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We survived price drop to $37 a bbl without govt help: IOC chairman

Retail is our bread and butter, says IOC Chairman Sanjiv Singh

Shine Jacob & Jyoti Mukul 

IOC chief, IOC, IOC chief, Sanjiv Singh
Sanjiv Singh, Chairman, Indian Oil Corporation Ltd

The country's largest petroleum retailer, Indian Oil Corporation, sees robust growth in despite the challenge from electric vehicles. In an interview with Shine Jacob and Jyoti Mukul, Sanjiv Singh, chairman, IndianOil, talks about the company’s experience with daily price revision and the government’s consolidation move. With the government hoping to have only electric vehicles (EVs) by 2030, what is the future of petrol and diesel? Gasoline (petrol) and diesel are the two major transportation fuels. Compressed natural gas (CNG) and auto LPG have a small percentage (of the market) in India. Petrol is moving at a compound annual growth rate (CAGR) of 9-10 per cent, while we are seeing more than 3 per cent annual growth in diesel. So although there is a push by different countries towards EVs, the growth of conventional liquid fuels is happening. There are concerns about pollution from conventional automotive fuels but India is moving to BS VI, which is similar to Euro VI. In another three years, the whole country will be shifting to BS VI. If you look at BS VI engines, their emission is much less than other BS engines, and these are fairly clean. BS VI diesel engines are on a par with those of gasoline BS VI, so the particulate emission in diesel engines will be very low. More efficient engines that give power from the same amount of fuel will have a bigger share in the fleet. When we talk about EVs, they are technically less polluting but you have to also look at how electricity is generated and whether it is renewable and clean electricity. How am I storing? If I am going for battery, then how am I disposing of old batteries? So, the whole eco system has to be compared to the conventional one. We are seeing a jump in EVs but in spite of all the push across the globe, in absolute numbers, probably there is still some time to go. What are the prospects of like Indian Oil Corporation, which refine and sell petroleum products? At least for the next 15-20 years, it is going to be fairly robust. The median projections for petroleum products by various agencies is 350 million tonnes of consumption by 2030. The present refinery capacity is clearly not sufficient. The challenge for us is to meet the demand when gasoline is required, and tomorrow, when the switch happens, we have to adjust to those kinds of switches. We have a large fleet of vehicles, of which 80 per cent are two-wheelers. Sixty-five per cent of my gasoline is consumed by two-wheelers. I am not saying that two-wheelers cannot be EVs. But the market for two-wheelers is more in rural areas. So probably, the requirement of the Indian market is slightly different. There is also a view that oil refiners will be increasingly relying on petrochemicals and aviation turbine fuel (ATF) as the market for liquid fuel squeezes? Aviation is a growing market and this matches our profile very well as India is reducing its kerosene consumption. There are four states that have become kerosene-free and more states are moving towards that. Kerosene volumes can either go to ATF or to diesel, for which certain modifications are required in refineries. All refineries are taking this step while introducing BS VI.

In another three years, refineries will have less kerosene production and more ATF or diesel, as the need be. ATF is a highly growing market, going up at 10 per cent, and we can also export. Petrochemicals provide a very good synergy with the refineries and despite all the plans by Indian companies, there is going to be a deficit. An integrated petrochemicals plant with the refineries is extremely viable and they meet the domestic requirements. India has a strong market. So, petrochemicals will provide tremendous flexibility to refining plans. What is the status of Saudi Aramco taking a stake in the West Coast Refinery? How far has work on it progressed? We are considering the Saudi offer. Today the IOC’s share is 50 per cent and Bharat Petroleum Corporation and Hindustan Petroleum Corporation hold 25 per cent each. Indian would remain the major shareholders. We don’t want to lose the ownership of the project. We are in the process of acquiring land, which is very important. The name of the company, Ratnagiri Refineries and Petrochemicals, has been registered. The first round of the configuration study has been done, along with Engineers India Ltd. Site activities are going on. Since there has been a spike in retail price of LPG, what is the outlook on subsidy? The increase is due to international prices. For subsidised LPG the impact is only Rs 4 a cylinder though upfront the customer pays more money, he also gets more subsidy share in his bank account. Aren’t the facing the issue of low refill of cylinders given under the Ujjwala scheme to BPL households? An average consumers uses 7-7.5 cylinders every year. For Ujjwala, we have analysed each district, the average comes to nearly four cylinders which is almost half of our national average. There may be reasons like that since these consumers are BPL families, for them buying a cylinder may be difficult. To improve this, we are more aggressively launching five kilogramme cylinders. What has been the experience of daily price revisions of petrol and diesel? If you see over a period of time, it doesn't make much difference. Earlier we were reviewing the prices every 15 days. If dealers anticipated that the prices would go up, they tried to procure as much of fuel and sell it when the prices went up. The daily pricing has streamlined the flow and now the dealer has no incentive to vary his procurement, which has stabilised the supply. When we were implementing it, dealers were complaining as the prices were going down and they could not sell at higher price. Now, since the prices are going up, they are silent. For consumers also, the impact of price fluctuation is not sudden.

First Published: Tue, November 07 2017. 01:57 IST