Oil refining companies worried over ban on diesel vehicles

Debabrata Das New Delhi | Updated on January 20, 2018



Say it is not possible to completely eliminate key transport fuel

Discouraging the use of diesel as a transport fuel is fast becoming a cause of concern not just for automakers but for domestic oil refiners, too.

According to the Indian oil refining and marketing companies, diesel cannot simply be wished away.

“Technically, it is not possible to completely eliminate diesel, because 45 per cent of a refinery’s output after refining the crude oil is diesel,” said Sanjiv Singh, Director (Refineries) at Indian Oil Corporation.

Singh’s comments come in the wake of the National Green Tribunal hearing a case to extend the ban on sales of diesel cars and sports utility vehicles (SUVs) with engine capacity beyond 2,000 cc across cities in eight more States — Maharashtra, Uttar Pradesh, Bihar, Tamil Nadu, Andhra Pradesh, Punjab, West Bengal and Karnataka.

Maharashtra, Tamil Nadu, Uttar Pradesh and Karnataka are among the four top-five States for diesel sales from retail outlets. In 2015-16, retail outlets in these four States sold 22.56 million tonnes diesel to passenger cars, SUVs and commercial vehicles.

Sale of diesel cars and SUVs with large engines is already banned in the Delhi-National Capital Region and is under dispute in the Kerala High Court. Besides, the Supreme Court has also ordered a gradual phase-out of diesel-run taxis in Delhi-NCR. Currently, the taxis that run on diesel and have an all-India travel permit can ply in Delhi. But once the permits expire, they will have to convert to using compressed natural gas (CNG).

In Delhi-NCR, Indian Oil Corporation alone sold 1.2 million tonnes of diesel in 2015-16 from its retail outlets.

According to a study by the Petroleum Planning and Analysis Cell, passenger cars, SUVs and three-wheelers account for 32.78 per cent of total diesel sales from retail outlets. In volume terms, this would be around 20 million tonnes of around 59 million tonnes of diesel sales from retail outlets in 2015-16. Diesel sales from retail outlets and direct sales to customers, such as Indian Railways, totalled 74 million tonnes.

Despite a steady fall over the past four years, diesel accounts for around 41 per cent of India’s total consumption of petroleum products. Apart from the large volume, diesel is also the fuel where marketing margins for oil refining and marketing companies is increasing. According to industry analysts, marketing margins for oil marketing companies increased to ₹1.4 per litre in the current fortnight as compared to ₹ 0.9 per litre in the second fortnight of May 2016, while margins on petrol remained flat at ₹2.2 per litre.

More efficient engines

IndianOil’s Singh also argued that modern diesel engines are most efficient. “There are four major pollutants from all kinds of engines…as far as unburnt hydrocarbons and carbon monoxide are concerned, they are not a concern for diesel engines,” he said.

“If you see the European automotive market, it is mainly diesel-driven cars. It is still a matter of debate whether or not to remove diesel-driven cars,” he added.

Diesel’s market share in passenger vehicles in the European Union stood at 55 per cent at the end of 2014. In India, industry experts say currently half of the new cars sold run on diesel.

(With inputs by Richa Mishra)

Published on June 02, 2016

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