February 2017


Global: Is India ready for the BS-6 changeover?

India is the seventh-largest country in the world by land mass. Urbanization is taking place at a rapid pace: According to the country’s 2011 census, more than 377 MM Indians live in nearly 8,000 towns and cities. This count represents more than 31% of the country’s total population.

Kanwar, R., Contributing Writer

India is the seventh-largest country in the world by land mass. Urbanization is taking place at a rapid pace: According to the country’s 2011 census, more than 377 MM Indians live in nearly 8,000 towns and cities. This count represents more than 31% of the country’s total population.

The country has wide variety in climate, from harsh cold to sweltering heat. Barring the national highways and a few other exceptions, roads in these urban areas are potholed or even non-existent. With the number of damaged and inadequate roads in the country, the manufacture of nearly 24 MM vehicles in India during the year ending March 2016 appears absurd. The odd combination of bad, perennially overcrowded roads and the exorbitant number of vehicles in use produces perpetual traffic snarls and excessive pollution.

Under these adversarial conditions, India is working to reduce auto emissions norms by leapfrogging from Bharat Standard-4 (BS-4) to BS-6. This move completely skips the implementation of the intermediate BS-5 norms. In September 2016, India’s Federal Ministry of Road Transport and Highways (MORTH) made an announcement that BS-6—which is equivalent to Euro 6 fuel standards—must be implemented by April 2020. This implementation would put BS-6 four years ahead of schedule.

Realistically, such a goal seems improbable. At present, only about 40 Indian cities are in compliance with BS-4 standards, while the rest of the country adheres to the outmoded BS-3 regime. As of April 2017, the federal government has barred the sale, registration and manufacturing of new vehicles that do not comply with BS-4 norms.

Refiners will need massive investments for BS-6

Oil refineries and automobile manufacturers have been asked to ensure that their respective technological changeovers are put in place in enough time so that the country will be ready for a switchover to BS-6 by April 2020. For both sectors, the drastic changeover from BS-4—and even BS-3, in many towns—to BS-6 norms would be a Herculean task. On the face of it, adhering to the government’s scheduled deadlines seems like a tall order. Apart from the required changes to refineries, massive logistical problems exist. For example, more than 50,000 filling stations across the country will need to flush out their underground tanks to make them ready to receive BS-6-compliant fuels—a mammoth operation.

Additionally, for oil refiners, the task involves drastic technological changes and massive capital investment. Refiners would need to designate project management consultants to conduct feasibility studies to identify the modifications required for existing units and to shortlist the additional machines and instruments required.

Another major necessary step is the technology selection for new units and the units to be revamped. Refiners will need to dedicate teams at various refineries, and also at the company’s headquarters, to oversee this technological changeover. 

Indian Oil Corp. (IOC), which operates 11 of the nation’s 23 refineries and markets its fuels to more than 25,000 filling stations in the country, is ready to comply. Sanjiv Singh, IOC’s refineries director, said that IOC will complete the required technological changeover within the allotted time frame. However, the implementation schedule is both tight and challenging. It involves the selection of technology, the preparation of a basic engineering design package, detailed engineering, final cost estimates and the securing of numerous statutory clearances and approvals. Other intermediate steps include the appointment of a suitable agency or contractor for project implementation, and shutdown for hookup, commissioning and stabilization. IOC is targeting mechanical completion by July 2019 and commissioning in September of that year. The total cost of the changeover is estimated at nearly $2.5 B.

Other Indian national oil companies will need to undertake substantial technological modifications at their refineries, at enormous cost. These companies include Hindustan Petroleum Corp., Bharat Petroleum Corp., and Oil and Natural Gas Corp.

Private refiner Reliance Industries Ltd. (RIL), with its giant refinery at Jamnagar in the state of Gujarat, has relatively less to worry about since it is already “future ready” and technologically equipped to produce gasoline and high-speed diesel in any grade. With an annual refining capacity of 33 MMtpy, the plant is the world’s largest. Its sister refinery in the nearby Special Economic Zone is the sixth largest in the world. Together, these two refineries have made Jamnagar the world’s largest refining hub. The plants export their fuels to several countries across the world with varying emissions standards.

Essar’s Vadinar refinery, located less than 28 mi from RIL’s Jamnagar complex, has a refining capacity of 20 MMtpy (405 Mbpd). The Vadinar refinery’s products are already in compliance with Euro 4 and Euro 5 emissions standards and should not require drastic technological changes. The refinery is fully integrated, with its own dedicated port, terminal facilities and single-point mooring. 

Automakers foresee big challenges with new standard

The Indian automobile industry is one of the largest in the world. It accounts for 7.1% of the country’s GDP. With 81% of market share, the two-wheeler segment represents the largest in the country’s automobile industry. Growth in this segment is attributed to the country’s young, middle-class population. By contrast, the passenger vehicle segment has a 13% market share. India exported more than 3.6 MM vehicles during fiscal 2015–2016. The top importers of Indian vehicles were the US, South Africa, Mexico, the UK, Turkey, Nigeria, the UAE and Colombia.

Like the downstream petroleum industry, automobile manufacturers will need to prepare to introduce substantial technological changes. The automobile industry cannot continue to produce vehicles inconsistent with BS-6 emissions standards. As previously stated, India produced nearly 24 MM vehicles in fiscal 2015–2016. This production represents an increase of 2.58% from the previous fiscal year. Domestic sales of passenger vehicles grew by 7.24% year-on-year in fiscal 2015–2016. The commercial vehicles market grew at an even faster pace, reaching 11.5% growth year-on-year. Likewise, the sale of two- and three-wheelers increased, albeit at a slower pace. However, while the number of vehicles is rapidly increasing, the condition of many of the country’s roads is deteriorating rapidly.

Unlike in Western countries, the use of national highways in India is not restricted to motor vehicles alone. The highways are free for use by all cars, trucks, passenger buses, tractor-trailers, bullock carts, water tankers, motorbikes, scooters and bicycles—to name a few. Ironically, more people die in road accidents every day than from any other cause, including enemy fire, terrorist attacks and diseases. Half a million road accidents occur yearly, which result in the death of approximately 146,000 citizens. On average, 400 people were killed every day in road accidents, with Delhi topping the list at 1,622 deaths in 2015. During a speech in late 2016, Nitin Gadkari, India’s Road Transport and Highways Minister, explained India’s traffic fatality statistics more forcefully when he said, “More people have died in India in road accidents than in all of the wars that India has fought.”

In the author’s opinion, Indian drivers are notoriously undisciplined and show blatant disregard for traffic rules and regulations. Although India’s automobile manufacturing industry is a sense of pride for the industrial landscape of the country, Indian roads are inadequate to bear such heavy vehicular traffic. One automobile expert pointed out that Euro-standard-type fuels are designed for vehicular traffic on smooth roads, and not for the damaged, potholed roads found in India.

Although automobile manufacturers claim they are ready to meet the BS-6 compliance deadline, they are skeptical that the country’s refiners will do their part. Furthermore, automobile manufacturers feel that the time frame for the changeover is insufficient. The short deadline of April 2020 has caught some car manufacturers off guard; therefore, extending the deadline by an additional year might be necessary. It will be a tight race against time for both oil refiners and automobile manufacturers to comply with incoming BS-6 fuels and emissions standards. HP

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