Ban on diesel-powered four-wheelers by 2027 and other suggestions related to phasing out of diesel by an advisory panel under the petroleum ministry will have little impact on refineries, as per stakeholders in the industry.
Till the time there is no alternative for diesel consuming heavy duty trucks that form bulk of the road based freight transport, banning diesel-based 4-wheelers will not impact the refiners, which continue to add fresh capacities.
The Energy Transition Advisory Committee (ETAC), set up by the petroleum ministry to draw up a transition roadmap, filed a report last month suggesting phasing out diesel vehicles in cities, which raised widespread concerns.
Among the many suggestions, the panel said that a ban should be enforced on diesel-driven 4-wheelers in all million-plus cities and towns with high pollution by 2027, and no diesel city buses addition be allowed in urban areas.
For trucks, the panel has suggested to encourage the development of several electric freight corridors to promote use of liquefied natural gas (LNG) and the electrification of the medium and heavy duty truck segment.
“Main consumption of diesel is not in 4-wheelers. It is in the freight transport and that is growing. So, there is no issue. Moving away from diesel vehicles is a much longer process,” said Anish De, global head – energy and natural resources, KPMG.
As per an all India study conducted by Nielson (India) Pvt Ltd for Petroleum Planning and Analysis Cell (PPAC) in 2014, 70% of diesel is consumed by the transport sector and more than half of it by the trucks and the buses.
While private cars, commercial cars and utility vehicles consumed 22% of total diesel produced, trucks alone accounted for 28.25% of the total. In FY23, total diesel consumption in India was 86 million metric tonne, 12% higher yoy.
Considering that there are other applications of crude oil and that the refineries are flexible, the refiners continue to add capacities despite India’s commitment to move towards cleaner fuel and net zero emissions by 2070.
“In the longer run when diesel consumption goes down, oil can be diverted to other value added products like ATF, and with hydro cracking even petrol. New units may be required to process this to lighter fuels,” said Prashant Vashisht, vice president and co-head, Icra.
Currently, there are 23 refineries in India – 18 under public sector, three under private and two in joint venture – with a total refining capacity of 251 MMTPA. Oil minister Hardeep Singh Puri has set a target of 450 MMTPA by 2030.
Speaking on the report by the energy panel, a senior official at a state-run oil refinery said that it will be wishful to think that diesel vehicles will be phased out anytime soon. He said diesel consumption will continue to rise.
Even a senior official at the ministry of road transport and highways said that a mere recommendation by a group cannot be taken seriously till it is discussed among major stakeholders and that his road department is a key stakeholder.
British Petroleum (BP) in its 2023 Energy Outlook, focused on three main scenarios Accelerated, Net Zero and New Momentum, said the role of oil is falling across all modes of transport, reflecting a shift to alternative, low-carbon energy sources. In road transport, the shift is dominated by electrification.
“There is also a switch away from the reliance on diesel in medium- and heavy- duty trucks and buses, with the share of diesel-based trucks in the global parc declining from around 90% in 2021 to between 70-75% in 2035 in Net Zero and Accelerated and 5-20% in 2050,” BP noted.