The Hindu Business Line : Euro bungling

THE UNCERTAINTY OVER migration to superior emission-control norms from April 1 has ended with the Cabinet last week approving the implementation schedule. The bad news, however, is that the oil industry has expressed its inability to supply adequate quantities of the upgraded fuel within the deadline set for it. Consequently, the Government has had to defer the implementation of Euro II diesel norms by six months to October 1 in seven States. Even the partial implementation will be subject to import of at least 6,00,000 tonnes of petrol and diesel of Euro II grade as the country's refineries are not fully prepared, yet, to meet the demand. The imports — first in the last five years — are bound to leave a gaping hole in the finances of the oil marketing companies as the Euro II products command a premium in the international market.

The supply shortfall is attributed to the inability of a couple of public sector refiners and a large private refiner to produce the required quality fuel owing to problems in their plants. It is indeed shocking that the oil industry — save for a couple of refineries that managed to stick to the schedule — has been caught unprepared despite the long notice that it has had. The implementation schedule of Euro or Bharat norms was framed several years ago and the time-table for migration was public knowledge. It is four years since India moved to Euro II norms in select cities and Euro I in the rest of the country — time enough for the refining companies to have invested in equipment needed to refine petrol and diesel to the required standards. Apart from the financial implications for the oil companies, the staggered implementation now means that a diesel car-owner in one of the 11 cities where Euro III norms come into effect will not be able to take his vehicle to places where diesel of Euro I grade will be supplied till October 1. Sustained usage of Euro I fuel in Euro III grade vehicles could prove harmful to the engine.

The bungling over the Euro norms once again highlights the lack of a comprehensive policy for the oil sector. Even while thrusting more responsibilities on the oil companies, the Government is draining them of their financial strength with its control over pricing of petroleum products and by burdening them with subsidies on LPG and kerosene. Not to speak of the subtle pressure these companies face every year to declare interim dividends and a substantial final. No surprise, then, that the oil companies have not been able to invest in upgradation of their refineries to keep up with the norms on emission control. Needed is a comprehensive re-look at the entire downstream petroleum sector that would include a change in the present pricing and subsidy policies. It is sad indeed that reforms that have changed the face of other industries, notably telecom, have largely bypassed this critical sector.

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