PNGRB: An Opportunity for LNG in the Transport Sector
The Petroleum and Natural Gas Regulatory Board (PNGRB) recently released a pivotal paper highlighting the strategic shift for heavy-duty trucks from HSD (High Speed Diesel) to LNG.
Savings in the Import Bill
Switching to LNG offers 30% savings in the national import bill.
(Crude at USD 10.34/MMBTU vs LNG at USD 7.2/MMBTU)
Savings for End Users
Operational efficiency translates to 22% savings for truck owners and operators.
(Driven by improved mileage, with retail prices per kg / per litre being broadly similar for HSD and LNG)
Significant Reduction in Pollution
Addressing the environmental footprint of heavy transport:
While media headlines focused on the USD 1 billion annual import bill savings, two interesting observations in the report received limited attention and are worth highlighting:
Two Key Observations
Why is pre-tax HSD cheaper than LNG?
Refinery economics and cross-subsidisation
Crude oil is refined into a basket of products (MS, HSD, ATF, LPG, petrochemical feedstocks). Refining margins allow internal cross-optimisation, enabling diesel to be priced aggressively. High-margin products effectively cushion diesel pricing.
Legacy scale and sunk infrastructure advantage
India’s liquid fuel ecosystem — refineries, pipelines, depots, and retail outlets — is largely fully depreciated. As a result, logistics costs per unit are structurally low.
LNG, in contrast, is sold as a single-molecule product, with no scope for internal cross-subsidy, and bears a “new-infrastructure premium.”
Takeaway
As volumes scale up and infrastructure utilisation improves, the LNG base-price gap is likely to compress naturally over time.
Does lower tax incidence on LNG imply a net economic loss for the Government?
Not necessarily. Savings accrue in other forms that bolster the macro-economy:
- Lower import bill: Direct foreign exchange savings.
- Health and productivity: Reduced losses due to lower pollution levels.
- End-user costs: Lower costs help moderate inflation and improve disposable incomes, supporting overall consumption.
- New Infrastructure: Creation of jobs and incremental tax revenues across the new value chain.
Takeaway
Lower fuel taxes do not automatically translate into a net economic loss for the exchequer; they represent a deliberate trade-off in favour of efficiency, sustainability, and long-term macroeconomic gains.