Indian Oil Corp to invest Rs 21,000 crore to upgrade fuel quality

State-owned Indian Oil Corp (IOC) will invest Rs 21,000 crore in upgrading six refineries to produce Euro-VI grade petrol and diesel by April 2020, its Director (Refineries) Sanjiv Singh said on Wednesday.

The investment on upgradation will raise the production cost of petrol by Rs 1.40 per litre and diesel by Rs 0.63.

IOC, the nation's largest oil firm, is investing Rs 7,000 crore in upgrading fuel quality from Bharat Stage-III, equivalent to Euro-III emission norm, to BS-IV by next year, he said.

Another, Rs 13,000-14,000 crore will be invested in six units to upgrade fuel quality straight to BS-VI or Euro-VI, he added.

In a bid to cut vehicular pollution, the government has decided to leapfrog from Euro-IV emission standards for automobiles as well as fuel to stricter Euro-VI by April 1, 2020. All PSU refineries need to invest Rs 28,750 crore for upgrading quality of fuel they produce.

"It is extremely challenging task (to produce Euro-VI fuel by 2020) but we will meet it. We are fairly confident will meet it," he said.

Singh said these investment does not include the money needed for upgrading IOC's newly built 15 million tonnes refinery at Paradip in Odisha.

"We haven't done the numbers yet, but it certainly will be much much lower than Rs 4,000 crore reported in certain media," he said.

Asked if the company will pass on the increased cost to customers, he said it is "upto now the capital investment in upgrade of fuel quality to BS-III and BS-IV is not being passed on to consumers. But definitely my cost of production will go up."

He remained noncommittal if the fuel prices will be raised. "These are very very sensitive... operating cost goes up, so we have to see."

India currently has Bharat Stage-III, equivalent of Euro-III specifications, 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 fuels contain 50 parts per million (ppm) sulphur while BS-V and BS-VI grade fuel will have 10 ppm sulphur.

BS-IV auto fuels are being supplied in whole of northern India covering J&K, Punjab, Haryana, Himachal Pradesh, Uttarakhand, Delhi, parts of Rajasthan and western UP. The rest of the country has BS-III grade fuel.

From April 1, 2016, all of Goa, Kerala, Karnataka, Telangana, Odisha, Union Territories of Daman and Diu, Dadra and Nagar Haveli and Andaman & Nicobar will get BS-IV fuel.

The rest of the country will get supplies of BS-IV fuel from April 1, 2017.