The shift to Bharat Stage-VI emission norms from April next year is likely to raise fuel prices as state-owned oil firms look to recover the investments made to upgrade their refineries.

Sources said the state-owned oil firms had written to the petroleum ministry seeking a mechanism to help them recover the cost of shifting to BS-VI, which is the equivalent of Euro-VI.

At present, BS-IV compliant fuels are used. Last year, it was decided to migrate to the BS-VI level from April 2020, leapfrogging the BS-V norms. Under BS-VI norms, petrol and diesel should have sulphur content of 10 parts per million, down from 50 in the fuel currently in use.

Oil refineries are estimated to have invested Rs 80,000 crore in upgrading the petrol and diesel quality to meet the specifications for cleaner fuel.

Sources said they have urged the ministry to take up the cost recovery issue with the finance ministry so that the refineries can recover their capital expenditure.

The Auto Fuel Vision and Policy 2025 in June 2014 had recommended a 75 paise cess to recoup the additional investments projected to make cleaner fuels.

The amount of cess, if agreed too, would be in addition to the recently hiked duty and cess on petrol and diesel.

The budget has imposed an additional special excise duty of Re 1 per litre as well as a road and infrastructure cess of Re 1 per litre on petrol and diesel.

“A fuel price increase is certainly needed for the oil marketing companies given that they have invested substantially to upgrade to BS-VI. They need to recover at least their cost,” K. Ravichandran, group head for corporate sector ratings at Icra, said.

New Delhi had shifted to the cleaner fuel in April last year because of increased pollution levels.

The whole of the National Capital Region would be covered by the end of this calendar year. However, the prices of petrol and diesel were not hiked there after the shift to the cleaner fuel.

New Delhi is one of the largest car and two-wheeler markets in India, accounting for 7 per cent of the country’s total car volumes and 25 per cent of the total sales in north India. Delhi also accounts for 3 per cent of the country’s two-wheeler sales and 11 per cent of north India’s two-wheeler sales.