Cost-benefit analysis of CNG implementation in petrol cars in Delhi
Student name: Ms Deepti
Guide: Prof M.N. Murty
Year of completion: 2013
Host Organisation: Institute of Economic Growth, New Delhi
Abstract: Rising levels of air pollution in Delhi paved way for the introduction of Compressed
Natural Gas in public transport in Delhi. This move had a positive impact on the
environment as well as led to financial savings due to the lower operational cost of CNG
as compared to diesel and petrol. But now the air quality trends in Delhi have started
deteriorating again which is supposed to have serious repercussions on human health.
The successful implementation of CNG in public transport in Delhi with the
introduction for CNG kits for cars in the market has increased its popularity as a
vehicular fuel amongst consumers. Although CNG has its advantages and
disadvantages, people have started to convert their private vehicles (cars) to run on
CNG. This is the basic crux of this thesis. In this study, an assessment of social costs
and benefits from the CNG conversion of a small car is done by considering two
scenarios with a baseline car, wherein in one scenario, the consumer purchases a
baseline petrol car and operates it on petrol over the lifetime of the car, while in the
other case, the consumer converts the car to CNG and operates it on CNG only. The
NPV comes out to be positive in this case. The analysis is then repeated for two other
cases by examining how the NPV changes as compared to the previous case; first, when
the social premium on foreign exchange is included and second, when the price of
carbon is altered.
