This is different from the Agha Waqar drama, but it's not the complete story also.
You see, you take an air tank, and fill with air with VERY high pressure, at a station (just like CNG, but CNG pressure is not *that* high). Now when you release that air, the pressure will rotate the relevant engine parts, and make the car go. They are using the air for *pressure*, not as fuel, like agha waqar is scamming us, pretending to use water as fuel.
Till there the science is okay, no fake science, just like water pressure can make electricity in a dam. (not exact analogy, but you get the idea)
The problem is, the tank. The air needs to be at VERY high pressure, and that's dangerous. Even a small leakage problem could blow up the car. We are already pushing it with CNG, but still, at least tanks for CNG are mostly okay, and as long as we keep pressure at the regulated ~200bar, and used approved tanks, there are no problems
(I have only heard of one incident with CNG tank in Pakistan, and that was early on. Thankfully people have learnt their lesson and not trying to mess this up)
Other problems include running the station, (How do you fill the main tank of the station) in a safe (bigger tank blows, Station could flatten) and economical way (it's costly to get that HIGH pressure, this not your small cycle tube filling station, what if it costs more electricity to fill the damn tank, then to just use petrol in the car)? And transferring the high pressure air from station to tank, from station to car in a safe way (which will take more time than filling CNG tank).
Also, I have heard the range is not good, (either you have to increase the pressure *even* more, or you have to use much bigger tanks; also, the weight makes it heavy) but if you have a lot of Air stations, and your daily commute is not that big, I guess it could work.
The problems with the tanks is also why Hydrogen cars fail to come to market, you need high pressure tanks like ~700 bars. Now not only is the high pressure alone sufficient to blow up the car if it fails, but it can also burn and make the explosion worse. Also, unlike air, which you can just get on the spot, Hydrogen must be made and transported, which is another headache.
If they can figure out how to make tanks *safe*, then things will improve, but people in the west don't like 700 bar tanks in the cars, infact they don't even like 200 bar CNG tanks, which why CNG is not *that* popular there, they are afraid of tanks blowing up!
This a simple story, and there are a lot of other aspects of course (energy density of fuel, and what not), but tanks are an issue to. If TATA can fix that, (not sure though, see the burning nano pic above) then they can succeed in dense cities with small commutes.