By R. Sasankan

Environmental concerns and business profits run counter to each other – and policy makers have to wade their way through a thicket of competing demands while trying to be fair to all stakeholders. Often, bureaucrats take decisions that have completely unintended consequences.

The clamour to address alarming pollution levels in Delhi and other leading metros had prompted the UPA government under Dr Manmohan Singh to come out with a road map to upgrade the quality of motor fuels under pressure from the Supreme Court. Last year, the Modi government went a step further when it announced its decision to leap frog an entire stage for emission standards going straight from Euro IV to Euro VI -- a bold decision that will impose an additional burden of Rs 250-300 billion on the public sector refineries.

Until a couple of weeks ago, petroleum analysts in India and abroad were, waxing eloquent about the amazing growth in the country’s fuel consumption which was being read as a clear sign of growth in the world’s fastest-growing economy. But it soon dawned that just one petroleum item – Pet coke – was responsible for all the hype. Pet coke is a residue derived from the refining process and has sulphur and a lot of other impurities. When it is burnt, mainly in power generating plants, sulphur oxide and other impurities are released into the air. This fact escaped the notice of the Supreme Court and, therefore, the elected representatives of the people cannot be expected to take corrective measures.

Indians cannot hope to emulate environment standards adopted in the US and the UK which do not permit the burning of Pet Coke. India is a developing country with 20 per cent of its population living in poverty and, therefore, pollution-free air will always be something akin to a luxury. This is precisely why Pet Coke produced in these countries is finding its way into India. Indian companies import about 1.1 to 1.2 million tons of Pet Coke annually. During FY 2017 (April 2016 to January 2017), Pet Coke accounted for 40.2 per cent of the total petroleum products imports followed by LPG at 29.2 per cent. Imported Pet Coke is very cheap.

In addition, Indian refineries produce about 1.2 million tons of Pet Coke annually. It is used in cement and power plants. In cement plants, it gets embedded as tri-calcium sulphate. In power plants, it comes out as sulphur oxide. The truth is that Pet coke increases the efficiency of power plants.

In Indian refineries, most of which are based on out-dated technologies, the residue was fuel oil which was converted into bitumen and Pet coke. The new refiners opted for sophisticated processing techniques that yielded 90 per cent of saleable products such as petrol, diesel and LPG with 8-10 per cent Pet coke as the residue. This technology is initially expensive as it requires investment in delayed coker.

The entire issue around regulating pet coke is complex. The country’s power generation basically depends on coal and natural gas. Pet coke used with coal increases the efficiency of power generation. Coal is polluting, but pet coke which has a higher content of sulphur (4 weight per cent) is far more dangerous in terms of sulphur oxide emitted.

The basic problem is the piecemeal approach to environmental pollution. So far, the emphasis has been solely on motor fuels which affect the rich and the influential who live mostly in cities. The government encouraged the processing of high sulphur crudes which increases the Gross Refinery Margins (GRM) of refineries. High sulphur crudes account for 70 per cent of the crudes processed in Indian refineries. These crudes also invariably yield a higher percentage of Pet coke. The option is not to force refineries to stop processing high sulphur crudes. The operating cost of such refineries is very high and they opted for it because the law permitted it.

The refiners are aware of the harmful aspects of Pet coke. Reliance Industries Ltd (RIL), whose refineries process heavy crudes and earn the highest GRMs, has gone in for coke gasification. RIL is reportedly facing problem with disposal of ammonia solution coming out of pet coke gasification. It is now negotiating the technology for its disposal as well. The government should insist that the refiners adopt such innovative options. Unless compelled, Indians would prefer to avoid the hard options.