Carmakers will be mandated to introduce flex-fuel engines: Nitin Gadkari
Union Minister of Road Transport and Highways Nitin Gadkari on Monday said he would issue an order in the next two-three days to make it mandatory for the carmakers to introduce flex-fuel engines in vehicles. Flexible fuel vehicles (FFVs) have an internal combustion engine and are capable of operating on both gasoline (petrol/diesel) and any blend of gasoline and ethanol. These vehicles are popular in countries like Brazil, Sweeden, France and Germany, among others. Addressing an event, Gadkari said, India imports petroleum products worth 8000 billion every year, and if the country continues to depend on fossil fuels, then its import bill will rise to ₹2.5 million in the next five years. “To reduce import of fossil fuels, I am going to sign a file in the next 2-3 days, in which carmakers will be asked to make flex-fuel engines vehicles (that can run on more than one fuel),” the road transport and highways minister said. Flex-fuel, or flexible fuel, is an alternative fuel made of a combination of gasoline and methanol or ethanol. Gadkari said that top officials of Toyota Motor Corporation, Suzuki and Hyundai Motor India have assured him that they will introduce flex engines in their vehicles. He also said India is the fastest-growing economy in the world. Gadkari noted that politics is an instrument of socio-economic reform.
GAIL Seeks Partners to Set Up Electrolyzer Manufacturing Unit to Produce Green Hydrogen
The Gas Authority of India Limited (GAIL) has issued an expression of interest (EoI) to select partners for setting up an electrolyzer manufacturing facility to produce green hydrogen. GAIL intends to set up an electrolyzer manufacturing project by incorporating a special purpose vehicle (SPV) or stock acquisition in an electrolyzer manufacturing company under operation or construction. In the case of an equity partnership, GAIL will hold 26% equity in the said entity. The last date to submit the bids is December 17, 2021. The EoI is valid for six months from the date of submission. Companies or consortiums from India or countries that share a land border with India can participate in the bidding. Apart from investing in the proposed electrolyzer manufacturing project, the proposed entity will secure land and project financing and select technology partners, engineering consultants, environmental consultants, and EPC contractors. The entity will monitor and review project development activities and ensure project execution timelines are met. The proposed entity will also manage the operation and maintenance of the electrolyzer project and get statutory approvals and clearances. The entity will also market the electrolyzers with an option for captive use for utilization by GAIL or their affiliates. Each organization can submit only one bid, either as a party or as a lead member of the consortium. The authorized person signing the EOI document should be a managing director, chairman, or C-suite executive. The bidders should state the equity they wish to acquire in the SPV or the equity it intends to offer GAIL in their existing company. The bidders should also specify the electrolyzer technology that would be used in the project. The bidders have to submit an estimated capital investment and operating cost for the annual electrolyzer manufacturing capacity of 200 MW, 500 MW, 1 GW, and 2 GW, along with the cost breakup of all major components. Recently, another government-owned enterprise, Indian Oil Corporation Limited, issued a global tender to develop green hydrogen generation facilities on a build, own, operate (BOO) basis at its refineries in Mathura, Uttar Pradesh, and Panipat, Haryana. In August 2021, NTPC issued an expression of interest (EoI) for Indian and global companies to set up a pilot project to blend green hydrogen with natural gas in the city gas distribution network.
India’s gasoline revival hopes shrouded with uncertainty as omicron lurks globally
India’s gasoline output rose in October, with production hitting a seven-month high on robust local demand as driving activity accelerated, but a sense of cautious optimism prevails as the new COVID-19 variant omicron emerges worldwide, threatening to put brakes on this recovery, industry sources told S&P Global Platts. “The market is assessing the impact of the new variant, especially as the oil complex is already fragile from the spike in cases and news of fresh restrictions in Europe and Asia,” a Singapore-based source said. India’s domestic gasoline production in October rose 11.95% month on month to 3.447 million mt, according to latest data from the Petroleum Planning and Analysis Cell, or PPAC. The country’s domestic gasoline production was last higher in March at 3.583 million mt, the data released Nov. 24 showed. In October, India’s domestic gasoline demand rose 5.81% on the month to a record high of 2.75 million mt, the PPAC data showed Nov. 11. This came as the festive season spurred motor fuel demand amid rising vaccination rates. Driving activity, a proxy for gasoline demand, averaged 91.60% above baseline levels in October, up from the 72.90% above baseline levels recorded in September, according to data from Apple Mobility. The total number of doses administered in the world’s second most populous country has already crossed the 1-billion mark. This comes after a second wave of the COVID-19 pandemic in India around May derailed economic activity. Refiners’ raise run rates State-controlled refineries in India were heard to be operating at maximum capacity or higher as the transport sector received a boost on fewer movement restrictions amid improved vaccination. Improved demand for transportation fuels in India prompted Indian Oil Corp., or IOC, the country’s No. 1 state-owned refiner, to run its nine refineries at an average of around 90% so far in October, company officials said Oct. 26. This was up from 82% in September. The average run for all categories of refineries in India rose to 99% in October, compared with 89% in September, as domestic fuel demand rebounded on easing restrictions, the latest survey of the oil ministry showed Nov. 23, reflecting improved economic activity in Asia’s third-largest economy. October’s run rate was also higher compared with the 87% run rate in the previous year, reflecting improvement in overall economic activity since the first wave of coronavirus in 2020. “Run rates [in December are] expected to keep at current levels,” said an India-based refiner source, adding that “everything is as per normal now.” “[Domestic] demand is very good, but we are keeping an eye on the global situation,” the refiner said. Higher refining margins was also reflected in the higher Asian crack spreads in October. The front-month FOB Singapore 92 RON gasoline crack against Brent swap averaged $9.60/b in October, up $2.50/b from the September average, Platts data showed. On the physical front, the FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures averaged $12.22/b in October, up $4.96/b from the September average. The FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures averaged $10.89/b over Nov. 1-29, Platts data showed. Road ahead Moving forward, market sources are cautious as global mobility is expected to take a hit, with the emergence of the new COVID-19 variant adding additional pressure on gasoline demand. “We are already approaching the winter months when gasoline demand is seasonally lower. Bearish headlines on COVID-19 will just add more pressure,” a market source said. Meanwhile, S&P Global Platts Analytics expects some reprieve in India’s gasoline demand growth in November while still staying circumspect about the outlook in December as the threat of renewed local restrictions lurks if the variant spreads. Several local media have recently reported that COVID-19 cases have been detected among some arrivals into India from South Africa. However, the variant had not been confirmed in India at the time of writing. “We expect the gasoline demand to grow in Q4 on a quarter-on-quarter basis, with November expected to show a positive growth over October as suggested by mobility indicators,” Shreyans Baid, a South Asia oil market analyst with Platts Analytics said. “December gasoline demand may face headwinds if there are restrictions due to the omicron variant from various state governments, like Maharashtra warning its citizens of a lockdown if COVID appropriate behavior is not followed,” Baid said. The growth in gasoline demand may not be impressive in coming months as there has been a year-on-year decline in two-wheeler and four-wheeler sales due to semiconductor shortages, Baid added.
CAG: Only 21% of cess on crude oil utilised for intended purpose in 5 yrs
Flagging concerns that cess proceeds collected by the Centre is not being fully utilised for the identified purpose, the Comptroller and Auditor General of India (CAG) said only Rs 155.06 billion or 21% of the total receipt of Rs 724.84 billion from cess on crude oil have been spent for development of oil industry during FY16-FY20. Oil Industry (Development) Act, 1974 provides for establishment of Oil Industry Development Board (OIDB) for the development of Oil Industry and for that purpose levy a duty of excise on crude oil and natural gas as a cess. CAG audit scrutiny for the period FY10 to FY20, showed that no funds from cess proceeds have been transferred to OIDB as against the total cess collection of Rs 1284.61 billion. It is also significant that since inception of OIDB only Rs 9.02 billion had been transferred to the body and since FY92, no funds out of the cess collected by the government were transferred to OIDB. Responding to CAG findings, the petroleum ministry has said that the government was financing various activities from the budget which included proceeds from the cess, and this qualified as being for development of the oil industry in terms of the OIDB Act. “It may, however, be noted that treatment of the cess as a general pool tax defeats the very purpose of levy of the cess which was to create a non-lapsable pool of funds for specified use,” the CAG said in its report tabled in Parliament on Monday. In the case of Universal Access Levy (UAL), for achieving universal service objectives by providing access to telephone services in rural and remote areas, CAG said against the total collection of UAL amounting to Rs 79.62 billion in FY20, only Rs 29.26 billion was transferred to the USO Fund, resulting in short transfer to the USO Fund by Rs 50.3553 billion.
Diesel, petrol prices unchanged since Diwali
Oil marketing companies have continued to keep prices of diesel and petrol unchanged across major Indian cities post revision of duties by the Centre and state governments on the Diwali eve. Accordingly, diesel and petrol prices in Delhi remained static at Rs 86.67 per litre and Rs 103.97 per litre, respectively. In the financial capital Mumbai, they were priced at Rs 94.14 and Rs 109.98, respectively. Prices also remained static in Kolkata at Rs 89.79 and Rs 104.67, respectively. In Chennai, petrol and diesel remained at Rs 91.43 and Rs 101.40. Across the country as well, the price of the fuel largely remained unchanged on Sunday but the retail rates varied depending on the level of local taxes. The excise duty cut by the Centre on November 3 was the first such exercise since the onset of Covid pandemic. In fact, the government had revised excise duty on petrol and diesel sharply in March and again in May 2020 to mobilise additional resources for Covid relief measures.
Omicron threatens oil demand recovery, already hit by Europe’s rising COVID cases
Asian oil refiners’ margins have slumped to the lowest in nearly five months amid worries that the Omicron coronavirus variant could deal another blow to oil demand recovery, already hit by rising COVID-19 cases in Europe. Governments worldwide imposed travel curbs on travellers from southern Africa during the weekend to limit the spread of Omicron, first detected in South Africa. Scientists are racing to find out whether it is more transmissible or causes more severe disease than existing variants. It comes as refiners’ margins in Asia and Europe had already taken a hit in recent weeks as many European countries reimposed coronavirus restrictions to contain surging COVID-19 cases. The double-whammy risks derailing the global economic recovery and by extension oil demand, which the International Energy Agency expects to grow by 5.5 million barrels per day (bpd) to 96.3 million bpd in 2021. “At a time when many travel lanes are reopening, this is a setback,” said Howie Lee, an economist at Singapore’s OCBC bank. “We need at least two weeks to figure out what impact this new variant will have on oil demand.” Concerns about the new variant pummelled oil prices on Friday in thin post-Thanksgiving volumes. Oil prices plunged more than 10% on Friday – their largest daily drop since April 2020 – but had only recovered some of those losses by 0608 GMT on Monday, standing up more than 3% on the day. Analysts said the Friday sell-off had been excessive. [O/R] Brent, WTI crude futures, Singapore’s complex margins, a barometer for Asian refiners’ profitability, stood at $2.15 a barrel on Friday, the lowest since June 30, Refinitiv data showed. Just a month ago, margins peaked at $8.45 a barrel, the highest since September 2019. “We are seeing drastic drops in refining margins over the past few days due to concerns over the fast-spreading Omicron coronavirus variant,” said an official at a major South Korean refiner, pointing to the growing number of countries imposing travel restrictions as a result of the new variant. “From a refinery’s end, we are facing a double whammy – drops in oil prices and refining margins, which would likely worsen our profitability.” The person declined to be named because of the sensitivity of the matter. Asia refining margins slip from 2-year highs, Despite a weakening outlook for jet fuel, some analysts expect gasoline demand to stay firm for now as most governments have not yet imposed domestic curbs on movement as a result of the Omicron variant. “Jet demand will get killed, but I think gasoline will hang in there,” said a Singapore-based analyst who declined to be named due to company policy. “Europe was already heading into lockdown so that’s a wash, so it’s more about (gasoline demand in the) U.S. and Asia.” In China, tight border controls may keep Omicron at bay from the world’s top oil importer, while the fall in prices could benefit Chinese refiners and consumers, said an analyst from a Beijing-based consultancy. “It’s bad news for the world but good news for China as oil prices have dropped significantly,” said a China-based analyst, who also declined to be named due to company policy.
More oil to tame oil? What India may gain by releasing crude from reserves
India is highly dependent on oil imports to fuel its economy — it is the world’s third largest importer of crude. In an unprecedented move, India is participating in a coordinated effort — with the US, China, Japan and South Korea — to release 5 million barrels of crude oil from its strategic petroleum reserves (SPR). This marks the first instance of nations getting together for such an initiative to cool down global crude oil prices. Repeated requests to the Organisation of the Petroleum Exporting Countries Plus (OPEC+) to bring down the prices have met with resistance from the energy bloc. Oil prices have been flaring up in recent weeks. Benchmark Brent was at $86.4 a barrel on October 26. From there, it dipped to $79, only to rise to around $83 per barrel after the five-nation announcement. Further, the fresh surge of COVID in Europe and elsewhere is expected to keep oil prices volatile in the coming weeks. What drove India to the move is more or less obvious. It is highly dependent on oil imports to fuel its economy — it is the world’s third largest importer of crude. The high price has been hitting the country’s forex reserves hard, with the rupee taking a beating, too. The big question is what impact the move will achieve, considering India plans to release just 5 million barrels — which is about the country’s average oil consumption per day. What are oil reserves and why do countries have them? Oil reserves are substantial quantities of petroleum held by governments, which are to be commercially recovered at some point in the future. Since modern economies depend almost entirely on energy, and much of it comes from fossil fuels, the reserves are critical. They are meant to prevent supply interruptions or shortage. Most countries ensure oil security by holding reserves, though the quantum varies widely. Venezuela, Saudi Arabia and Canada are estimated to hold the maximum reserves. The reserves are typically stored in secured locations with strict access control. India keeps its reserves across three underground rock caverns — one each in Visakhapatnam (with a capacity of 9.8 million barrels), Mangaluru (11 million barrels) and Padur, Karnataka (18.4 million barrels). A fourth cavern is being constructed in Chandikhol, Odisha. The caverns are located in coastal areas so that the oil, when required, can be easily transported to refineries. The reserves are designed to meet 9-10 days of India’s oil demand in crunch situations. India is expected to release the oil over 7-10 days, to public sector oil companies MRPL and HPCL. To that extent, the two PSU can avoid imports. What triggered the release from the reserves? As oil prices shot up, the Joe Biden administration decided that releasing some oil from their reserves would help tame the prices to an extent. Not only did it go ahead with the move, but also roped in India, Japan, China and Korea for a coordinated initiative. While the decision is purely economic on the surface, it has political implications, said analysts. Biden, who is close to completing one year of presidency, and known to hold ambitions to try for a second stint, has been seeing a dip in his approval ratings. The oil reserve move could be an attempt to shore up the ratings, it is felt. The US plans to release 50 million barrels. The release of oil by the five countries, including India’s 5 million barrels, is expected to add 70-80 million barrels of crude supply to the global pool. Though less than the 100+ million barrels the markets had expected, per media reports, it is likely to cool prices a little. Will OPEC+ pay heed? Experts say that the US-led five-nation initiative should be viewed more as a symbolic gesture, to draw the attention of OPEC+. All the countries have been hit hard by COVID, are on the path to recovery, and find high oil prices to be a huge burden. On the flip side, OPEC+ may stall plans to boost production from its own reserves, which would negate the roughly 80 million barrels of oil being released into the market. Net-net there would be no additional oil in the market, and prices will remain intact. On the other hand, the posturing by the two sides may make negotiations with OPEC+ even more difficult.
Switch off internal combustion engines
Pushing the envelope vis-a-vis electric mobility will have to be a priority for governments to achieve climate mitigation goals. The Glasgow COP26 declaration on speeding up the transition to 100 per cent zero-emission cars and vans was categoric. The agreed timeline for this globally was 2040. In leading markets, the deadline was 2035. This calls for acceleration in phasing out internal combustion engine (ICE) vehicles in the coming years. At the Glasgow meet, countries, financial institutions and companies joined the Zero-Emission Vehicles (ZEV) declaration. So did India. In fact, Prime Minister Narendra Modi announced a net-zero pledge by 2070 on day one itself. As the fourth-largest auto market, India committed to a new target for phasing out fossil fuel vehicles. The Indian motor industry also revealed fresh plans to make two-thirds of new vehicles electric by 2030. But will it be able to deliver? The challenge is considerable. Says Anjal Prakash, research director at the Bharti Institute of Public Policy, Indian School of Business, Hyderabad: “In India, the transport sector contributes around 13 per cent to carbon dioxide emissions. EVs with zero tailpipe emissions are seen as an alternative to fossil fuel-based vehicles… India must have the right policies for infrastructure development to encourage zero-emission vehicles on the road.” One of the challenges in promoting EVs is the requirement for charging infrastructure. In the absence of a single, all-encompassing policy for infrastructure creation, we need to independently evaluate various state policies to create an ecosystem for EVs to operate without hurdles, says Prakash. According to him, the states and the Centre must unitedly draft a comprehensive plan. The carbon dioxide reduction targets must be decentralised to give states room to cut emission in a phased manner. Strong monitoring and evaluation are a must. The wait is over The industrialised global North, largely responsible for climate change, had agreed to mobilise $100 billion per year by 2020 towards mitigation efforts. However, it failed to meet this goal. The expert view is that we should no longer wait for it. India must quickly adopt ZEVs. Its oil import bill in 2019-20 was a whopping $102 billion. According to a Petroleum Ministry study, nearly 65 per cent of the total diesel and 98 per cent of total petrol consumption is by the automotive sector. Additionally, the transport sector contributes to 23 per cent of the greenhouse gas emissions, and roughly 2.3 million deaths are linked to air pollution. India has set a target of transitioning to EVs by 2030. The breakdown for this is two- and three-wheelers (80 per cent), private cars (30 per cent), commercial cars (70 per cent) and buses (40 per cent). Though the government has introduced various policy interventions and launched the e-AMRIT portal to raise awareness, there is still a long way to go. EV adoption faces both supply and demand challenges. Low mineral reserves, high capital requirement, naïve technology and demand uncertainty are preventing domestic investments. The overwhelming dependence on imports for major components is leading to unviable manufacturing costs. On the demand side, the high initial cost of EVs and lack of awareness are inhibiting adoption, in addition to range anxiety and limited charging infrastructure. Says Rohan Rao, Partner, KPMG India: “Existing policy measures are a step in the right direction. However, continued support will be critical for faster transition to EVs. There is a need to formulate policy and encourage discoms and oil marketing companies to invest in developing charging infra and facilitate global alliances for sharing technology and resources.” The subsidy effect Aniruddha Bhattacharjee, senior researcher at communication network Climate Trends, shares Rao’s views and adds that subsidies must be maintained or even enhanced at the Central and State levels. According to him, electric two-wheelers are selling well because they are affordable in many states with the subsidies. Similarly, electric four-wheelers can be popularised, but their higher prices (versus ICEs) deter customers. Hence, they need further subsidies. As for manufacturers, tax breaks would help. Several State governments including Maharashtra, Tamil Nadu and Telangana offer tax holidays to set up EV-only manufacturing units. This could be extended to those making both EVs and ICEs as an incentive for a faster switch. The transition to electric mobility and zero-emission vehicles is a reality whose time has come.
Rising fuel prices- Small is big: How the ‘Chhotu’ LPG cylinder became a bestseller
To encourage regular refill, a swap option from the standard 14.2 kg connections to 5 kg connections was offered to Pradhan Mantri Ujjwala Yojana (PMUY) consumers. When popular shampoo brands started selling sachets, they managed to rope in a consumer with small pockets but big aspirations. Small soon became big in the FMCG industry, with everything from coffee to chips and shampoo to cream being sold in single-use packing costing not more than Rs 5, thus reaching buyers who could never afford the larger packs. With fuel costs spiraling, the LPG cylinder has also taken on a ‘Chhotu’ 5-kg avatar that is more in demand than the standard 14.2 kg version. Even if the small cylinder costs a bit more, it makes sense for many who can’t shell out Rs 900 in one go but would prefer to commit Rs 500 for the small one instead. The uptake of small cylinders would probably grow further if the government’s plan to supply these through the network of fair price shops across the country kicks off. And with no subsidy in sight for LPG, more consumers would be forced to opt for the smaller ones. State-run oil marketing companies are said to have appreciated the proposal of retailing through fair price shops, and have even committed their support. The consumer affairs ministry had requested the Union ministry of petroleum and natural gas for leveraging electronic point of sale (ePoS) devices for sale of 5 kg small cylinders from fair price shops. “We are looking into the business model and a pilot has been started in Kerala,” state-run Indian Oil Corporation Ltd (IOCL) told FE. “As per preliminary discussions and business model proposed, the retail sale price of small cylinder at FPS will be same as market price,” IOCL added. As for IOCL, the 5 kg small cylinder is primarily marketed to cater to the needs of customers such as migrant labourers, students, food hawkers who were dependent on the grey market due to lack of address proof, etc. The sale of these small cylinders recorded a significant jump in FY20 after it was re-launched under the ‘Indane Chhotu’ brand name in December, 2020. Sales grew further in FY21 when subsidies on standard 14.2 kg domestic cylinders were stopped. To encourage regular refill, a swap option from the standard 14.2 kg connections to 5 kg connections was offered to Pradhan Mantri Ujjwala Yojana (PMUY) consumers. As FE reported earlier, of the 80 million PMUY beneficiaries, 32 million did not refill their LPG cylinders in the first quarter of FY22. The government not paying any subsidy on LPG since May 2020 has led to rural households spending nearly 10% of their monthly expenditure on the cooking fuel, a recent study by the Council on Energy, Environment and Water (CEEW) has said. The report, released in September, said 85% households in the country have LPG connections, and 80% of the non-user households cited affordability issues for not having an LPG connection. A drop in global crude oil prices, and hence global LPG product prices since May 2020, gave the government an opportunity to withdraw the subsidy. The end consumers had not felt the pinch till November 2020 thanks to muted global LPG prices. Even without subsidies, domestic LPG cylinders cost just around Rs 600, close to the price at which the subsidy kicked in. While the global prices have since risen, the government has not reinstated the subsidy. India imports more than 55% of its LPG requirement and the cost of an unsubsidised cylinder depends on global rates.
Slew of products, starting with CNG and LNG planned; Ashok Leyland
Hinduja Group flagship Ashok Leyland has put in place a team to focus on alternate fuel technology that uses low carbon like CNG and LNG as part of its move towards building a green mobility future, the company said on Wednesday. The city-headquartered commercial vehicle maker also dedicated its existing testing facility in Hosur to exclusively focus on alternate fuels. Ashok Leyland today announced several initiatives to build a green mobility future. To enhance its presence in the alternate fuel space, the company has planned a slew of products, starting with CNG and LNG, the company said in a statement here. Powertrains are predominantly driven by IC engines — gasoline and diesel. Over the next decade, alternative powertrains comprising of battery electric, fuel cell electric would emerge and Ashok Leyland has dedicated teams focusing on the development of these future power trains, it said. “As we march towards our vision of being among the Top 10 Global CV Makers, it is equally important that we do this sustainably. Our mission is to positively impact humanity and conserve the environment through sustainable energy and mobility solutions”, Ashok Leyland Managing Director and CEO, Vipin Sondhi said. Future mobility is moving towards alternate fuel technology, and the Hosur Testing facility dedicated today, managed by a talented and capable team will help drive Ashok Leyland’s green mobility future”, he said. The CTO N Saravanan said the company was already seeing a push for CNG and LNG and expects other fuels like methanol and hydrogen to start replacing fossil fuels. “At Ashok Leyland, we are working on the development of all the above alternate fuel technologies, while we continue to make our IC engines more efficient. We are committed to this path of sustainable mobility”, he added.