Govt to Penalize Refineries Not Producing EURO-5 Petroleum Products


Recent media reports suggest that the government has devised a penalty parameter for the refineries that don’t produce EURO-5 rated petroleum products. Reportedly, the refineries were none too pleased by the development and denounced the government in a bid of petroleum for imposing a penalty instead of allowing relaxation to the OMC’s to ensure compliance with EURO-5 production and distribution measures.

The reports further highlighted that the official document with the guidelines for determining fuel prices, because of the change of the benchmark price from PSO’s FOB to Platt FOB price, states that the penalty is to be applied on the ex-refinery price of the refineries that are making products below the price of EURO-5 standard. The difference between ex-refinery price and the EURO-5 price will be adjusted under current mechanisms of periodic pricing.

In response to this, the refineries demanded that if a refinery that produces EURO-II rated product but the sulphur contents 10ppm or less, the sulphur penalty should not be imposed, as their sulphur content is the same as EURO-5 rated fuel.

The refineries are of the view that, based on contents if the products, imposing a second penalty on MS-91 product or below makes no sense, since the refineries that do not produce RON-92, are already subject to a RON penalty already. Therefore, imposing a second penalty on the refineries would not be fair.

The government has their sights set on normalizing EURO-5 petroleum products in the near future, but the refineries and the OMC’s continue their backlash against the set goal. The effects of these clashes are also likely to be borne by the general public, as the cost related challenges prompt the OMCs to bump up the prices. Whether or not both parties, i.e. the government and the refineries can come to a consensus, remains to be seen.

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