Hikes helping refiners recoup BS-VI capex


State-owned oil marketing companies (OMCs) have used the latest round of fuel price increases to begin recovering a part of the combined ₹35,000 crore investment made in upgrading their refineries to BS-VI fuels.

“The revised fuel prices have an inbuilt element of [recovery on] expenditure that we have made towards upgrading to BS-VI fuels,” said a top official at an OMC, speaking on the condition of anonymity.

The official, however, declined to provide details on how much the OMCs were recovering per litre of petrol and diesel sold.

State-owned refiners had invested more than ₹35,000 crore on upgrading their refineries, pipelines and marketing and distribution network to be able to introduce BS-VI fuels, directly leapfrogging from BS-IV fuels.

The ‘Auto Fuel Vision and Policy 2025’ of 2014 had recommended a 75 paise cess to recoup the additional investments projected for producing cleaner fuels.

“The OMCs are recovering up to ₹1 per litre of petrol and diesel sales from the consumers,” said another senior official at an OMC, who declined to be identified. “However, it is not reflected in the price buildup,” the official added.

During the launch of BS-VI fuels in late March, OMC officials had sought to address concerns that consumer prices of petrol and diesel could be raised to recover the investments made in upgrading refineries by pointing to the fact that the prices of automobile fuels had remained unchanged since March 16.

Upgradation cost

“The element of BS-VI upgradation cost had to be built into the cost of petrol and diesel as BS-VI has enhanced operating expenditure besides the capital expenditure of ₹35,000 crore,” said a director at an OMC, speaking on the condition of anonymity.

OMCs, on Saturday, revised fuel prices for a 14th consecutive day with a 51 paise increase in the price of petrol and a 61 paise increase in diesel prices, taking the cumulative increase in the rates of the fuels in two weeks to ₹7.62 and ₹8.28, respectively.

A litre of petrol now costs ₹78.88 in New Delhi, while diesel costs ₹77.67 a litre.

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