Shell out more for power, fuel and cars

NEW DELHI: Consumers will have to shell out more for power, fuel and cars in a few years as these industries begin to pass on the burden of technology upgrades being put in place for meeting increasingly stringent environmental and emission norms. 

The new environmental norms for coal-fired power plants, for example, are expected to push up electricity cost by 40-50 paise per unit. Motor fuels could become costlier by 70 paise or more per litre as the country moves to Bharat Stage-VI – akin to Euro-VI – grade fuels by April 2020. Similarly, carmakers say prices may rise by anywhere between Rs 1 lakh and Rs1.5 lakh.

No doubt these are back-of-envelope calculations and the final figures would depend on several factors such as rupee exchange rate, bulk prices of refined products and coal as well as shipping costs etc in the future.

The new norms for coal-fired power stations, announced in December, for example, would impact 180,000 MW of generation capacity. Generators would have to shell out Rs 1.8 lakh crore to retrofit machinery for meeting the new emission norms, at the rate of Rs 1 crore per MW. This would be passed on to consumers.

The new norms cover the range of emissions from power station including particulate matter, sulphur dioxide, nitrogen oxide, mercury etc as well as limiting water usage.

While future plants can be designed with relevant technology, retrofitting the existing plants remains a challenge due to lack of space and massive investment needs. Same is true for refiners. There are other issues for power stations. While dealing with SPM (ash particles) and SO2 emissions is easier and requires less investment – most of NTPC’s plants, for example, are compliant or getting ready – for NOx there is the larger issue of technology best suited for Indian coal which has high ash content.

 

There is also another issue that would have to be tackled. Since NTPC has significant coal-based capacity, the modification at all places in a time-bound manner would require huge investments and substantial shutdown of the generating capacity.

The Auto Fuel Vision & Policy 2025 in June 2014 had recommended a 75 paise cess to recoup Rs 64,000 crore of the Rs 80,000 crore investment projected for producing cleaner fuels.

The recommendation came after refiners indicated an incremental increase of Rs 2.64 and Rs 1.43 per litre for producing cleaner petrol and diesel, respectively. This was in addition to the Rs 35,000 crore invested till then for graduating from BS-III to BS-IV in metros and chosen cities and BS-II to BS-III in the rest of the country.

The capital servicing and operational costs was lower at 91 paise a litre for petrol and Rs 2.20 for diesel for shifting from BS-III to BS-IV. But moving from BS-IV to BS-V or BS-VI, fuels costs double. This is because graduating to BS-V or BS-VI requires refineries to put up additional units, while BS-IV can be achieved by upgrading existing systems. So keep your wallets ready.

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