The transition or rather leap from Euro II to V fuel might not be as simple and smooth as it first seemed. As soon as the government announced the mandatory dates for petrol and diesel Euro-V standard switch, there were already qualms regarding implementation.
Initially, the plan to implement the Euro-V standards was from August 1, 2020, which was later delayed for a month to September 1, 2020. The new Euro-V specifications for petrol are for all the three octane ratings i.e. the regulated petrol RON92, and the deregulated high-octane blends RON95 and RON97. Implementation of Euro V standards on High Speed Diesel is expected to take effect from January 2021. Though the intent behind the plan for cleaner fuel cannot be contested, a recent report by Islamabad Policy Institute (IPI) points out the decision being executed in haste with serious repercussions on the existing infrastructure. Though the petroleum division has rejected the issues raised against the import of the higher standard fuel, let’s look at some highlights from the report that should at the very least be answered by the authorities to remove doubt.
A one liner about the IPI report: hasty transition without consultations with the stakeholders including the consumer (public). The policy institute feels the need for public debate due to various factors. First and foremost are the country’s age-old refineries that are not ready for the transition operations and infrastructure wise. The country imports 70 percent of its Premium Motor Gasoline (PMG) and 50 percent of High-Speed Diesel (HSD), while the rest, 30 percent PMG and 50 percent HSD, respectively, are produced at local refineries. This means that these refineries are expected to match fuel standards eventually. The recent decision by the government to introduce a penalty mechanism for refineries not producing in par with Euro-V specifications is an attestation of this.
The second factor is the limitations in the OMC retail infrastucture. The retail network will require additional storage and dispensing units at the port, which is barely enough for existing storage and distribution of existing higher sulfur fuels. Recall the various times the country has faced petrol shortages.
Third is the testing capacity of Hydrocarbon Development Institute of Pakistan (HDIP), which the policy institute believes should increase as it has been lacking even with lower grade fuels. The fear is that in case it is not upgraded; the consumers might end up paying premium for the poor-quality fuels.
Another fourth important factor for contention with the decision presented in the report is no consultations with the auto sector. The report indicates that the local auto sector is not ready; and the decision to ask the downstream sector to adhere to the fuel standards means that the cars here have sophisticated Euro V emissions-compliant car engines, which is not the case. The author gives the example of the world where compared to Pakistan’s leap from Euro-II to Euro-V, the methodology adopted globally was to first design the Euro-II, Euro-III, Euro-IV, Euro-V emissions-compliant engines and then subsequently mandate fuel specifications required by those engines to give the industry adequate time to upgrade.