The Indian government has been proactive in taking steps to prepare the market for the introduction of Bharat Stage VI (BS-VI) emission standards on the 1st April 2020. The standards will be enforced on the same date across the country, allowing businesses to devise national investment strategies in a country that could be the fourth largest SCR & AdBlue market in the world by 2023.
BS-VI is set to be enforced on the 1st April 2020. This will supersede the existing BS-IV standards that were enforced nationwide last year, and as early as 2010 in New Delhi, Mumbai and 12 other major cities.
BS-VI will encourage the use of selective catalytic reduction (SCR), which require a high-quality urea solution commonly referred to as AdBlue. At present, SCR is only used in heavy-duty trucks and buses, and some of the largest Indian truck manufacturers such as Ashok Leyland only use SCR in select bus models.
We estimate 20,000 SCR-equipped commercial vehicles were sold in India in 2017, but forecast that the widespread use of SCR to meet BS-VI will result in more than 2 million units per year from 2021 onwards, with 80% of these being cars and light-duty vehicles. Nevertheless, the largest segment consuming AdBlue over the next ten years will be trucks, as these vehicles require a higher AdBlue dosing rate, drive longer distances, and consume more diesel.
Hitting the deadline
Despite initial concerns, there have been strong indications that 10ppm (BS-IV) diesel will be available nationwide by April 2020.
Late last year, the Petroleum Ministry announced that BS-VI fuel would be introduced in New Delhi from the 1st April 2018, and Indian Oil’s Mathura Refinery, the largest in the region, has recently announced that it will be able to supply Delhi and its surrounding regions by this date, with other refineries expected to follow suit. Secondly, the three largest oil companies (Indian Oil, Bharat Petroleum and Hindustan Petroleum), who collectively sell over 90% of diesel and gasoline in the country, have agreed to market BS-VI fuel as early as September 2019.
What does this mean in the short term?
BS-IV emission standards will be enforced on the same date across the country. This removes a lot of the complications brought about by the current BS-IV standards, which were phased in over a seven-year period in different parts of the country.
Harmonising its enforcement makes investment decisions in the Indian SCR and AdBlue industry more straightforward, however, these developments are heavily dependent on the timing and effective control of these standards. In other emerging markets, the use of defeat devices has become a major issue to ensure stricter emission limits are met.
The AdBlue industry is preparing for the boost in consumption after 2020. Seven AdBlue production facilities will open in 2018, which will join the nine existing medium-sized plants currently in operation. These plants join a market that we forecast will consume more than 18 million litres in 2018, more than double its level last year.
The government appears to be determined to reduce environmental pollution, and as a consequence we expect India’s SCR and AdBlue market to become the world’s fourth largest. This has created an even more immediate need to develop the necessary supply infrastructure to support an industry of this size. India provides a huge opportunity for all global companies operating in the SCR and AdBlue segments.
Figure 2: A map of all existing medium-sized AdBlue producers (pink) and those to open in 2018 (green)