGD players currently depend excessively on CNG. Data shows, For Indraprastha Gas and Mahanagar Gas, which supply gas to Delhi-NCR and Mumbai, respectively, nearly 73-74 per cent of their total gas sales volumes comes from CNG. For Torrent Gas it is 85 per cent and for Adani Total Gas (ATGL) it is a little over 50 per cent.

“Companies had hopped on the CGD bandwagon, eyeing big money in CNG. But CNG vehicles may soon face a perception issue when pitched against an EV. Besides the growing traction, even the power tariffs for charging points are subsidised, thereby giving EVs an edge over CNG vehicles,” said a source declining to be named.

Coexistence of EV and CNG

Yet, CGD players are seemingly not losing heart — at least for the short- to medium term.

The largest of them, Gujarat Gas continues to aggressively expand CNG infrastructure by adding 150-200 stations a year. “In the near term, (we are) focusing more on virgin operating areas for increasing CNG penetration. CNG, with a better developed infrastructure, high affordability, a robust ecosystem in place, will continue to grow at a faster pace. With India’s energy demand going to more than double by 2040, the government and stakeholders are sanguine about the coexistence of CNG vehicles and EVs,” a company spokesperson said. Gujarat Gas is working on increasing CNG use cases in light and heavy commercial vehicles (LCVs, HCVs) and marine vehicles, besides rolling out LNG fuel stations.

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Apart from the Centre’s extended FAME-II (Faster Adoption and Manufacturing of Electric Vehicles) scheme for EVs, various state governments are incentivising EVs and charging infrastructure to leapfrog into e-mobility.

Gujarat was the latest with its ₹870-crore subsidy support to bring nearly 2 lakh EVs — including two-, three- and four-wheelers — on road by 2025. Cars and three-wheelers are seen as major CNG consumers. ATGL sells 50 per cent of its CNG to three-wheelers, 40 per cent to cars and 10 per cent to heavy vehicles.

When asked, however, CGD players prefer to overlook the disruptions triggered by EVs.

Focus on large vehicles

At an investor concall in May, Suresh Manglani, CEO of ATGL, maintained that EVs were at a “developmental stage”. “We believe that it will take a good amount of time before EV ecosystem fully takes off,” he said. Currently, he believes, there is a huge focus on PNG and CNG from the highest levels of the government. “For a couple of years more, CNG would be playing a very, very dominant role and, a couple of years down the line, EV would come in for certain type of vehicles like two-wheelers etc, which will not be market for us,” he said.

Echoing the sentiment during a recent interview with BusinessLine , Jinal Mehta, Director, Torrent Gas, said that any “widespread penetration of EVs in the medium term will be limited to two-wheelers and intra-city buses, which are in any case not a significant target market for CNG. There are inter-city buses, which are unlikely to get converted into EV in near future. I don’t see a threat from EVs capturing a meaningful market share in the next decade.”

For now, the EV segment faces problems of poor availability of charging infrastructure, significantly higher capital cost than petrol or CNG vehicles, and limited availability of models from OEMs. In this backdrop, CGD players expect growth to continue from CNG in the medium term. “EV would start co-existing with us. But still, for many years, CNG would continue to dominate,” Manglani had told ATGL investors.

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