Making sense of the use and misuse of used oil

July 04, 2021 1:11 PM

To explain the malady of a residue from a commodity that we exhaust in thousands of gallons every year, we must first explain the peculiar circumstances that could trigger an environmental crisis.

The 10-year benchmark 6.10%-2031 bond yield ended at 6.1974%, marginally lower than 6.2039% on Friday. The most-traded 6.64%-2035 closed at 6.8076%, compared to 6.8122% yield on the previous trading session.The 10-year benchmark 6.10%-2031 bond yield ended at 6.1974%, marginally lower than 6.2039% on Friday. The most-traded 6.64%-2035 closed at 6.8076%, compared to 6.8122% yield on the previous trading session.

By Vidya Amarnath

Oil, Oil Everywhere, Not Enough to Recycle or Reuse, the Ancient Mariner may have bemoaned had he faced the complexity in the present day, of a little known, highly underestimated waste product named “Used Oil.” To explain the malady of a residue from a commodity that we exhaust in thousands of gallons every year, we must first explain the peculiar circumstances that could trigger an environmental crisis. Let’s understand the grim picture first, and then review positive steps being taken by the
Government of India to ward off the danger.

Here’s an innocuous, everyday occurrence: A car is dropped off at a servic station for water wash, interior cleaning and most important, oil change. Now you have three to seven litres of Used Oil, depending on the car or SUV’s sump capacity. Multiply that by 365 days and lakhs of vehicles. Now add used oil from generators, furnaces, turbines and other plant equipment and
you have enough kilolitres to kill the environment.

Returning to the vehicle example, as the spruced up car reaches the road, a parallel economy gets to work. The oil which is insoluble and contains toxic chemicals and heavy metals, is sold to industries as a replacement for furnace oil and light diesel oil (LDO). While a responsible automobile dealership or service chain will reach the waste to a recycler, a road side garage may sell to the grey market or tip it into drains which contaminates the sewerage system and slows down effluent treatment.

Of the hazardous waste generated in India, Spent Oil accounts for 45% of recyclable waste, of which Used Oil is 46.67% and Waste Oil is 53.33%. In line with Green Principles and in pursuit of a truly Circular Economy, the environment-friendly option is to re-refine Used Oil, convert to lubricant base stock and reprocess to fuels and other petroleum-derived products.

According to Central Pollution Control Board, India has 399 registered recyclers with an installed capacity 3 million tons. However, their capacity utilisation of Used Oil and other waste oils is 10.8% as per 2019-20 data, which points to a humungous feedstock supply gap.

The capacity utilisation can’t be higher considering the present system of collecting used oil from intermediaries such as kabadi walas, or from service centres and bazaar trade, and from big corporates through tender participation and allocation.

From a commercial perspective, however laudable the objective of recycling may be, feedstock procurement comes at a cost, varying from Rs. 18 to Rs. 24 per litre. Margins are at 15% of variable cost and investment in recycler units can be Rs. 2 crore to Rs. 8 crore excluding land cost. Historically, re-refining has remained an SME endeavour, despite the vital role the industry plays in reducing use of virgin crude oil for refining.

While we accept that the SME re-refiner is no big daddy to take up the challenge and contribute to environment conservation, on the other side we have millions of tons of used oil being generated in multiple sectors: Cement, coal, engineering, fertiliser, marine, defence, railways, mining, steel, power… phew, we can only  name a few!

As per available estimates over 900,000 MTs of Used Oil are generated by industry while the recoverable quantity (@50%) is half this figure. The activity faces challenges at every stage:

Used Oil recycling sector is rife with small time, unorganised and unregistered players using outdated technology.  Lack of proper HAZOP measures make the re-refining activity unsafe and an environmental hazard, defeating the purpose of re-refining.

Why blame only the re-refiners? Equally guilty are those used oil generators who do not follow proper handling and disposal protocol which again leads to a vicious cycle of poor collection and misuse.

Used or Waste Oil that that is suitable for refining should conform to specifications laid down in Schedule 5 of Ministry of Environment and Forests, Govt. of India (viscosity, density, lead and arsenic content etc), and this is often overlooked by procurers.

When virgin oil price, which is pegged to the international crude market, drops, and the product becomes available at a competitive price, there is no price advantage in re-refining waste oil, and the oil company may
choose to produce lubricant base stock from virgin crude oil.

The biggest villain is the grey market, which funds unauthorised re-refiners who in turn supply duplicate or poor quality lube products for profit.

Now we know, we have met the enemy and he is us! We talk of lesser fuel consumption, reducing carbon footprint, and dream of a Nation running on electric vehicles. Yet, if the low recovery percentage of used oil is not addressed, it will be a case of two steps forward and one step backward.

What efforts is the Central Government taking to resolve the problems of the re-refiner, and minimise environmental hazard? Working on a war footing, the Used Oil Technology Solutions Committee, set up by NITI Aayog on behalf of Ministry of Petroleum and Natural Gas, Govt. of India, is taking proactive steps by involving captains of industry, technology providers and circular economy specialists to review the existing rules and regulations, halt the environmental damage an incorporate fresh measures to prevent waste oil being wasted any further.

The Committee plans to bring generators of Used Oil under the purview of Extended Producer Responsibility rules so that the onus shifts to the source of the problem rather than downstream.

The Committee is also examining best practices followed in developed countries for encouraging re-use. These include high subsidies for re- refining and collection, structured collection methods and penalty for dumping of Used Oil. While the Committee is engaged in a draft recommendation of rules and regulations, equal focus should be on reviving the re-refiners.
Government, industry and institutionalized intermediaries should find ways to increase feedstock supply, help lower production costs and identify distribution channels to funnel re-refined output to oil companies. Clean tech funds must encourage re-refiners with equity investment.

In the final analysis, if new investments are not made in this priority sector, if stakeholders such as Generators, Collectors and authorised Re-refiners of Used Oil do not take ownership, and the grey market gets away with greed, we will be left with contaminated air, soil and water,and the guilt of complicity that stems from silence or acquiescence.

(The author is Co-Founder of Paterson Energy and a member of NITI Aayog’s Used Oil Technology Solutions Committee. Views expressed are personal.)

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