LPG on thin ice

THE VACC has joined a crescendo of calls for the former Howard government’s successful LPG conversion subsidy to continue beyond the federal budget in May.

A News Limited newspaper report earlier this month claimed a federal government “razor gang” had decided to dump the $670 million LPG Vehicle Scheme ahead of its scheduled conclusion in June 2014, bringing a potential saving of around $400 million.

It said the government's Expenditure Review Committee had called for the axing of the LPG subsidy, as part of its goal to slash up to $14 billion from the next federal budget in order to cover the government’s election promises - one of which was the $500 million Green Car Innovation Fund that commences in 2011.

Prime minister Kevin Rudd said in January that severe cuts would be made to government spending to ease pressures on inflation, and it has been reported that the PM will decide the fate of the LPG subsidy when he returns from his current overseas trip.

Introduced in August 2006, the LPG subsidy led to a bottleneck of demand for LPG conversions, which attracted a $2000 rebate (through Centrelink or Medicare offices once the conversion was paid for) for LPG conversions in new or used private vehicles, and a $1000 rebate for factory-fitted LPG non-business vehicles. The average LPG conversion cost to customers is $1000 after the subsidy.



Left: VACC executive director David Purchase.

Industry sources say at least 120,000 vehicles have now taken advantage of the subsidy, at a cost of about $240 million. As well producing an average of 15 per cent less greenhouse gases than petrol, LPG Autogas is usually less than half the cost of petrol, which at some Sydney sites this month hit $1.60 per litre. Some estimates say long-haul commuters can save up to $200 by converting to LPG and that Holden Commodore owners would be $1764 better off a year if they travel 23,000km.

GoAuto last month exclusively reported a call by one of Australia’s most experienced automotive engineers, former GM Holden advanced engineering chief Dr Laurie Sparke, for Australian car-makers to concentrate not on the development of petrol-electric hybrid vehicles, but on more vehicles that run only on liquefied petroleum gas (LPG) or compressed natural gas (CNG), both of which he said were readily available in Australia – unlike petrol.

The VACC this week joined the federal Liberal opposition party, LPG Australia and the government’s own resources and energy minister, Martin Ferguson, in support of the LPG subsidy.

“Scrapping the subsidy makes no sense at all,” said VACC executive director, David Purchase. “LPG is cleaner than petrol, with less harmful emissions, so there is an environmental benefit to moving the fleet to LPG.

“With current petrol prices hovering at just under $1.50 per litre, a motorist running a car on LPG can save as much as 77 cents per litre. Assuming an average car’s fuel fill of 40 litres occurs once a week, after factoring in the 10 per cent loss of economy on LPG, the annual savings are around $1441.44. If you keep your car, as most Australians do, for five years, that’s a massive saving of around $7210.

“If the federal government scraps the LPG subsidy, they will not just be hurting the motorist. They’ll be inflicting more harm on an already fragile economy.

“LPG is abundant in this country. With Australia’s massive trade imbalance being swelled by our dependence on imported petrol, using locally produced LPG would greatly assist our balance of payments problems and reduce pressure on inflation,” said Mr Purchase. The chief executive of LPG Australia, Stephen Woodward, said that, if anything, the LPG subsidy had been more successful than expected and that Australia will eventually pay millions more if car owners do not make the switch to LPG. While alarmed at the prospect of losing the subsidy, Mr Woodward said he has been unable to confirm the reports.

“We've been trying very hard to confirm it but the budget is a secret document and it would be improper for government to say in advance whether it was true or not. They're not ruling anything in and they're not ruling anything out,” he told ABC Radio National.

Shadow energy minister, senator David Johnston, said two weeks ago that the Rudd government will prove it is “all cluck and no egg on the environment” if it scraps the subsidy.

“If the Rudd government cuts the program to save money then all the song and dance around signing Kyoto will prove what the opposition has been saying all along – that Labor is all symbolism when it comes to making the big decisions on the environment,” said Mr Johnston. “The LPG subsidy has been a hugely successful program and it would be a very bad decision to scrap it for short term monetary savings - bad news for motorists and bad news for our air quality.

“Kevin Rudd has been receiving bouquets for his decision to sign Kyoto, but only a few months on when he’s needed to put the environment before the almighty dollar he can’t deliver,” he said.

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