Maruti to talk CBG production expansion with Centre: Suzuki Motor

Maruti Suzuki India (MSIL) will hold discussions with the Centre and state governments on how the production of compressed biogas (CBG), which can be used in vehicles that run on compressed natural gas (CNG), can be expanded in the country, its majority shareholder Suzuki Motor Corporation (SMC) said.

The demand for CNG vehicles has been rising significantly in the country. MSIL sold 145,000 CNG vehicles in the first quarter of 2024-25, marking a 28.3 per cent year-on-year (Y-o-Y) growth.

This contrasts with its total vehicle sales of 427,000 units in the first quarter of 2023-24, which grew 1.2 per cent Y-o-Y.

The physical production of CBG currently faces significant challenges in the country. These include arranging feedstock, transporting it over distances, and producing organic manure within specific timelines. 

To address these challenges, SMC in 2022 signed a memorandum of understanding (MoU) with National Dairy Development Board (NDDB) and Banas Dairy to start a project to produce CBG by refining methane from biogas generated through the fermentation of cow dung.

Under this project, four biogas production plants are planned to commence operations in Banaskantha, Gujarat, starting in 2025, with an investment of Rs 2,300 crore.

“The backlog for CNG vehicles tended to be long previously, but CNG component supply capacity has been improving since the second half of last year,” SMC told analysts during a conference call on August 6.

The Japanese company said that component supply for Ertiga improved from the beginning of this year, allowing it to bolster production.

“Ertiga is manufactured at the Manesar unit, which has increased its capacity by 100,000 units since last year. Currently, the annual production capacity of CNG vehicles is about 600,000 units,” SMC elaborated.

SMC said the July 5 order of the Uttar Pradesh government wherein it removed the road tax of about 8-10 per cent on strong and plug-in hybrid cars. This has reduced the on-road prices of hybrid cars by up to Rs 4 lakh in the state.

“We have also heard news of a bill in Uttar Pradesh to provide state tax benefits for HEVs (hybrid electric vehicles). At the same time, biogas, which we are promoting, can be applied to CNG vehicles, and we would also like (to) appeal to it as an alternative measure to achieve carbon neutrality in the future. We will discuss this with the government and discuss how it can be expanded,” it said.

SMC would like to increase the supply of CNG cars as it would like to connect them to the increase in CBG production. This would assist in lowering the fuel per km cost for car owners and would assist in significantly reducing carbon emissions.

“In terms of profits, CNG vehicles have become profitable to some extent, and this is also a major reason to increase the number of CNG vehicles. Since the fuel cost of CNG is considerably lower than that of petrol and the demand from customers is strong, we intend to further expand sales while maintaining a good balance between the two,” it said.

Currently, no vehicle in India runs on CBG. In the last couple of years, Maruti has showcased CBG-run Brezza and WagonR at major auto events in India.

CBG can be used in CNG-run vehicles. However, before being fed into the CNG grid, the CBG has to be tested under a government-set criteria.

Under this criteria, the CBG must have a methane content of at least 90 per cent. The criteria also mentioned the maximum amount permissible for sulphur, carbon dioxide and water vapour in the CBG.

“The current tax structure for passenger vehicles other than EV (electric vehicle) is GST of 28 per cent and compensation cess varies from 1 per cent to 22 per cent depending on the category of the passenger vehicle. There are no special rates currently for biogas-run cars and CNG cars,” Sridhar V, Partner, Grant Thornton Bharat, said.

“With the focus on achieving net zero it will be good to have lower GST rates for the CNG/biogas cars and strong hybrid vehicles since their tailpipe emissions will be considerably less in comparison to ICE (internal combustion engine) vehicles,” he added.