Govt panel proposes 75 paise per litre cess on fuel to fund refinery upgrade

An expert committee constituted by the government of India has proposed a cess of 75 paise per litre on gasoline products in order to upgrade refineries and accelerate implementation of BS V emission norms.

The committee headed by Planning Commission member Saumitra Chaudhury to suggest an Auto Fuel Vision and Policy 2025, recommended imposing a cess of 75 paise per litre on all gasoline products and a similar amount of cess on all Bharat Stage (BS) III grade gasoline and diesel, to help accelerate the implementation of BS V emission norms in the country.

While automakers are already making BS V compliant vehicles in the country, oil marketing companies are not yet ready with the fuel.

The committee estimates that oil marketing companies need to invest a further Rs80,000 crore to upgrade their refineries and produce 100 per cent BS V grade fuel.

The committee recommends that the cess be put in place by 1 July 2014 so that refineries in the country are ready to produce BS V grade fuel by 2020.

A 75 paise per litre cess on all gasoline products from 1 July would fetch a total Rs64,000 crore by 2021-22, according to the committee.

''This will eliminate the incentive to use BS III fuel, when BS IV fuel is also available,'' the committee stated in its report in justification of the introduction of a cess.

''However, the additional charge on BS III fuel will not accrue to the oil companies but will be in the form of a High Sulphur Cess, which will accrue to OIDB and can be utilised to finance the capital investment required for refineries to upgrade themselves to move to full BS V automotive fuels by 2020.''

BS IV grade fuel is only available in 30 cities in India where as the rest of the country still buys BS III grade fuel. BS IV grade petrol and diesel have lower sulphur content than BS III grade fuels. By 2017, the entire country is expected to get BS IV grade fuel.

The committee also recommends that as and when oil marketing companies are ready with BS V grade fuels, they can be sold simultaneously with BS IV grade fuels by branding BS V as a high grade fuel.

''It could also be ensured that across the country that specified outlets on the highways stock BS V auto fuels so that vehicle owners/operators who choose to use BS V fuels do not have to switch back,'' the committee stated in its report.