In a relief to consumers, the government has decided not to levy a new cess to make the investments needed to roll out cleaner Bharat Stage (BS)-V and VI grade fuel in the country. Earlier, it was being planned to levy a cess in order to fund the upgrade of refineries, which may cost upto Rs 80,000 crore, to launch clean auto fuels.
“The refineries are capable of funding the upgrade required to produce clean fuel. So, there would be no additional burden on consumers by way of cess,” a senior petroleum ministry official told FE.
An expert committee report – Auto Fuel Vision and Policy-2025 — headed by Saumitra Chaudhuri, former member of the Planning Commission, had proposed to levy a “special fuel upgradation cess” of 75 paise per litre on all petrol and diesel sold in the country up to 2021.
The government proposes to complete roll out of BS-IV fuel in the entire country by April 2017. Currently, this fuel is available in northern India and around 50 more cities across India. Going ahead, BS-V roll out is contemplated by 2021 and BS-VI by 2024. The government has already mandated BS-V emission norms for vehicles manufactured across India from April 2019.
“The government is yet to come out with a notification on the exact deadlines for roll out of BS-V and VI fuels,” said an official at IOC. There has been discussions to advance the roll out of BS-V to 2019 and BS-VI by 2021.
The oil companies and their refineries have been operating with stretched finances and therefore the financial constraints are operative, the Chaudhuri committee felt. It is estimated that the capital costs in terms of new plant and equipment and some refurbishment of existing equipment which the refineries will have to incur in order to be able to switch to 100% BS-V automotive fuel by 2019-2020 is of the order of Rs 80,000 crore.
The levy of special fuel upgradation cess could have mopped up Rs 64,000 crore, the panel said. This cess will accrue to the Oil Industry Development Board, which will make the funds available to the oil companies for investments which are necessary to achieve the upgrading of quality of fuel produced.
