Govt issues draft notification on ethanol blending in petrol
Paving the way for the transformation of the fossil fuel ecosystem in the country, the Ministry of Road Transport and Highways has issued a draft notification for facilitating use of a blend of 12 per cent and 15 per cent ethanol in gasoline as automotive fuels. Comments have been invited from stakeholders within a period of 30 days. “The newly manufactured gasoline vehicles fitted with spark ignition engine compatible to run on ethanol gasoline blends of E-12 and E-15 shall be type approved as per prevailing gasoline emission norms,” the draft notification said, Recently, Road Transport and Highways Minister Nitin Gadkari had said the government will take a decision over flex-fuel engines as it is considering making these mandatory for the automobile industry. “…I am going to issue an order to the industry that only petrol engines will not be there, there will be flex-fuel engines, where there will be choice for the people that they can use 100 per cent crude oil or 100 per cent ethanol,” he had said. “I am going to take a decision within 8-10 days and we will make it (flex-fuel engine) mandatory for the automobile industry,” he had further said. Gadkari had mentioned that automobile makers are producing flex-fuel engines in Brazil, Canada and the US providing an alternative to customers to use 100 per cent petrol or 100 per cent bio-ethanol. Recently, Prime Minister Narendra Modi said the target date for achieving 20 per cent ethanol-blending with petrol has been advanced by five years to 2025 to cut pollution and reduce import dependence. The government last year had set a target of reaching 10 per cent ethanol blending in petrol by 2022 and 20 per cent doping by 2030. Gadkari had said ethanol is a better fuel than petrol, and it is an import substitute, cost effective, pollution-free and indigenous. “It (making flex-fuel engines mandatory) is going to boost the Indian economy because we are a corn surplus, we are a sugar surplus, and a wheat surplus country. We don’t have places to stock all these foodgrains,” he had noted.
Soaring pump prices a threat to India’s recovery and inflation
Indian pump prices are in unchartered territory as ever-increasing government levies coincide with crude’s recovery from the depths of the Covid-19 pandemic. Fuel costs have been ratcheted up to current levels by the combined effects of rising benchmark Brent prices and numerous tax hikes over the past few years. The record-high gasoline and diesel prices are leaving some Indian car owners unable to afford the cost of using their vehicles and spurring the country’s transport industry to agitate for change. Buying gasoline in major Indian cities such as Mumbai costs almost twice as much as in New York, casting a shadow on the recovery across Asia’s second-largest oil guzzler as virus-related movement restrictions are eased. The federal government kept upping taxes last year even as it put the country into a national lockdown and global crude prices collapsed. Mumbai gasoline costs have risen by more than 25per cent over the past three years, while diesel prices have climbed by a third over the same period, according to data from Indian Oil Corp. The run-up in prices is adding to inflationary pressures to the Indian economy amid a broad commodity rally. Biggest Drivers In India’s capital of New Delhi, gasoline prices have jumped almost 20per cent year-to-date, alongside a similar surge in diesel costs. Federal taxes on gasoline, which powers scooters and motorcycles, have more than tripled over the last seven years. Those on diesel, the country’s most-used fuel, have swelled by seven times over the same period. Higher prices are hitting the country’s burgeoning middle class, the engine that’s driven India’s economic and oil demand growth in recent times. Rahul Srivastava, a 48-year-old former executive at an advertising agency in New Delhi, upgraded to a shiny new sedan just a month before the country went into a nationwide lockdown last year. Now he’s considering selling his vehicle. “Driving the car is now a luxury for me,” said Srivastava, who turned to stock trading after losing his job and is now making about a fifth of what he used to. “Earlier, I would tank up whenever I needed to refill and it would cost me 3,000 rupees ($40). Last time, refilling less than half the car’s tank cost me more than $25. I now drive only when it’s absolutely necessary.” Unfortunately for Srivastava, truck drivers, and millions of others, India’s budget deficit ballooned to a record last year, and fuel taxes represent a reliable source of income that’s been hard for the government to ignore. The taxes are eroding disposable incomes and feeding inflationary pressures, according to ICRA Ltd., the local unit of Moody’s Investors Service. “Definitely, the high prices will have an impact on the growth and return to normalcy,” said Prashant Vasisht, Vice President at ICRA. “Prices above a particular level do pinch and people travel less and try to save on the fuel cost.” Demand Impact While India’s economy is now grinding its way back from a 7.3per cent contraction in gross domestic product in the year to March, millions remain under pressure. Unemployment is still rising, and the Pew Research Center estimates the nation’s middle class shrank by 32 million people in 2020. “High prices do have an impact on fuel demand,” said Senthil Kumaran, head of South Asia oil at FGE. “But, at this point the price effect will be less significant as the country is still coming out of the second-wave lockdowns. Pent-up demand will outshine high retail prices, so, it won’t pause the demand recovery. But if high prices continue through July, then it will impact more.” With fuel prices soaring, India’s truckers have had enough. Drivers have limited ability to pass on the rising prices, which account for about 70per cent of the cost of operating a truck, according to the All India Motor Transport Congress, which represents more than 14 million truckers and bus and tourist vehicle operators. “The record high diesel and gasoline rates have impacted the livelihoods of millions of small transport operators and wage earners, who are struggling to make ends meet,” said Kultaran Singh Atwal, president of AIMTC. The group plans to go on a nationwide protest this week, and follow that with a general strike if the government doesn’t reduce fuel prices, he said.
Pradhan puts ONGC, OIL on notice: perform or get shipped out
Petroleum Minister Dharmendra Pradhan on Tuesday put state-owned ONGC and OIL on notice saying oil and gas reserves they hold need to be monetised through joint ventures with domain experts or the government will take them away and auction them. Speaking at BNEF Summit, he said state-owned firms cannot indefinitely sit on resources when the nation is a net importer of oil and gas. Despite India bidding out acreages to private and other companies since the 1990s, Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) hold a “sizeable number of acreage for years,” he said. “We have asked them to do two things – do it yourself, (produce oil and gas) through some joint venture (with domain experts and foreign companies) (and) through a new business model. But the government cannot permit you to hold resources for an indefinite time,” he said. ONGC and OIL, which discovered and brought to production all of India’s eight sedimentary basins, produce about three-fourths of the nation’s oil and gas. The two, especially ONGC, have faced criticism ranging from not being able to quickly bring discoveries to production to lower recovery. Pradhan said India needs energy for its ambitious economic growth agenda. “We want to reduce import dependency. We want to monetise our own resources.” “So we have given policy guidance to our state-owned oil companies – either you do on your own through new partners and new economic model, (else) the government will after a particular period intervene and use its authority to bid out the resources,” he said. The government has already taken away dozens of small and marginal discoveries from the two firms and auctioned them in what is known as Discovered Small Field (DSF) rounds. DSF offers pricing and marketing freedom to operators, something which ONGC and OIL do not have currently, constraining their efforts to monetise smaller discoveries. But now Pradhan has indicated the government would not hesitate to take away larger idle discoveries and auction them to private and foreign players. Earlier this month, the minister had stated that the Directorate General of Hydrocarbons (DGH), the oil ministry’s technical arm, had the “full mandate” to identify unmonetised major fields that could be offered for bidding. “Resources don’t belong to a company. They belong to the nation and the government. They cannot lie with a company indefinitely. If somebody cannot monetise them, we will have to bring a new regime,” he had said on June 10. The statement comes weeks after his ministry told ONGC to sell a stake in producing oil fields such as Ratna R-Series in western offshore to private firms and get foreign partners in KG basin gas fields. had on April 25 reported a seven-point action plan, ‘ONGC Way Forward’. It was drawn by the ministry that called for the firm to consider a sale of a stake in maturing fields such as Panna-Mukta and Ratna and R-Series in western offshore and onshore fields like Gandhar in Gujarat to private firms while divesting/privatizing ‘non-performing’ marginal fields. It wanted ONGC to bring in global players in gas-rich KG-DWN-98/2 block where output is slated to rise sharply next year, and the recently brought into production Ashokenagar block in West Bengal. Also, identified for the purpose is the Deendayal block in the KG basin which the firm had bought from Gujarat government company GSPC a couple of years back. This proposal is the third attempt by the oil ministry to get ONGC to privatise its oil and gas fields. In October 2017, the DGH had identified 15 producing fields with a collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic meters of gas, for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction. A year later, as many as 149 small and marginal fields of ONGC were identified for private and foreign companies on the grounds that the state-owned firm should focus only on bid ones. The first plan could not go through because of strong opposition from ONGC, sources aware of the matter said. The second plan went up to the Cabinet, which on February 19, 2019, decided to bid out 64 marginal fields of ONGC. But that tender got a tepid response, they said. The sources added that ONGC was allowed to retain 49 fields on the condition that their performance will be strictly monitored for three years. ONGC produced 20.2 million tonnes of crude oil in the fiscal year ending March 31 (2020-21), down from 20.6 million tonnes in the previous year and 21.1 million tonnes in 2018-19. It produced 21.87 billion cubic meters of gas in 2020-21, down from 23.74 bcm in the previous year and 24.67 bcm in 2018-19.