Greener fuels to cost more

State-run oil marketing companies (OMCs) say they have approached the government to increase the fuel prices. In April 2005, Delhi, Mumbai, Hyderabad, Kolkata, Chennai and Agra moved to Euro III at an additional cost of 30 paise per litre of petrol and 24 paise for diesel. Petrol currently costs Rs 44.63 a litre in Delhi and Rs 48.76 in Mumbai. Diesel costs Rs 32.87 in Delhi and Rs 36.07 in Mumbai.

“We have made substantial investment in upgrading the refineries and need to recover the same. The government has to take into account the marketing margin as well,” a marketing director of a PSU told Business Standard.

The state-run refiners have committed over Rs 28,000 crore to upgrade their refineries to Euro III and IV norms. Euro IV compliant auto fuel has low level of pollutants like sulphur. Under the present pricing, retailers lose gross revenue of Rs 3.49 on a litre of petrol, Rs 2.38 on diesel, Rs 18.13 on kerosene and Rs 250.67 on every 14.2 kg cylinder of LPG. The PSUs are projected to lose revenue of Rs 45,478 crore in 2009-10.

The Auto Fuel Policy framed after instructions from the Supreme Court requires Euro IV compliant fuel to be supplied from April 1, 2010.

Mangalore Refinery and Petrochemicals, a subsidiary of Oil and Natural Gas Corporation, has spent Rs 8,000 crore to upgrade to Euro IV emission standards and expand capacity to 15 million tonne per annum (mtpa) from 9.69 mtpa. Hindustan Petroleum Corporation (HPCL) has invested Rs 4,000 crore on its refineries in Mumbai and Vishakapatnam, while Indian Oil Corporation says it has spent Rs 12,000 crore for upgradation of seven refineries. Bharat Petroleum Corporation (BPCL) claims to have spent Rs 4,300 crore at its two refineries in Mumbai and Kochi.

The OMCs, however, fear they might not be able to meet the Euro III deadline and have sought extension till July 2010. Sources in the Ministry of Petroleum and Natural Gas said they had asked the OMCs to approach the Supreme Court.

IndianOil says its refineries at Panipat, Mathura and Haldia are ready to meet the deadline, but Gujarat, Barauni, Digboi and Guwahati refineries would be delayed. Upgradation work at BPCL’s Kochi refinery could be delayed, too, though HPCL claims its refineries are ready.