BS VI petrol, diesel likely to pinch more

Customers may have to shell out more for petrol and diesel from April as fuel retailers are looking to pass on the higher cost of producing Bharat Stage VI-compliant fuel, said two senior officials at the companies.
This would help the state-run fuel retailers recoup their investments in upgrading their refineries to produce the cleaner fuel, the officials said, requesting anonymity. They said a final decision would be subject to government approval. The refiners are estimated to have spent more than Rs 30,000 crore to improve their facilities, with India set to implement BS VI emission norms, the equivalent of Euro VI, from 1 April.
“We have made large investments in upgrading to BS VI and we need to get a return on our investments. This is only logical. The thought process is to recover cost and not profit-making,” one of the two officials cited earlier said on condition of anonymity.
“The price increase could be anywhere between a few paise to a maximum of Rs 2, which is likely to be charged in the form of a special cess or duty,” said the second official. The Auto Fuel Vision and Policy 2025 in June 2014 had recommended a 75 paise cess to recoup additional investments projected for producing cleaner fuels.
“Pricing for petrol and diesel would be different and it will be averaged out according to what each company has invested,” the second official said. “The pricing would be decided closer to the launch and discussions are on to suggest to the government that we have made such huge investments and would like them to find a method for us to recover the same.”
Another increase in auto fuel prices would be a double whammy for consumers. Petrol and diesel prices rose by about Rs 2 each after the government imposed an additional special excise duty of Rs 1 per litre as well as a road and infrastructure cess of Rs 1 per litre on the fuels in the Union Budget for 2019-20.
“A fuel price increase is certainly required by the oil marketing companies given they have invested substantially to upgrade to BS VI. They need to recover at least their cost,” said K Ravichandran, Group Head for Corporate Sector Ratings at ICRA. “Though it will be an additional burden on the consumers, it would be beneficial for the environment as the fuel will help reduce pollution. However, if the extent of fuel price increase is anything more than Rs 1 per litre, it would be a stretch for the consumer given the Rs 2 per litre hike in prices recently on account of additional cess/duties.”