In this list
Oil

India's Euro 6-compliant fuel target tough but achievable

Energy | Coal | Thermal Coal | Electric Power | Emissions | Nuclear | Renewables | Energy Transition | Natural Gas | Oil | Crude Oil | Refined Products | Gasoline

China's climate conundrum: Carbon neutrality 2060 and its implications for fossil fuels

Oil

Platts Market Data – Oil

Oil | Crude Oil | Coronavirus | Energy Transition | Macroeconomics

37th Asia Pacific Petroleum (APPEC 2021)

Electric Power | Natural Gas | Natural Gas (North American)

Texas lawmakers advance eight energy bills; send two for governor's signature

Electric Power | Emissions | Renewables | Energy Transition | Natural Gas | Oil | Refined Products | Naphtha | Metals | Steel | Raw Materials

Commodity Tracker: 5 charts to watch this week

India's Euro 6-compliant fuel target tough but achievable

Highlights

Oilgram News

European Marketscan

Crude Oil Marketwire

Asia Pacific - Arab Gulf Marketscan

Bunkerwire

Latin American Wire

Singapore — * Auto makers have tougher job at hand than refiners
* Clean fuel push to encourage gasoline car sales
* New Delhi diesel ban could have ripple effect

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

The Indian government has announced an ambitious goal to leap-frog to Euro 6-compliant fuels in four years in an effort to battle pollution, throwing a challenge to refiners and auto makers to quickly draw up investment plans in order to meet the target.

Transport minister Nitin Gadkari said this week that India would jump from Bharat Stage IV fuels -- the equivalent of Euro 4 -- directly to Bharat Stage VI by 2020, skipping one upgrade in between in a unanimous decision taken after a meeting of environment, industry, road transport and oil ministries.



The move was welcomed by analysts who said the target looked realistic and signaled the government's intention to speed up the move towards cleaner fuels as the country was facing a serious pollution issue.

The latest World Health Organization report puts 13 Indian cities in the notorious list of 20 cities with most particulate (PM 2.5) pollution.

The announcement to move to Euro 6 equivalent fuel comes just after a recent policy decision aimed at temporarily cutting the number of diesel vehicles plying the roads in New Delhi to battle pollution.

"Refiners will need to finalize their investment plans in the next six to nine months to meet the 2020 target for Bharat VI. Given the capex plans refiners have, the target is reasonable and looks achievable," said Tushar Bansal, Head of Oil, East of Suez, at Facts Global Energy.

Gadkari has said that Indian oil companies will need to invest about $4.5 billion to produce Euro 6-compliant fuels by 2020. Before the latest announcement, the plan was to roll out BS V by 2020 and BS VI by 2024.

Indian refiners said it would make sense to directly upgrade to Euro 6 equivalent fuel, rather than first upgrading to Euro 5 standards.

"It is up to the auto industry to come up with the engine or vehicles with emission norms to run on BS VI fuels. For us, the fuel specification is almost the same -- 10 ppm sulfur for BS V and VI," said B.K. Namdeo, director of refineries at Hindustan Petroleum Corp. Ltd.

IMPACT ON AUTO MAKERS

Analysts also said this upgrade would make sense but auto makers would need to incur huge costs to modify engines, which in turn could affect the price of vehicles.

"Auto makers have enough lead time to adapt to the changes but it involves huge costs. It could push up car prices," Bansal said.

India brought in BS IV fuel standards with 50 ppm sulfur diesel, first in 13 cities in April 2010. Since then, 63 cities have been covered under BS IV and the target right now is to complete BS IV coverage across the country by April 2017.

The government is also keen to ensure BS VI fuel introduction across the entire country at the same time instead of in a phased manner as it did with BS III and BS IV.

"It is a tough job. We refiners are taking it as a challenge," Namdeo said.

Auto makers have voiced their concern about moving directly to BS VI, saying that skipping BS V involved technical complexities and a huge financial burden. Gadkari is expected to meet automakers later this month to understand their concerns.

DIESEL BAN

Rattled by the level of pollution in New Delhi, India's Supreme Court last month banned registration of diesel-guzzling SUVs until March 31, 2016, in New Delhi and surrounding areas, leaving auto manufacturers in limbo and the refining industry gauging the impact it would have on diesel demand.

Analysts said the ban, which applies to SUVs with engine capacity of 2,000 cc or more, has triggered alarm bells across the country as prospective buyers fear similar bans in other cities.

"It is entirely possible that the Delhi diesel ban could spread to other cities which could affect demand for the fuel," said R.K. Pachauri, director general at the Energy and Resources Institute. "The answer lies in better diesel and emission technologies in cars."

While diesel may provide CO2 savings as a road fuel, it produces considerably more harmful nitrogen dioxide and particulates than gasoline cars.

A car salesman in eastern India said that inquiries for gasoline-based passenger cars had risen after the New Delhi diesel ban. "Many consumers don't want to buy diesel cars now as they are not sure about what the government's thinking about allowing diesel cars for private use," he said.

An oil and gas analyst with a private bank said that the share of diesel cars in the passenger car segment would most likely fall over the next few years as the price gap between petrol and diesel had narrowed after New Delhi removed diesel subsidies late last year.

The gap between retail petrol and diesel prices in New Delhi was as high as Rupees 28/liter ($1.59/gallon) in 2012. Currently, it's about Rupees 15.

"Diesel cars in the private vehicle segment totaled more than 60% a few years ago. Now it is about 38%. It will fall further," Bansal said.

Percentage growth in gasoline consumption has been higher and in double digits compared with growth in diesel consumption in 2015. In the

January-November period, India's gasoline demand was up 16.67% to 19.27 million mt, while diesel demand grew by 4.83% to 66.19 million mt in the same period.

Pachauri said that in addition to pushing cleaner fuels, there was a pressing need for the government to produce a road map on biofuels.

"We don't have a clear vision on biofuels yet. There is an urgent need to come out with a plan to commercialize biofuels," he added.

The Ministry of New and Renewable Energy has proposed a national biofuels policy with a target of 20% blending of transportation fuels -- diesel and petrol -- raising it from the current 10%. But even the existing mandate has not been strictly implemented because of supply and pricing uncertainties.

--Sambit Mohanty, sambit.mohanty@platts.com
--M.C Vaijayanthi, newsdesk@platts.com
--Edited by Maurice Geller, maurice.geller@platts.com