Clean Fuel Norms/Pay­ment Banks

The Economic Times - - Deep Dive -

Last month en­gi­neers in au­to­mo­tive R&D con­verged at a con­fer­ence in Chen­nai to de­bate en­gine de­sign and pro­cesses. They seemed keen on meet­ing the new April 2020 dead­line for the Bharat Stage VI emis­sion and fuel stan­dards, or the Euro norms, as they are pop­u­larly known. Through the day they delved into nu­ances of par­tic­u­late fil­ters, se­lec­tive cat­alytic re­duc­tion (SCR) and other tech­nolo­gies to clean up ve­hic­u­lar emis­sions but a worry nagged them. Can In­dian re­finer­ies de­liver up­graded Euro VI fuel by the date as promised? All the tin­ker­ing they will do with their ve­hi­cles and sup­ply chains will be ren­dered fu­tile if the su­pe­rior fuel doesn’t flow from fuel sta­tions on the day.

While the auto in­dus­try has been ar­tic­u­lat­ing their Euro VI chal­lenges vo­cally, as al­ways, the oil re­finer­ies have been quite fru­gal with bar­ing their plans. A curt ‘we will de­liver’ state­ment and that an in­vest­ment of around ₹ 40,000 crore will be made in re­fin­ery pre­pared­ness is all that is prof­fered. Skep­tics abound. “As a country we are not go­ing to be ready with even BS IV fuel be­fore 2017,” says Vishnu Mathur, di­rec­tor gen­eral of t he So­ci­ety of I ndian Au­to­mo­bile Man­u­fac­tur­ers (SIAM) hint­ing at the ef­fi­cacy, or lack of it, of the oil sec­tor. “The oil com­pa­nies — they have taken seven long years to reach here.”

BS IV grade fuel was in­tro­duced in 2010 and is now avail­able in 39 cities; the rest of the country con­tin­ues to be sad­dled with vin­tage BS III fuel. The govern­ment, un­der pres­sure from the cit­i­zenry, has now de­cided to skip the Euro V stage and move straight to Euro VI as the air qual­ity across cities, es­pe­cially in Delhi, has taken a turn for the worse. Ve­hic­u­lar emis­sions — es­pe­cially ni­tro­gen ox­ides (Nox), ben­zene, com­bus­tion prod­ucts of sul­phur and par­tic­u­late mat­ter (PM) — have been a ma­jor fac­tor in the de­te­ri­o­ra­tion of the air we breathe in. A re­cent global bur­den of dis­ease study in­di­cates out­door air pol­lu­tion caused 712,000 deaths in 2010 in South Asia.

In­dia was ex­pected to move to Euro V stan­dards in 2020 and Euro VI only by 2024 or so. In view of the emerg­ing cri­sis sit­u­a­tion, it was im­per­a­tive for the govern­ment to do some­thing, and it did, by ad­vanc­ing the kick-in of Euro VI. Emis­sion largely is a play of en­gine de­sign and sul­phur in fu­els. Reg­u­la­tion has en­sured a drop in fuel sul­phur from 2500 parts per mil­lion (ppm) in BS I grade fuel to 50 ppm in BS IV fu­els. The idea is to take it to 10 ppm in BS VI. The new norms ad­dress th­ese is­sues. Un­for­tu­nately, it has also trig­gered a slugfest be­tween the auto and oil in­dus­tries. The ma­noeu­vres by th­ese two pow­er­ful in­dus­try sec­tors were bared last month with the draft no­ti­fi­ca­tion on the Euro VI fuel norms is­sued by the Min­istry of Road Trans­port and High­ways.

SIAM went bal­lis­tic with the ‘highly di­luted’ fuel norms and in­sisted that it wanted the ex­act char­ac­ter­is­tics of the Euro VI fuel as pre­scribed in Europe. The bone of con­ten- year Pre emis­sion test 10 year Ma­jor Cities Ben­e­fits of avoided pre­ma­ture mor­tal­ity Na­tion­wide Net ben­e­fit Costs of ve­hi­cle con­trol tech­nol­ogy tion was the re­search oc­tane num­ber (RON) at 91 for gaso­line, and a whole lot of other di­lu­tions in­clud­ing den­sity and poly-aro­mat­ics in diesels. RON ba­si­cally is a mea­sure to de­ter­mine a fuel’s ‘anti-knock’ qual­ity and re­sis­tance to det­o­na­tion.

“Oc­tane 91 fuel will ad­versely im­pact fuel ef­fi­ciency of ve­hi­cles,” ex­plains CV Raman, ex­ec­u­tive di­rec­tor- engi­neer­ing, de­sign, R&D, Maruti Suzuki. SIAM says the hit is ex­pected to be around 3% in fuel ef­fi­ciency in a sit­u­a­tion when fuel ef­fi­ciency norms are turn­ing more strin­gent.

Mathur ques­tions the re­lax­ation given to oil re­finer­ies. “The RON of fu­els com­mer­cially avail­able in Europe is 95, we want that,” he in­sists. The auto sec­tor is keen on a higher RON as it en­ables higher com­pres­sion en­gines which in turn leads to im- Ex­pected Re­gional sul­phur con­tent in gaso­line and diesel across the globe


12 30 435 500 180 875 195

13 15 870 1,130

400 3,350

325 10 10 80 75 45 235


10 15 155 130

80 890 105 20xx proved fuel ef­fi­ciency. RK Mal­ho­tra, for­mer di­rec­tor (R&D), In­dian Oil Cor­po­ra­tion, now di­rec­tor gen­eral of the Petroleum Fed­er­a­tion of In­dia (Petrofed), a plat­form of the oil com­pa­nies, de­scribes the dis­play of ag­i­ta­tion by the auto com­pa­nies as un­called for nit- pick­ing.

Bust­ing the holier-than-thou at­ti­tude, he re­calls that auto com­pa­nies had in the past lob­bied for and se­cured con­ces­sions on emis­sion test­ing norms. So, they shouldn’t be re­ally miffed at this fuel norm re­lax­ation, given for a rea­son. Com­ing to the RON crux, Mal­ho­tra ex­plains that the Euro­pean direc­tive - 98/70/ EC with amend­ments - al­lows for both 91 and 95 RON, giv­ing mem­ber coun­tries a de­gree of adop­tion flex­i­bil­ity. In­dia has been largely fol­low­ing the Euro norms over the years.

Next, RON has ‘no cor­re­la­tion what­so­ever with emis­sions’ which is the pri­mary con­cern of the cit­i­zenry right now and the rea­son for ad­vanc­ing Euro VI. Data also in­di­cate that two-wheelers, which con­sti­tute about 72% of ve­hi­cles in In­dia, con­sume about 61. 4% of gaso­line; a higher oc­tane level has no bear­ing on en­gine per­for­mance or emis­sion lev­els on this cat­e­gory.

Petrofed main­tains that the re­fin­ers are com­mit­ted to achieve de­sul­phur­iza­tion to 10 ppm by the 2020 dead­line, which is quite an achieve­ment by global norms (see box) but if higher oc­tane is in­sisted upon there will be con­sid­er­able de­lays as the re­finer­ies will have to set up elab­o­rate alkyli­sa­tion plants which are ac­tu­ally not needed, for now.

“Can the auto in­dus­try com­mit that if we give high oc­tane fuel all their en­gines will be of high com­pres­sion,” Mal­ho­tra asks. High -com­pres­sion is limited to high-speed, high­per­for­mance cars, the num­bers of which are few. In any case, he ar­gues, pre­mium grade RON 93 fuel is avail­able even to­day.

He does, how­ever, con­cede that fuel ef­fi­ciency may be hit but then, it can also be ar­gued that high-com­pres­sion is not the only route to im­prove fuel ef­fi­ciency. It can be done with bet­ter en­gine de­sign, lightweight­ing or even bet­ter aero­dy­nam­ics. Why should high-com­pres­sion bear the en­tire re­spon­si­bil­ity for fuel ef­fi­ciency?

The auto sec­tor, which is bristling by the turn of events, in­di­cates that the ex­treme re­luc­tance shown by the oil com­pa­nies to pro­vide RON 95 fuel is due to crass com­mer­cial rea­sons. The oil com­pa­nies are open about this and con­cede that there is in­deed a com­mer­cial an­gle to it.

Re­finer­ies pro­cess­ing crude oil have to work on a prod­uct mix — gaso­line, diesel, kerosene, LPG and other mi­nor prod­ucts. “If we fo­cus on alkyli­sa­tion for higher oc­tane, the big­gest ca­su­alty will be LPG pro­duc­tion, and also diesel,” con­cedes Mal­ho­tra.

He goes on to give a so­cial twist to it; he would like to ex­pand on pro­vid­ing LPG to ru­ral women, as is the plan, rather than cater to a small num­ber of high per­for­mance cars driven by the elite. The govern­ment is ready­ing to pro­vide LPG con­nec­tions to over five crore be­low- poverty- line fam­i­lies.

The fact that In­dia is a diesel econ­omy also can­not be ig­nored. Any­thing im­ped­ing diesel pro­duc­tion can have far reach­ing con­se­quences. The May 2014 re­port of the ex­pert com­mit­tee -Auto Fuel Vi­sion and Pol­icy 2025- does pre­dict a mis­match in diesel de­mand and pub­lic sec­tor re­fin­ing ca­pac­ity in the country by 2020. The LPG and diesel stick, there­fore, is be­ing used lib­er­ally by the oil in­dus­try to beat auto.

The con­cern over cook­ing gas pro­duc­tion was re­port­edly put across in a joint meet­ing called by the govern­ment ear­lier this month and it is un­der­stood that, this time, it was the oil in­dus­try that pointed a fin­ger at the auto sec­tor for lay­ing red-her­rings in the form of RON 95 in­sis­tence when the real in­tent is to de­rail the en­tire tran­si­tion process to Euro VI.

The oil in­dus­try hinted the auto sec­tor was be­ing driven by com­mer­cial pri­or­i­ties and prof­itabil­ity. It wasn’t taken kindly by the auto rep­re­sen­ta­tives present and there was a call for with­draw­ing of the ‘al­le­ga­tion’ made, and it was done. The an­i­mosi­ties boiled over.

Why would the auto sec­tor want to de­rail or pro­long the tran­si­tion process? The auto sec­tor, it is ar­gued, would want to stretch the pe­riod for re­cov­er­ing costs and in­vest­ments made in ex­ist­ing mod­els. ‘ref­er­ence fuel’ and the wor­ry­ing di­lu­tion of fuel stan­dards. Ideally, up­graded fuel should be ready and in the mar­ket be­fore up­graded ve­hi­cles are in­tro­duced.

Raman also hints at the fu­til­ity of the ex­er­cise in the ab­sence of a si­mul­ta­ne­ous ve­hi­cle end-of-life or scrap­ping pol­icy. While we will soon have ve­hi­cles with bet­ter emis­sion con­trol run­ning on su­pe­rior fuel, our roads will also be clogged with mil­lions of older, pol­lut­ing clunkers. They have to be taken off the roads.

While, the auto and oil in­dus­tries await the fi­nal fuel no­ti­fi­ca­tions, the big is­sue, which both rec­og­nize and la­ment, is the ab­sence of a holis­tic view on the fu­ture of mo­bil­ity. Mul­ti­ple min­istries in­volved — power; heavy in­dus­try; road trans­port & high­ways; petroleum & nat­u­ral gas; en­vi­ron­ment, for­est & cli­mate change — work in si­los.

“Even if dif­fer­ent min­istries cater to their in­di­vid­ual spa­ces, some­one should be think­ing holis­ti­cally, look­ing at the big pic­ture,” says Raman. A Na­tional Au­to­mo­tive Board was firmed up some time ago. But it fell flat due to lack of man­date and teeth.

Pre-Euro Euro1 Euro2 BS1 Euro3 BS2 BS1 Euro4 BS3 BS2 Euro5 BS4 BS3 Euro6 Source: World Oil Out­look 2013, OPEC

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