PM Modi advances 20% ethanol blending target for petrol by 5 years to 2025
Prime Minister Narendra Modi on Saturday raised his bet on ethanol in India’s fight against climate change by advancing the date for 20% blending of petrol by 5 years to 2025 and launching a pilot project at three Pune petrol pumps for running vehicles fully on the ‘swadeshi’ fuel. “The country is fast moving towards clean energy and we will see a great benefit from this (rapid ethanol blending), especially in the agriculture sector,” he said addressing a function to mark World Environment Day. The PM unveiled a roadmap prepared jointly by the oil ministry and government think-tank Niti Ayog for developing an ethanol economy in the country. The roadmap reckons 20% blending of petrol with ethanol will result in an annual saving of $5 billion, or Rs 30,000 crore in India’s oil import bill. India’s net petroleum import bill stood at $551 billion in 2020-21. For the uninitiated, ethanol is ethyl alcohol – also referred as ‘drinking alcohol’ – made from molasses, grains and farm waste. The pandemic has made ethanol a part of our everyday life as one of the alcohol options for hand sanitisers. It is less polluting, and offers equivalent efficiency at a lower cost than petrol by raising the octane level. Petrol 20% laced with ethanol is known as ‘E20’ and ethanol for automotive use is known as ‘E100’. “Seven years ago, there was barely any discussion on ethanol. But now, it is connected to our 21st-century goals… In 2013-14, 38 crore litre of ethanol was bought as compared to over 320 crore litre today, which is about eight times more. This is worth Rs 21,000 crore, a lot of which has gone to farmers. When we achieve 20% ethanol blending, imagine how much money farmers will make,” he said. In 2014, the country had 1.5% ethanol blending, which has now gone up to 8.5%. A 5% ethanol blending programme for petrol and diesel was first launched by the Atal Bihari Vajpayee government in 2001 with three pilot projects covering 300 petrol pumps in Maharashtra and UP under then oil minister Ram Naik’s watch. The programme progressed in fits and starts under the Manmohan Singh-led UPA governments till the Modi government sharpened its focus on the swadeshi fuel after coming to power in 2014. Brazil is the world leader in ethanol use and has fuels blended up to 28%. The country has ‘flexi’ engines running on gasoline or gasohol – the other name for ethanol-blended fuels. This gives consumers the freedom to choose the fuel on any given day, based on the price advantage of the options and distance travelled. The US is the next major market, followed by Europe.
Oil hits new multi-year highs; investors eye Iran nuclear talks this week
Oil extended gains to hit fresh multi-year highs on Monday, underpinned by a brighter economic and fuel-demand outlook, while investors eyed the outcome of talks between Iran and world powers over a nuclear deal that is set to boost crude supplies. Brent crude futures for August rose 28 cents, or 0.4%, to $72.17 a barrel by 0107 GMT, their highest since May 2019. U.S. West Texas Intermediate crude for July touched $70 for the first time since October 2018 and was at $69.91 a barrel, up 29 cents, or 0.4%. Both contracts have risen for the past two weeks as fuel demand is rebounding in the United States and Europe after governments loosened COVID-19 restrictions ahead of summer travel. Global oil demand is expected to exceed supplies in the second half despite a gradual easing of supply cuts by OPEC+ producers, analysts say. A slowdown in talks between Iran and global powers in reviving a 2015 nuclear deal and a drop in U.S. rig count also supported oil prices. Iran and global powers will enter a fifth round of talks on June 10 in Vienna that could include Washington lifting economic sanctions on Iranian oil exports. While the European Union envoy coordinating the negotiations had said he believed a deal would be struck at this week’s talks, other senior diplomats have said the most difficult decisions still lie ahead. Analysts expect Iran to increase its production by 500,000 to 1 million barrels per day once sanctions are lifted. In the United States, the number of oil and natural gas rigs operating fell for the first time in six weeks as growth in drilling slowed.
Options being explored to further sweeten BPCL privatisation deal
The Central government proposes to further sugarcoat the BPCL strategic sale deal for the interested investors by giving few more clarifications through a new set of frequently asked questions (FAQ). Sources said that the Department of Promotion of Investment and Internal Trade (DPIIT) may soon issue a clarification that the BPCL under new private sector owners would be free to bring in foreign direct investments (FDIs) to the tune of the entire 100 per cent equity of the company without conditions. Also, after privatisation, BPCL would be free to exercise its right to stay or come out of the joint venture company that plans to build the world’s largest 60 million-tonne integrated refinery-cum-petrochemicals complex in Maharashtra’s Ratnagiri district at an estimated cost of Rs 3 lakh crore. Moreover, the government is also looking to allow BPCL to sell its stake in Petronet LNG and Indraprastha Gas Ltd, where the oil refiner is one of the promoters, before its own strategic sale. This will prevent new owners of BPCL from making mandatory open offers to the shareholders of these companies, an exercise that could increase the cost for the new investors by up to Rs 20,000 crore. “The aim is to conclude the BPCL strategic sale this year. We have also received decent interest from the investors for whom the company’s data room has been opened before the financial bids are invited. A few more clarifications would make the sale process even more attractive for the investors and provide higher valuations for the government stake,” said an official source not willing to be named. The government is selling its entire 53.29 per cent stake in BPCL to a strategic investor to mobilise over Rs 52,000 crore as disinvestment receipt. Though started in 2019 when its disinvestment got nod, BPCL’s disinvestment has been postponed on numerous occasions due to the pandemic related disruptions. It is understood that along with domestic oil and gas and metal company Vedanta, Apollo Global Management and Think Gas (promoted by I Squared Capital) are reportedly among the interested parties. Though the government says that multiple bids have been received, major energy giants, including Reliance Industries, Saudi Aramco, the UAE’s Adnoc and the UK’s BP, have not placed interest for the state-run oil major so far. This has made the task difficult for the Centre, which is looking to retain investor interest to conclude the deal this year. The proposal to clarify 100 per cent FDI permission for the new owners of BPCL is required as the refiner is a PSU company right now where only up to 49 per cent FDI is permitted. Experts say that this clarification is essential as the government already allows 100 per cent FDI in the oil and gas sector and the case for BPCL should be no different after it gets converted into a private entity. The freedom to decide investment in the proposed Ratnagiri refinery could allow the bidders to place aggressive bids as it would reduce liabilities for the new owners who could decide the future of BPCL on their own terms. The most important decision would be to allow BPCL to exit PLL and IGL before sale and save almost Rs 20,000 crore for the new owners. Some of the interested qualified investors have also sought exemption from open offer to the shareholders of BPCL post its privatisation. This could save another Rs 25,000-30,000 crore for the investors. But no call has been taken in this regard so far, sources said. BPCL operates four refineries in Mumbai, Kochi, Bina (Madhya Pradesh) and Numaligarh (Assam), but the facility in Assam has been hived off. The company accounts for 15 per cent of India’s refining capacity of close to 250 million tonnes. The public sector company also owns 15,177 petrol pumps, 6,011 LPG (liquefied petroleum gas) distributorships and 51 LPG bottling plants. BPCL distributes 21 per cent of the petroleum products consumed in the country and owns a fifth of the 250 aviation fuel stations in India. The government targets Rs 1.75 lakh crore through disinvestments during FY 2021-22, with BPCL expected to provide a large portion of this amount. Despite being a good takeover target, the company sale plan had to be postponed on several occasions since March 2020. The concern now is that the pandemic should not result in distress sale of this valuable government asset.