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Auto Emission Norms getting Tougher with Euro IV implementation – Fuel, Autos get more dearer

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Come April 1, 2010, the phase-wise implementation of the cleaner Euro-IV emission norms – an equivalent of Bharat-IV – is proposed to be introduced in most of the Tier I and II cities for private and public vehicles. Euro IV is the minimum standard that is followed worldwide in a bid to ensure cleaner breathing air !

From the upcoming new financial year, Euro-IV fuels will be introduced in metro cities such as Mumbai, Chennai, Kolkata and Delhi apart from other major cities like Hyderabad, Ahmedabad, Surat, Banglore and Pune.

Fuel-standards

With the implementation of the new emission norms, the fuel prices are likely to get dearer as stringent Euro-IV equivalent grade auto fuel gets set to replace existing equivalent of Euro-III grade petrol and diesel from April 2010.

The petrol and diesel fuels conforming to Euro-IV grade norms are usually very low in their sulphur content (not more than 50 parts per million), thus reducing the pollution in the air and improving the breathing atmosphere for the public in general.

According to Oil secretary S Sundareshan,

“Petrol prices in cities like Delhi and Mumbai may go up by Rs0.41 per litre and diesel by Rs0.26 a litre from 1st April when cleaner Euro-IV grade auto fuel will replace the existing grade in 13 big cities.”

The above mentioned price rise is fuel rates are contemplated as per the requirement to bring domestic rates to international parity and not on the basis of capital expenditure that is incurred in upgrading the facilities of oil companies to produce fuels in conformity with new Euro-IV norms. The costs for shifting from Euro-III to Euro-IV norms are even higher for the Oil Marketing Companies (OMC).

According to a Bloomberg report which analyses implications of shift in Euro norms on OMCs,

“Refineries have spent nearly Rs.15000 crore to upgrade to Euro IV IOC, BPCL and HPCL have spent nearly Rs.40000 crore on up gradation. Operational capex for refineries may see constraints. Capital cost of refineries will increase on Euro IV compliance. Profitability will depend on quantum of price increase for Euro IV fuel.”

More recently, during the announcement of Budget 2010, the Finance Minister had levied an excise duty of Re.1 per litre on petrol and diesel both along with partial roll-back of excise duty on fuels to 10%. The government had also hiked the fuel prices by Rs.2.71 per litre for petrol and Rs.2.55 per litre for diesel.

While most of the major cities of the country will see a shift from observing Euro-III to Euro-IV norms, the other smaller cities and inner rural areas which may be currently following Euro-II norms will see a gradual shift towards a more complaint Euro-III norms. Also, the supply of Euro-III fuel is being phased as some oil refineries have not yet upgraded to Euro-IV norms completely.

As per the National Auto Fuel Policy enacted in 2003, the permissible sulphur content in the petrol under Euro-II, Euro-III and Euro-IV norms stands at 500 PPM, 150 PPM and 50 PPM respectively. Sulphur is a major pollutant component in terms of air pollution through auto fuels exhaustion.

Along with implementation of Euro-IV norms, even the automobile-manufacturers – like Tata Motors, Fiat, Hyundai, Mahindra among others – are likely to up the prices for their autos based on the extra costs required by them to upgrade their Automobiles.

For such manufacturers, the need to hike automobile prices comes not only from the need to upgrade their system but also on account of recent hike in excise duty as announced in Union Budget.

You will breathe easy next time you are on the road, but it will come with a cost !

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