Oil companies gear up to supply BS-VI fuel to Delhi from April 1

From Sunday, Delhi will be getting Bharat Stage VI (BS-VI) grade fuel, which will then, in phases, be expanded to the rest of the country.

While the auto industry and oil retailers are prepared, what about consumers? Will this fuel create a larger hole in their pockets? The fuel prices today are already market determined — petrol in Delhi is sold at ₹72.79 a litre and diesel at ₹63.66/litre — and if the companies are allowed to pass on the costs, then yes, it will go up slightly more.

Ask the companies, and they say the respective managements are yet to announce how much the cost of production has gone up for processing these fuels.

A more critical question is whether the Centre will allow the oil marketing companies to pass on the costs to the consumers. They can easily reduce the tax components on these fuel, which is almost 50 per cent of the retail price (varies from State to State, depending on the local taxes and levies) and keep the rates at the current level.

Asked how ready the oil refining-cum-retailing companies are with supplies, they told BusinessLine that they have factored in Delhi’s demand and will be supplying the fuel to the capital from April 1.

But supplying BS-VI grade fuel to Delhi alone is just the tip of the iceberg. A HPCL official said: “Delhi’s fuel demand for BS-VI is estimated at 0.952 million tonnes for petrol and 1.267 million tonnes for diesel.”

According to Petroleum Planning and Analysis Cell data, the country’s total demand for petrol stood at 23.7 million tonnes and for diesel stood at 76.02 million tonnes in FY17. It is expected to be similar in the current financial year too.

In November last year, the Ministry of Petroleum and Natural Gas agreed to roll out BS-VI grade two years earlier in Delhi, as the city is regularly engulfed in smog, worsened by vehicular emissions.

Indian Oil’s Mathura and Panipat refineries will be supplying BS-VI grade fuel to the c apital. While the company has spent ₹183 crore on the Panipat refinery upgradation, the expense at Mathura has been nil.

While HPCL will source it from HPCL-Mittal Energy Ltd’s (HMEL’s) Bhatinda refinery, BPCL will look to its Bina refinery for the same.

Are car-makers ready?

According to automobile manufacturers, there is no problem is using BS-VI fuel in a BS-IV vehicle, but the problem is only when a BS-VI vehicle is filled with a BS-IV fuel.

As of now there is no car-maker in India who manufacturers BS-VI compliant vehicles — not even Maruti Suzuki India or Hyundai Motor India, the top passenger car-makers. (Exception being except Mercedes-Benz India’s new S-Class).

“Current vehicles will not be impacted at all, as BS-VI will be a refined fuel,” said a senior official of a vehicle company.

“There will not be a serious problem like engine siege, but the engine performance might take a hit and there could be more impact on a diesel engine than a petrol engine,” said Puneet Gupta, Associate Director at IHS Markit.

Delhi could be a pilot for the government as well as vehicle manufacturers to test their vehicles on a sample basis and, accordingly, roll out their BS-VI vehicles on or before the deadline.

However, some also said that it will all depend on the mindsets of the consumers as well and many of the consumers may fill up their fuels from border cities like Noida, Ghaziabad or Gurugram.

The deadline for a nationwide BS-VI grade fuel rollout remains April 1, 2020.

The total investment required to supply BS-IV grade fuel for the entire country is estimated at ₹28,000 crore, according to an April 2017 report from the Ministry of Petroleum Natural Gas.

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