India Reduces Vehicle Pollution by Subsidizing LPG

India’s population of 1.36 billion is the second largest in the world and, with one of the highest growth rates, is expected to surpass China by 2030. While the population is over 70% rural at least 25 cities have populations of over 1.0 million and many are among the world’s most polluted urban areas. Vehicles account for most of the pollution with more than 75 million cars, trucks, buses, taxis, two-wheelers and three wheel rickshaws growing more rapidly than the population.

Alternative fuels are just one of the many measures initiated by the Government of India to reduce vehicular pollution. The Government of India has approved Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG) as alternatives to gasoline and diesel.

LPG is subsidized in India and in 2006-07 LPG prices were approximately ½ of gasoline prices. The price advantage has lead to triple digit growth of LPG in the transportation sector. There are over 1.0 million vehicles operating on LPG in India however only about 350,000 have been retrofitted in compliance or produced by OEM’s. The demand for LPG as a vehicle fuel has been so high that the remaining vehicles were converted illegally and many use domestic propane.

The industry is challenged to meet the infrastructure requirements beyond the major centers with over 350 refueling stations in place primarily in the urban centers. The vehicle manufacturers in India are now beginning to produce LPG powered vehicles with major companies such as Maruti (the largest car manufacturer) and Bajaj (two wheelers, three wheelers and rickshaws) producing factory equipped LPG vehicles and it is anticipated that GM and Tata will launch LPG powered vehicles in the near future.