The government's latest decision to switch over from BS IV auto fuel quality standards to BS VI norms by 2020 will raise the cost of production of petrol by Rs 1.40 per litre and cost of diesel by an estimated 63 paise for Indian Oil Corporation (IOCL), the nation's largest fuel retailer.
Indian Oil will spend Rs 21,000 crore in upgrading six refineries to produce Euro-VI grade petrol and diesel. This includes Rs 7,000 crore in upgrading fuel quality from BS-III to BS-IV by next year and another Rs 13,000-14,000 crore to be invested to upgrade fuel quality straight to BS-VI, the company's Director Refineries Sanjiv Singh said.
He, however, declined to specify the expected increase in retail prices of petrol and diesel as a result of the increased cost of production due to changed norms. "These are ballpark figures. We will not charge anything extra but cost of production will go up," he said, adding the final impact on retail prices will be determined by other factors like global crude oil prices and taxes.
The government had last week announced switching from Euro-IV emission standards for automobiles as well as fuel to stricter Euro-VI by April 1, 2020. All PSU refineries would invest Rs 28,750 crore for upgrading capacities.
Singh said the task of switchover was "extremely challenging" as it may require changing the crude mix of some refineries, ramping up capacities under expansion projects and even changing the product streams for some units. "But we are confident we will meet the target," he said.
India currently has BS III across the country and BS IV in major cities.
BS IV will be supplied in most big cities by April 2016, and all over the country from April 2017. BS IV auto fuels are being supplied in whole of northern India.
Singh also informed IOC plans to set up India's biggest oil refinery on the West Coast along with the other two OMCs - Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL). "The concept has gone beyond thinking stage. The capacity will be bigger than 15 million tonnes," he said, without sharing details of location and investments required. IOC recently started its 15 million tonnes refinery at Paradip in Odisha, the biggest PSU refinery in the country.
IOC currently operates six refineries of a total capacity of 54 million tonne along with subsidiary refineries with an 11-million-tonne capacity. The company's refining capacity will go up to 80 million tonnes once the Paradip unit is fully commissioned.