Switch to BS VI fuel will cost ₹13,000 cr: IndianOil

Indian Oil Corporation will invest close to ₹13,000 crore to upgrade its refineries and produce BS VI grade automotive fuels from April 1, 2020.

The investment figure does not include the amount required for the company’s newest refinery in Paradip, Odisha, the company’s Director (Refineries) Sanjiv Singh said on Wednesday.

“The move to BS IV would require an investment of ₹7,000 crore. This is already being done as we would need to sell BS IV across the country by April 1, 2017. Further, the move from BS IV to BS VI would require ₹13,000 crore of investments,” Singh told reporters.

Last week, the Ministry of Petroleum and Natural Gas, Ministry of Heavy Industries, Ministry of Environment Forests and Climate Change and Ministry of Road Transport and Highways agreed to implement the BS VI emission norms by April 2020 instead of the earlier date of April 2021. It was also decided to move straight from BS IV which will be implemented by 2017, to BS VI. However, an official notification is yet to be issued.

Public sector oil marketing companies are expected to invest ₹28,750 crore to make the switch to BS VI automotive fuels.

IndianOil’s early estimates indicate that the switch would make diesel 63 paise a litre more expensive, while petrol will be ₹ 1.45 a litre costlier. This includes both the capital expenditure and the increase in operational cost.

“For producing BS VI, operation costs also go up due to higher energy consumption. We will try to be as efficient as possible. Also the capital investment will not be passed through,” Singh said.

He admitted that the April 1, 2020, target for BS VI fuels is ‘extremely challenging’. The company’s internal studies for the upgrading the refineries are expected to be completed by March as the modifications will take 3-4 years for completion.

IndianOil might also consider clubbing capacity expansion at its refineries with the BS VI upgrade, Singh added. Meanwhile, at its Paradip Refinery the petrochemical plant is being constructed. The polypropylene plant with 700,000 tonnes per annum capacity will be in place by 2017-18. Singh said board approval would soon be sought for an Ethylene Recovery Unit to manufacture Mono-Ethylene Glycol.

This would require an investment of ₹3,752 crore and could be in place by 2020-21.

A large capacity refinery on the west coast of India, developed by the three public sector oil marketing companies is a win-win situation for all, said Singh.

While he did not give the size of the refinery that could be set up jointly by IndianOil, HPCL and BPCL, Singh said, “Right now it is beyond the thinking stage but not yet at the DPR (detailed project report) stage.”

He said IndianOil was independently working on a concept of a west coast refinery and had engaged Engineers India Ltd.

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