Economy

BS VI policy: A clean-up plan or tall order?

Murali Gopalan Mumbai | Updated on January 09, 2018 Published on November 15, 2017

The abrupt shift in policies is a matter of concern SHUTTERSTOCK

Will auto and oil marketing firms be able to adapt to the new norms?

The intention could be well meaning, but it is the abrupt shift in policy that is worrying. In a bid to clean up the foul air in Delhi, the Petroleum Ministry has decided to do its bit by directing the oil marketing companies to supply Bharat Stage VI fuel in the Capital from April 1 next year.

This is a good two years before its actual implementation date at a time when the key stakeholders involved – the auto sector and oil companies – are working overtime to make this a reality.

It is also a well-known fact that India will be jumping directly to the BS VI regime while bypassing BS V in the process. The move to supply BS VI fuel in Delhi two years ahead of this already stringent deadline is also a signal that the refineries are actually ready to meet this tall order.

Infrastructure ramp-up

This literally means that over the next four months, they will need to get their supply chain ready for this transition, which includes supporting infrastructure such as pipelines, depots and retail outlets. It is also not clear if BS IV fuel will continue to be supplied alongside BS VI while the change takes place in Delhi.

Beyond the public sector trio of IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation, private players such as Reliance will play a big role in this makeover exercise. As an oil industry source said, it is “going to be a hell of a lot of hard work” except that there is really no choice in the matter.

Now where does this leave the auto sector? It has just about recovered from a huge challenge in moving from BS III to BS IV earlier this year following a Supreme Court directive to liquidate old stocks. Can the present lot of BS III/IV cars operate on BS VI fuel which is a lot cleaner? Or will this require careful validation to ensure that this can be done? For the moment, the feedback coming in from the auto sector is mixed.

Mahindra & Mahindra, for instance, has stated that it does not see any “mainline player with multiple models” being able to launch a complete portfolio of BS VI-compliant vehicles by April 2018. According to the company, confining a BS VI range to Delhi is also not feasible, since the fuel will not be available elsewhere in the country.

For the moment, no mass manufacturer of cars is ready with its BS VI range, and to that extent, there will be no offering in the Delhi market through 2018 except for some premium offerings in the luxury space.

It is in this backdrop that it remains to be seen if the cleaner fuel can meet the needs of the present BS III/IV range. The reverse, of course, will be catastrophic in terms of a BS VI car using BS IV fuel. The same holds true for the two-wheeler industry where no manufacturer is ready with its BS VI options.

For the moment, the challenge for companies is to handle the costing of fuel injection systems and ensure that a price-sensitive segment such as bikes and scooters can still remain within the reach of customers from 2020. It is still work-in-progress for the likes of Hero, Honda, TVS, Bajaj and Yamaha, and not a simple exercise by any stretch of imagination.

New registrations

If one were to assume that BS VI fuel can only be supplied to corresponding BS VI cars and two-wheelers, this would mean that there would practically be no new registrations in Delhi from April 2018. However, if BS IV vehicles can manage BS VI fuel, the show will go on.

On the face of it, there is no debating the fact that any move to clean up vehicular emissions is welcome. However, in this case, it is the abrupt shift in policies that is a matter of concern as evident from the eight-month diesel ban in Delhi recently.

Advancing the BS VI deadline may just end up putting enormous pressure on auto and oil companies. Whether it helps solve the crisis is the million-dollar question.

Published on November 15, 2017
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