India’s petroleum ministry to drive sales of electric vehicles

The share of electric vehicles (EVs) in India’s transport sector is expected to reach a level of 25 percent by 2025, from the current miniscule level of 0.02 percent, a working group set up by India’s petroleum ministry has projected.

The share of EVs is projected to grow even further by 2030 and reach 40 percent marketshare, the working group report said.

While auto industry analysts have described the projections as “too ambitious”, the steep increase in use of EVs projected in the Indian market has put a question mark on the massive expansion plans proposed in petroleum refinery capacities in India by both public and private sector players.

India’s public sector petroleum refining companies are said to have plans for about 60 million tonne capacity expansion in refining in the coming years.

This includes a 30 million tonne-capacity new refinery-cum-petrochemicals project to be set up by the proposed 50:50 joint venture between Saudi Aramco and a consortium of 3 PSUs – Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum.

Reliance, the private sector petroleum and petrochemical major in India, has also proposed a multi-billion, mega expansion in its refinery in the state of Gujarat.

“Though the oil refiners in India, whether in the public or private sector, have talked about mega expansions in their refining capacities, they are most likely to wait for a year or two before actually going ahead with their plans,” Amit Kumar, Partner with PwC India, told Arabian Business.

The refining companies, not only in India but the world over, will be watching whether there will be any breakthrough technologies happening which will bring down the cost of electric vehicles substantially.

“If that happens, then these proposed expansions in refining capacities will not fructify,” Amit Kumar said.

Since India is a highly price sensitive market, the cost-price graph for EVs has to be ‘correct’, and more needs to be done to develop the Indian infrastructure to give easy access to battery charging stations to grow in popularity, Amit Kumar said.

Petroleum industry experts said the proposed surge in EVs in transport sector is a global phenomenon and many countries including China, the US, Europe and even the Gulf countries such as UAE, are expected to see rise of EVs in the transportation sectors of their respective markets in the coming years.

“It (expected surge in EVs) is not an India-specific issue. It is a global phenomenon and oil refineries and petroleum sector players in all major countries are expected to deal with the issue. We will also deal with this issue when the rise in use of EVs start happening in India,” a senior RIL executive told Arabian Business.

“The petroleum ministry itself is planning about 60 million capacity brown field and green field expansion by its refinery companies and if the ministry is so convinced about the prospects of a fast rise in use of EVs in India, why are they still going ahead with their expansion plans?” a senior executive with another private sector petroleum company, said.

Based on current demand trends, India is expected to require 472 million tonnes (mt) of petroleum products by 2040.

The working group report says a transition to a mix of EVs and renewable could bring down the requirement to about 390 mt. If a steep rise in the use of EVs and renewables occur during this period, the projected demand for petroleum products could get drastically reduced to 266 mt.

India is already seeing a fall in private ownership of vehicles, with the domestic auto industry registering about 20 percent decline in passenger cars last year.

“The millennials in India do not want to own a car and are quite comfortable using Uber and Ola. This is leading to the fall in private ownership of vehicles, which will also impact the demand for petro products in India going forward,” Amit Kumar said.

However, he said India being  a developing country, the demand for energy will rise with the increase in population and development.

“So, net-net, there will be no impact on the current level of demand for petro products in India, but it will not be ‘business as usual’ in future, if EVs become popular and the current declining trend of private ownership of vehicles continue,” Amit Kumar said.

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