New and stricter environmental norms in India

Increasing the cost for power, fuels and cars

Business & Politics

News - Biz@India

June 9, 2016

/ By / New Delhi



The new environmental norms for power plants fired by coal are expected to increase electricity costs by around 40-50 paise per unit and motor fuels by 70 paise or more per litre

The new environmental norms for power plants fired by coal are expected to increase electricity costs by around 40-50 paise per unit and motor fuels by 70 paise or more per litre

The new and more stringent Indian environmental standards for power plants, fire stations, auto fuel policy and others will lead to an increased cost for energy, fuel and automobiles in the future and the people will have to spend more from their pockets.

Users will have to spend more for the consumption of power, fuel and cars after some years as these industries are starting to pass on the burden of technology upgrades for meeting increasingly stringent environmental and emission norms.

The new environmental norms for power plants fired by coal are expected to increase electricity costs by around 40-50 paise per unit and motor fuels by 70 paise or more per litre. Along with this, prices of cars may rise by between INR 0.1 million and INR 0.15 million on average.

However these calculations are just an idea about the hike in prices and the final figures would depend on factors including the future Indian Rupee exchange rate, bulk prices of refined products and coal and shipping costs, among others.

Newly announced norms for coal-fired power stations would impact 180,000 MW of generation capacity. Generators will have to spend INR 1.8 lakh crore to retrofit machinery for meeting the new emission norms.

Future plants can be designed with relevant technology but retrofitting the existing plants is a challenge due to lack of space and huge investment requirements. Also, while dealing with the ash particles and SO2 emissions is easier and requires less investment, most of NTPC Limited’s plants are compliant for NOx and there is a larger issue of technology best suited for Indian coal which has high ash content.

Substantial shutdown of the generating capacity

NTPC, the Indian central public sector undertaking under the ministry of power, has significant coal-based capacity so 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 and policy 2025 in June 2014 recommended a 75 paise cess to recoup INR 640,000 million of the INR 800,000 million investment projected to produce cleaner fuels.

The recommendation came after refiners indicated an incremental increase of INR 2.64 and INR 1.43 per litre for producing cleaner petrol and diesel, respectively.

The capital servicing and operational costs were low at 91 paise per litre for petrol and INR 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.

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