India's RRBO EPR targets: Feasibility concerns raised
Satyan Gupta

India’s RRBO EPR targets: Feasibility concerns raised

In an address to key stakeholders in the Asian lubricant industry, Satyan Gupta, director, Energy Team, of Kline, a renowned consulting firm in the lubricants industry, raised concerns about India’s proposed Extended Producer Responsibility (EPR) guidelines for re-refined base oil (RRBO). 

Given the current state of Indiaโ€™s re-refining industry, there is a need for a more “modest and achievable target,” says Gupta.

India’s forthcoming legislation mandates that all finished lubricants sold within the country must contain at least 5% RRBO by April 2024. This requirement is set to increase annually, reaching 50% by 2029, marking a substantial shift in the lubricants market.

Speaking at the ALIA Seminar on Sustainability in the Lubricants Supply Chain, held at Jen Singapore Tanglin by Shangri-La on November 6-7, 2023, Gupta discussed the Evolution of EPR Guidelines for RRBO and its Implications for Lubricant Marketers. The in-person seminar was a collaborative effort with F&L Asia Ltd., aiming to highlight the most pressing issues facing the lubricants industry in Asia today.

Gupta pointed out that the penetration of RRBO in India is currently low, with only 27 kilo tons (KT) of RRBO produced. Meeting the proposed EPR guidelines would require a massive investment of approximately USD2 billion in both brownfield and greenfield re-refining assets, he says. Specifically, 38-40 modern re-refineries, each with a 50 KT feed capacity, will need to be established in the next six years to meet the targets set by the EPR guidelines. Currently, there are only about 400 small-scale used oil processing units, which are insufficient to meet the anticipated demand for RRBO due to the forthcoming legislation.

Gupta also outlined several potential challenges facing RRBO adoption in India including inadequate collection infrastructure, high burn rates for used oil and the prevalence of used oil for making fuel oil and other distillate products. In addition, he noted declining demand for Group I base oil, and the relatively low profitability of re-refining base oil due to high feedstock costs and low margins. Currently, domestic re-refiners only produce Group I base oils, while most of Indian virgin base oil requirements are being met by Group II.

In light of these concerns and challenges, Gupta suggested that lobbying the government for a more realistic EPR target and greater incentives for regeneration may be necessary to ensure the long-term success of the RRBO industry in India. The Indian legislation does not include any fiscal incentives for used oil collectors, RRBO producers or finished lubricant manufacturers.