Consumers To Eventually Pay More For Cleaner Fuel, Says IOC

India's largest fuel refiner and retailer said consumers will eventually pay more for cleaner auto fuels though prices won't go up immediately as petrol and diesel with lower emissions become mandatory in New Delhi from April 1.

The government had decided to roll out the Bharat Stage VI fuel in the national capital two years earlier than planned after New Delhi remained engulfed in a toxic fog breaking all pollution charts for more than a week in November. The cleaner grade fuel will cut particulate matter and sulphur dioxide emissions by up to 20 percent.

“For supplying Bharat Stage-VI fuel from April 1, we are investing Rs 16,600 crore and execution is underway,” BV Rama Gopal, director (refineries) at Indian Oil Corporation Ltd., told BloombergQuint in New Delhi. “Having invested so much, we will expect return on investment but immediately we don't have the mechanism. We will chalk out a plan by April 1, 2019.”

Diesel prices are at an all-time high in Delhi at Rs 64.14 a litre and petrol at Rs 73.31 is costliest in more than three years as the Brent crude hovers around $70 a barrel amid geopolitical concerns and continuing production cuts by the OPEC bloc. Among the Indian metros, petrol is the costliest in Mumbai at Rs 81.41 a litre.

Indian Oil will source BS-VI fuel for Delhi from its Mathura and Panipat refineries. Total demand in the national capital for BS-VI fuel will be 960 thousand metric tonnes a year of petrol and 1,265 TMT of diesel, Gopal said. Of which, Indian Oil will roughly meet half the requirement through its 187 outlets.

The Supreme Court had also asked the government to look into the possibility of rolling out the BS-VI fuel in 13 metro cities by April 2019 instead of 2020. If accepted, that would increase the number of Indian Oil outlets supplying cleaner fuel to 1,013.

“We are going to meet the Petroleum Ministry next week for advancing supply of BS-VI fuels to April 1, 2019 in 13 metro cities and details will be worked out,” Gopal said. “The problem is refineries may be able to produce but we will have to overcome the challenge of positioning this fuel in select cities, especially with respect to logistics.”