This begs a lot of questions:

a: Where will the H2 come from?

b: Why are they doing it -
To make engines cleaner, or
To pad out the CNG with H2 to increase the amount of fuel they can make ?

c: I thought h2 was difficult to store - or does the blend make it less of a problem?

I would have thought India was a bit short of electricity and cannot spare any for H2 production.

Or is it just a crazy report.

From an environmental point of view, this is a good deal. And strategic: India has lots of sunshine (they're also thinking of using their thorium) and can make their own H2, whereas CH4 is sure to come from sources friendly to neither India nor its democracy.

However, I hope they are careful enough to avoid any bad experiences. H2 leaks more easily than methane, and if it does leak it ignites more easily. Not the thing for poorly-maintained vehicles.

(One safety benefit, though: if HCNG leaks it will leave the scene for the sky quicker. Just be sure to park outside.)

Hydrogen increases the flame speed of methane. It may also make it easier to ignite. Easier ignition would allow the use of leaner mixtures, causing cooler combustion and less NOx.

It is a known fact that the addition of a small percentage of hydrogen to gasoline improves the combustion process along with increased power and mileage and reduces polutants to amlost zero, so why wouldn't it be beneficial with CNG.

@mahonj,
I agree. In fact, India imports coal to produce electricity. 2-3 hour blackouts are still a common occurrence, especially in rural areas. On the other hand, having traveled in Indian autorickshaws, I can tell you that this will definitely be a much cleaner alternative to diesels/CNG-only vehicles.

Addition of hydrogen to NG reduces emissions of CO and hydrocarbons, but it is not a big deal to already clean-burning NG. The main advantage is significant reduction of NOx and extremely fine soot (soot is produced if engine is running rich, and much more NOx is produced when engine is running lean).

Hydrogen atoms have ability to reduce NO to harmless N2. This chemistry is universally used in three-way catalytic converters.