Up to 5% Blending Introduced in Diesel; Oil Companies Adding Biodiesel to Cut Costs

Much like the addition of ethanol to petrol, oil companies have now begun blending 5% biodiesel into diesel. Rising crude oil prices are causing significant losses for these companies.

A major development has emerged regarding diesel: oil companies have started blending it, similar to how they blend ethanol into petrol. They are now incorporating up to 5% biodiesel into diesel. With global crude oil prices on the rise, the retail price of diesel for consumers has remained unchanged, forcing oil companies to absorb substantial losses.

Major domestic oil companies—IOCL, BPCL, and HPCL—have begun adding up to 5% biodiesel to their diesel supply. In Delhi, while the retail price of diesel is ₹95.20 per litre, the cost to the companies—thanks to the biodiesel blend—is ₹88 per litre, making it more economical for them to sell. Currently, this blended diesel is available at select fuel stations across Gujarat, Rajasthan, and the Delhi-NCR region.

Private Companies Raise Petrol and Diesel Prices

It is worth noting that private players like Nayara and Jio-bp recently increased the prices of petrol by ₹5 per litre and diesel by ₹3 per litre, whereas state-run oil companies have kept their prices frozen. Public sector oil companies claim they are incurring losses of ₹8 per litre on petrol and ₹9 per litre on diesel.

Biodiesel is produced from sources such as soybean, palm oil, and used cooking oil. The government has set a target of achieving 5% biodiesel blending in diesel by 2030. While diesel is already subject to some blending, the current level is only 0.5%. Under the Bureau of Indian Standards (BIS) norm IS 1460, there is no requirement to explicitly disclose the addition of up to 5% biodiesel in diesel. This acts like an additive and reduces smoke emissions by 85%.

Why did crude oil prices rise?

In February, the price of crude oil stood at $69 per barrel. However, the crisis in West Asia—triggered by US actions involving Iran in March—disrupted the supply of crude oil. Consequently, the price, which was previously $69 per barrel, has now climbed to $122 per barrel in October, driven by supply bottlenecks and an increase in shipping costs.

Following the recent controversy surrounding the blending of ethanol in petrol, the Indian government had ruled out the possibility of adding ethanol to diesel. Nevertheless, Nitin Gadkari, the Minister of Road Transport and Highways, has indicated that bio-isobutanol could potentially be used as an alternative additive for diesel.