The government’s drive for climate and environment is unmatched. And it is much needed given how air pollution and smog have emerged as big urban challenges over the years. As per the Petroleum Division’s decision in late June 2020, all petrol imports were to be switched to Euro-V compliant petrol from August 1, 2020, whereas diesel imports are also to be moved completely to Euro-V standards by January 2021.
Switch to cleaner fuel cannot be debated given its many benefits. While Pakistan has only moved to Euro-II fuel a few years ago, countries across the globe are progressing to low-Sulphur content fuels such as Euro-IV, V and VI. India is already Euro-IV and is planning to adopt Euro-VI this year.
But decision to switch has become another bone of contention between the authorities and the oil industry amid many unfinished disputes between the two be it the petrol pricing mechanism, stock maintenance, or refinery upgradation plans amid furnace oil curtailment. The recent petrol crisis is an example of poor planning and lack of coordination between the industry and the regulatory bodies. Incidents like such, and resistance from the oil sector raises qualms over the implementation of the plan. The problem that the oil sector has had with this decision is the timing and the pace of its execution. The sector did not seem ready for a quick conversion to Euro-V; however, starting August, PSO has reportedly started importing Euro-V standard petrol for cars.
The transition is necessary, but it is not going to be smooth. And it will not be quick. There are bottlenecks and limitations. OMCs have flagged storage issue that can aggravate. They also highlight the impact on logistics and ports, depots and retail outlets, leading to temporary shortages. Pricing is another issue; the import of high-quality fuel will reportedly increase the price by Rs5-7 per liter. Pakistan imports and produces both fuel and vehicles. Where 70 percent of the petrol and around 50 percent of diesel are imported, the remaining are produced by local refineries. Importing Euro-V means that they have not upgraded to higher fuel specifications. The refineries that have not been able to upgrade their refining process and have had trouble with excess furnace oil produced when the demand has been falling will require major investment to be able to produce low Sulphur fuels.