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.

Three Key Benefits
1

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)

2

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)

3

Significant Reduction in Pollution

Addressing the environmental footprint of heavy transport:

CO₂ Emissions 15–30% lower
NOx & PM 80–90% lower
SOx Emissions 99% lower

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

01
While crude oil is 30% costlier than LNG at the import stage, the pre-tax sale price of HSD is 5% lower than LNG.
02
Taxes form 9% of LNG prices versus 35% for HSD, resulting in 73% lower tax realisation per unit for the Government when LNG replaces diesel.

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:

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.

Source: PNGRB Report - An Opportunity for LNG in Transport Sector - Dec'2025 Download Report