A project of plying transport buses in Gujarat on compressed natural gas (CNG) is unattractive and unviable, concluded a feasibility report conducted by the Gujarat State Petroleum Corporation (GSPC) and the Gujarat State Road Transport Corporation (GSRTC).
"It is also proposed that the state government should exempt CNG from sales tax (charged at 20 per cent at present) which will yield a distinct operating cost advantage to CNG and it will mitigate the capital cost disadvantage partially," the report said.
The report says: "In the limited context of GSPC-GSRTC operation, using CNG it is not an attractive proposal because GSRTC faces the prospect of a considerably enhanced price of a CNG bus and suffers a fuel cost disadvantage in the first three years."
Surat was selected under the name 'Surat Operation' for this project on account of the availability of sufficient gas in the city.
"The operation should be viewed as one which has potential to combat pollution and become economically viable in the medium term. We have chosen Surat because gas is available there. If through appropriate policy support, Surat operations become successful, it can be extended to other parts of Gujarat," it said.
"We have gas grid project which offers opportunity for an extensive CNG station network. The Surat operation, in the context of gas grid project, is also a desirable seeding operation. Given the pollution combating significance of CNG and the potential for creating a state-wise network of CNG stations through the gas grid, the state government needs to extend their support," the feasibility report added.
The report further mentioned that GSRTC faces real cost disadvantage of Rs 181 lakh in present value terms. While it gains in subsequent years, it has a cumulative negative cash flow of Rs 599 during the first four years. The GSRTC programme encompasses 250 buses.
It therefore proposed that the state government should extend an upfront financial incentive of Rs 2 lakh per bus to GSRTC for acquiring and operating CNG buses. A gross provision of Rs 5 crore by way of financial incentive to GSRTC needs to be made to support its CNG operations, the report observed.
There is a considerable scope for policy action by the central government. However, such action may take long to concretise and hence we have not considered its impact on GSRTC's economics of CNG profitability, GSPC-GSRTC report added.
The salient details of concessions which central government can provide were summarised as under:
(a) Equipment purchased and exclusively utilized for manufacture of CNG kits or assembly of CNG engine and other parts should be exempted form excise duty, import duty, central sales tax. These add up to approximately 30 per cent of the cost of a CNG kit or dedicated engine;
(b) vehicles equipped with CNG engine or kit and certified by RTO should be exempted from road tax for a minimum period of five years;
(c) the custom duty , counterveiling duty and excise duty on equipment bought exclusively for compression or dispensing CNG should be waived. Such duties from 25 per cent of the equipment cost and 18 per cent of the project cost of a CNG filling station;
(d) a flat subsidy of Rs 50,000 should be provided by Central government for replacing a less than 8 year old diesel bus with a CNG engine bus, and
(e) these measures fall within the domain of central government and have potential to bring down the capital cost of a CNG bus by around Rs 2 lakh and the project cost of a CNG filling station by 18 per cent.
