Refineries face an existential challenge from vehicle electrification. Examine how PSU refiners can adapt.

Electrification is shrinking the transport fuel pool Indian refineries were built to serve: in August 2026, registrations of renewable, hybrid-EV and CNG vehicles exceeded those of hydrocarbon-fuelled vehicles [1]. The threat is real but staggered, giving PSU refiners room to convert it into a transition opportunity.

Nature of the challenge

• Demand erosion is uneven: the shift is sharpest in two- and three-wheelers, hitting petrol first; trucks, ships and aircraft still lack cheap electric substitutes [1].
• Stranded-asset risk: refining units have long lives, so a fuel-heavy product slate locks in capital against a declining market.
• Timing: the turning point has already arrived, not in some distant decade [1].

Adaptation pathways

• Petrochemical pivot: moving from a fuel-based to a petrochemical-based slate — plastics, fibres and chemical feedstock — insulates the barrel, since these are not displaced by EVs. CPCL has signalled exactly this shift [1].
• Compressed bio-gas: SATAT promotes CBG from agri-residue, cattle dung and municipal waste [2], and the CBG Blending Obligation is mandatory from FY 2025-26, rising to 5% by 2028-29, with about ₹37,500 crore investment and 750 projects expected [3].
• Sustainable aviation fuel: aviation is hard-to-abate; indicative targets of 1% (2027) and 2% (2028) for international flights, with SAF brought under the ATF Control Order, create assured demand [4], and indigenous feedstock with Make-in-India technology adds self-reliance [5].
• Refinery decarbonisation: sourcing green power for refinery operations, as CPCL plans at Manali [1].

What will decide success

• SATAT's record cautions against optimism: against 5,000 plants targeted by 2023-24, only 40 were set up, and 3,263 letters of intent yielded 35 commissioned plants [6].
• The Standing Committee urged feedstock-linked pricing, generation-based incentives, single-window clearance and gas-grid connectivity — supply-side fixes a blending mandate alone cannot deliver [6].

Adaptation is therefore less about abandoning refining than about rebalancing the barrel. PSU refiners should anchor the pivot in petrochemicals for scale, using CBG and SAF to build early capability, backed by assured long-term offtake and feedstock security. Done well, this aligns commercial survival with India's net-zero-2070 and energy-security goals.