In today's newsletter we discuss India's faltering EV mission and the big stake sale of Bharat Petroleum Corporation Limited
The Story
For years now, our government has been gunning to promote Electric vehicles in an attempt to go green. So it might come as a shock to most people that the country sold only 8000 electric vehicles in the past 6 years. That is a rather dismal figure considering we sell hundreds and thousands of conventional vehicles every month. So what gives?
Well, the most obvious thing everyone points to is the infrastructure. In fact, there was a study last year suggesting that close to 90% of all car owners were willing to go electric if only India provided the necessary infrastructure, a sort of a nationwide charging grid.
Now, I don’t know who ran the study. But I think this figure is slightly misleading. A more pertinent analysis would be possible if they asked — Who’s willing to go electric and at what price. Because, right now even if the country made the investments to put together a charging grid, I don’t think a lot of people would be willing to shell out the ridiculous money needed to match the EV price tag.
For instance, when Hyundai launched its first electric car “Kona” this year, there was considerable optimism surrounding the event. However, when people found out what the thing cost, optimism quickly gave way to disappointment. At an on-road price of around 25 lakhs, this is a luxury vehicle. It’s like trying to buy three mid-range cars when a large part of the population still can’t afford one.
And then there is another concern. The large automakers that could perhaps bring down the cost of Electric Vehicles simply don’t have enough incentives to do so. For the past few years, they’ve been making large investments in creating a pipeline to produce BS-VI compliant engines. These are the more eco-friendly alternatives to the ones that are currently being sold. And since these investments are sizeable, companies would want to earn a fair return on the capital (money) employed. So they’ll want to stay away from this party for at least the next 5 years.
And of course, the final caveat is the infrastructure and the accompanying charging grid. Who’s going to pump in the cash? The Chinese government, for instance, has spent close to $60 Billion dollars over the last few years to facilitate the ecosystem. Does the Indian government have enough leeway to be spending this kind of money? I am not sure. What I can tell you is that we won’t be looking at an EV revolution any time soon. We will have to wait for this one. And hopefully, it’s not too late by then.
Selling BPCL
Also, in other news, there was considerable chatter about the government wanting to privatise BPCL (Bharat Petroleum Corporation Limited) and the possibility of them relinquishing full control of the company.
For the uninitiated, BPCL is responsible for refining and marketing (selling) different kinds of petroleum products. The government had already sold large chunks of the company earlier. However, many people thought a full sale wasn’t possible because of the wording of the BPCL nationalisation act which explicitly prevents the government from doing so. Until yesterday when somebody noticed that the government had already repealed the act back in 2016. So technically there isn't anything holding the government back now and we could be looking at a fully private BPCL very soon.
The question then is — What exactly are the repercussions?
For one, a private entity can set its own prices. Yes, a government-owned entity like IOCL (Indian Oil Corporation Limited) can also set its own prices. But the government has a different agenda. If an election were approaching tomorrow and fuel prices were soaring high, the government might choose to take a hit on its profits to appease the masses. A private sector entity has no such compulsions.
So does that mean fuel prices will rise from here on in? Very unlikely. Even though a private BPCL might just fiddle around with a price a bit, it won’t be able to do much considering the government still sells about 67% of all the oil in this country. Who's going to buy fuel from BPCL at a higher price when you can get it at much cheaper rates from IOCL and HPCL (Hindustan Petroleum Corporation Limited).
Yeah, you won’t.
So even private owned entities won’t have a lot of leeway here and you don’t have to worry about rising petrol prices. At least for now.
Also this: Workers union to launch protests against BPCL privatisation
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Okay then, that’s it from us today. We will see you on Wednesday. We are taking a day off tomorrow. Don’t miss us too much yeah? Cheers :)
