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Panel proposes cess of 75 paise per litre on petrol, diesel

LiveMint logoLiveMint 03-06-2014 Utpal Bhaskar

New Delhi: A high-level government panel has proposed sharing the burden of stricter green fuel norms with consumers by imposing a cess of 75 paise per litre of diesel and petrol.

India plans to introduce the stricter Bharat Stage V emission norms across the country by 2020 to curb growing air pollution. With `80,000 crore to be spent for upgrading refineries to meet the stricter fuel emission norms, the panel on automobile fuel emissions standards has recommended imposing the “special fuel upgradation cess”.

The panel, formed in December 2012 to revise India’s auto fuel emission standards, submitted its report to the petroleum ministry on 3 May. The Bharatiya Janata Party (BJP)-led National Democratic Alliance government will have to take a call on the report.

Petrol now costs `71.41 per litre in Delhi and diesel is sold at `57.28 per litre.

According to documents reviewed by Mint, the cess to be levied on all petrol and diesel sold in the country and collected by Oil Industry Development Board would create a corpus of around `64,000 crore between 2014-15 and 2021-22.

This fund would then be used to lend to refiners at concessional rates with extended loan tenures of more than 10 years.

“India will move to Bharat Stage IV emission standards by 2017, which is equivalent to Euro IV standards. The Bharat Stage V emission standards will be in place by 2020-21, subject to the availability of the fuel,” said a senior government official requesting anonymity.

“This will require an investment of around `80,000 crore for the upgradation of refineries, of which `20,000 crore will be towards gasoline (petrol) and `60,000 crore for diesel. Some refineries are already producing fuel which ranges from 20% to 50% of the Bharat Stage IV emission standards. This has to be upgraded to 100%,” this official said.

Such a transition would strengthen India’s stand at climate change negotiations.

According to a recent World Health Organization (WHO) study, India is home to 13 of the world’s 20 dirtiest cities based on air quality.

In comparison, Euro V standards have been in place in Europe from 2009-10, with Euro VI standards to be implemented from 2014-15, which will require improvement in vehicle technology such as filters and efficient catalytic convertors.

India has a refining capacity of 215 million tonnes per annum (mtpa) through 22 refineries and has become a refining hub, ranked fourth in the world. This is expected to increase to 310.9mtpa by 2016-17. India is a net exporter of petroleum products such as petrol, diesel, jet fuel and naphtha.

Bharat Stage V standard specifies a maximum of 10 parts per million (ppm) of sulphur in fuel as against 50ppm in Bharat Stage IV and 150ppm in Bharat Stage III. Sulphur in fuel makes it dirtier and lowers the efficiency of catalytic converters that control emissions.

Going forward, the plan is to implement Bharat Stage VI standards by 2024, which will require automobile manufacturers to put in place technological improvements.

While the WHO study has been challenged by the government, automobile fuel emissions are seen as a leading cause of deteriorating air quality.

According to the International Energy Agency (IEA). the world will need $48 trillion in investment to meet its energy needs to 2035 with investment decisions increasingly being shaped by government policy measures and incentives.

“Today’s annual investment in energy supply of $1.6 trillion needs to rise steadily over the coming decades towards $2 trillion. Annual spending on energy efficiency, measured against a 2012 baseline, needs to rise from $130 billion today to more than $550 billion by 2035,” IEA said on Tuesday at the release of an investment report, part of the World Energy Outlook series.

“The reliability and sustainability of our future energy system depends on investment,” said Maria van der Hoeven, executive director of IEA, in a press statement.

“But this won’t materialize unless there are credible policy frameworks in place as well as stable access to long-term sources of finance,” she added.

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