What Will Be the Impact of Odisha Extending the Furnace Oil Transition Deadline to 31 December 2027?
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Introduction
The Odisha Government has extended the deadline for existing industries to shift from Furnace Oil (FO) to cleaner fuels until 31 December 2027. The decision comes as a relief for many businesses that are still working on fuel transition plans/ infrastructure upgrades and other operational changes needed for compliance. While industries now have more time to prepare, the broader objective remains the same- reducing the use of high-sulphur fuels and gradually moving towards cleaner fuel options across the state.
The amendment replaces Bullet No. 3 of Clause II (o) Use of Furnace Oil in the 2023 fuel policy notification with three new provisions:
The Three New Provisions:
- The timeline for existing industries to switch from Furnace Oil (FO) to cleaner fuels with low sulphur content, namely Low Sulphur Heavy Stock (LSHS), Light Diesel Oil (LDO), or Gas, is extended to 31 December 2027.
- Industries that have already committed to shift to cleaner fuels on an earlier timeline must continue to adhere to those committed timelines; the extension does not apply retroactively to voluntarily committed deadlines.
- No new industries shall be permitted to use Furnace Oil in the State of Odisha; this restriction remains absolute and is unaffected by the extension.
Effective date: Immediately, the notification states, "This order shall take effect immediately" from 12 June 2026.
Circulation: The notification was forwarded to the Chief Secretary, MoEF&CC (New Delhi), DGFT, CPCB, Industries Department, Commerce & Transport Department, all PSUs, all Revenue Divisional Commissioners, all District Collectors and District Magistrates, all Divisional Forest Officers, and the State Pollution Control Board of Odisha for information and necessary action.
The Odisha Fuel Policy Context: A Timeline
Understanding the extension requires understanding the full history of Odisha's Fuel Policy on Furnace Oil:
| Year | Action |
| 2021 (April) | Odisha's first systematic Fuel Policy notification (No. 7485) initiated the state's phased move toward cleaner industrial fuels |
| 2021 (September) | Supplementary notification (No. 16458) further elaborated on fuel policy provisions |
| 2023 (April) | Consolidated notification (No. 7271) set out clean fuel transition requirements, including the original deadline for Furnace Oil phase-out |
| 2026 (June) | The present amendment extends the existing industry deadline to 31 December 2027 |
This means the Odisha Fuel Policy has been actively evolving for 5 years, with the state progressively tightening its stance on high-sulphur fuels while repeatedly recognizing that industry transition takes time.
What is Furnace Oil and Why Is It Being Phased Out
Furnace Oil is a heavy residual fuel oil, a by-product of crude oil distillation, consisting of the heaviest fractions remaining after lighter products (petrol, diesel, kerosene, and naphtha) are extracted. It is:
- High in Sulphur content: typically 1.5-4% Sulphur by weight
- High in heavy metals: vanadium, nickel, and iron in trace quantities
- Energy-dense: high calorific value per unit
- Low cost: significantly cheaper per unit of heat energy than cleaner alternatives
Where FO Is Used in Odisha's Industries?
Odisha is one of India's most industrially significant states, with substantial heavy industry:
- Steel plants: Tata Steel (Jamshedpur/Kalinganagar), JSPL (Angul), RINL, and several mid-sized steel producers use FO in reheating furnaces, ladle preheating
- Sponge iron plants across the Angul-Jharsuguda belt
- Thermal power plants (FO used for startup and flame stabilisation)
- Aluminium smelters: NALCO (Angul), Vedanta (BALCO, Jharsuguda) use FO for anode baking furnaces
- Ceramic and refractory manufacturers in the Rourkela and Barbil regions
- Textile dyeing units
- Chemical plants
- Lime kilns serving the steel and mining industries
- Food processing plants using steam boilers
Why Odisha Extended the Deadline?
Odisha's industrial base is dominated by energy-intensive heavy industries, steel, aluminium, ferroalloys, chemicals and mining support industries. These are not light manufacturing units that can swap a fuel line overnight. Transitioning from FO involves:
- Engineering studies to assess the compatibility of existing furnaces with LSHS, LDO, or gas
- Capital expenditure on burner systems, piping, storage, and control systems
- For gas (piped natural gas or LNG): Gas pipeline connectivity, which is itself dependent on gas grid expansion into Odisha's industrial belts, many of which are in geographically challenging, remote locations
The extension acknowledges that for the bulk of Odisha's heavy industry, the infrastructure and investment required for fuel switching simply could not be assembled before the previous deadline.
- Gas Infrastructure Availability: The transition to gas, the cleanest alternative to FO, is constrained by-
- GAIL's gas pipeline network is not yet fully extended to all of Odisha's major industrial clusters.
- City Gas Distribution (CGD) projects in Odisha are still being commissioned (Bhubaneswar, Cuttack, and industrial corridors).
- LNG trucking or rail infrastructure for units distant from pipelines an option, but expensive and operationally complex.
The government cannot compel industries to switch to a fuel that is not yet reliably available in their location. The extension gives gas pipeline development time to catch up with policy intent.
- Post-COVID Capital Investment Lag: Industrial capital cycles were severely disrupted by-
- COVID-19 operational shutdowns (2020-21)
- Commodity price volatility (2021-23)
- Global supply chain disruptions affecting equipment procurement
Many Odisha industries that had planned fuel-switching capital projects in 2020-22 were forced to defer. The extension recognises the effective 2-3 year lost window in industrial investment planning.
- Global FO Price Dynamics and Business Viability: The relative economics of FO vs LSHS/LDO/Gas are not static-
- International crude oil prices and refinery configuration drive FO availability and pricing.
- LDO and LSHS prices track diesel and other distillate markets
- Gas prices in India linked to APM gas, RLNG, and global LNG markets have been volatile.
The cost differential between FO and cleaner alternatives has been significant enough to affect business viability in energy-intensive sectors. Industries need time to plan for the energy cost impact of switching, build it into product pricing, and absorb or pass through the cost differential in competitive markets.
- Existing Industries Are Different from Greenfield: The fuel policy already bars new industries from using FO entirely. This distinction is crucial-
- Greenfield projects can design their fuel systems from day one around cleaner fuels.
- Existing industries have entire furnace designs, heat management systems, and operational parameters built around FO characteristics.
- Retrofitting changing burner designs, fuel storage, handling systems, and often control systems is a 12-24 month engineering and construction exercise.
The extension to December 2027 gives existing industries a realistic 18+ month window from June 2026 to execute retrofits properly.
- Odisha's Industrial Growth Agenda: Odisha has been aggressively positioning itself as an industrial investment destination under the "Utkarsh Odisha" investment summit framework. Its industrial sector-
- Contributes significantly to Odisha's GDP and state revenues
- Is a major employer of both skilled and semi-skilled workers
- Underpins the economic development of some of Odisha's most tribal-dominated and historically underdeveloped districts (Sundargarh, Keonjhar, Jharsuguda, Angul)
Without additional time, many industries could have struggled to complete the transition, leading to disruptions in production, delays in planned expansion and investment activities, and concerns among businesses looking to invest in Odisha.
Impact on Businesses in Odisha in 2026
The extended deadline gives industries more time to move away from Furnace Oil, it provides relief to businesses that were still working on fuel conversion projects.
1. Steel and Metal Industries
Steel and metal manufacturers are among the biggest users of Furnace Oil in Odisha. For many of these units the extended deadline comes as a practical relief, as they now have more time to plan fuel changes, arrange funding and complete the required modifications without rushing the process.
- Identify furnaces, and boilers currently operating on Furnace Oil.
- Evaluate suitable alternatives such as LSHS, LDO, or natural gas.
- Prepare budgets and timelines for retrofit work.
- Submit a Fuel Transition Plan (FTP) to OSPCB during CTO renewal or through a separate compliance submission.
2. Aluminium and Smelter Industries
Many aluminium and smelter operations in Odisha continue to rely on Furnace Oil for anode baking, heating and steam generation. Moving to gas is possible but it involves technical modifications, and testing before full-scale implementation. The extended deadline gives companies time to:
- Complete technical studies for alternative fuels.
- Upgrade burner, and control systems where required.
- Conduct pilot trials before large-scale conversion.
3. Sponge Iron and DRI Plants
For sponge iron units, particularly in industrial clusters such as Angul, access to reliable gas infrastructure remains a major challenge. The additional time allows businesses to:
- Assess whether LSHS can be used as an interim solution.
- Explore LNG-based fuel supply options.
- Plan investments required for future fuel conversion projects.
4. Ceramic, Refractory, and Chemical Industries
These industries depend on stable heat generation for their manufacturing processes making fuel selection a critical operational decision. For many units:
- LDO may be the most practical cleaner alternative
- The revised timeline provides sufficient time to plan and implement fuel system modifications without disrupting production.
5. Food Processing and Textile Units
Food processing and textile businesses generally have a simpler transition path compared to heavy industries especially in areas where gas infrastructure is already available. Businesses should use this period to:
- Explore natural gas or LDO as cleaner fuel options.
- Assess available CGD network connections.
- Complete the transition well before the December 2027 deadline instead of waiting until the last moment.
How Businesses Will Be Compliant Step-by-Step
Businesses that are still using Furnace Oil should use the extended timeline to prepare for the shift to cleaner fuels. Rather than waiting until the last moment industries can start planning now so that the transition is completed smoothly before the December 2027 deadline.
Step 1: Verify Current Fuel Use and Policy Obligation
Industries that are still using Furnace Oil will first need to identify where it is being used and whether they have already committed to a separate transition timeline with OSPCB.
Step 2: Develop a Fuel Transition Plan (FTP)
The next step is to prepare a practical transition plan covering-
- Current Furnace Oil consumption across boilers, furnaces or other equipment.
- The cleaner fuel option most suitable for the facility, such as LSHS, LDO, or Natural Gas.
- Technical changes required for the switch, including burner modifications, storage systems and fuel handling infrastructure.
- Estimated project costs, and implementation timelines.
- A target completion date well before 31 December, 2027 to allow sufficient time for testing and stabilisation.
Step 3: Discussions with OSPCB and Other Authorities
As consent renewals and routine interactions come up, fuel-switching timelines and project progress are expected to become part of ongoing discussions with regulatory authorities.
Step 4: Equipment Upgrades and Infrastructure Work
Once fuel choices are finalised, attention is likely to shift towards burner modifications, storage facilities, pipelines, and other changes needed to support cleaner fuels.
Step 5: Testing, Stabilisation, and Full-Scale Operations
Before completely moving away from Furnace Oil, companies are expected to spend time testing new systems, fine-tuning operations and ensuring production processes continue smoothly under the new fuel setup.
Is This the Right Decision or a Burden on the Environment?
The deadline extension has drawn both support and criticism. While many industries have welcomed the additional time, environmental concerns remain because Furnace Oil will continue to be used for a longer period in some industrial areas.
The Case That It Is the Right Decision
| Reason | Explanation |
| Industry Transition Takes Time Genuinely | Converting industrial furnaces and boilers from FO to gas or LDO is not a regulatory paperwork exercise; it requires engineering, procurement, installation, and commissioning over 12-24 months |
| Gas Infrastructure Is Still Expanding | Odisha's gas distribution infrastructure is not yet complete in key industrial belts, compelling a transition before gas is available, which would force expensive and logistically challenging LNG trucking solutions |
| No Rollback of the Policy Direction | The extension does not remove the requirement, but it gives more time. The direction of travel is unchanged and unchanged by this extension |
| No New FO Permitted | The absolute ban on new industries using FO remains this is the most important long-term provision. Every new industry in Odisha must use clean fuels from day one |
| Committed Timelines Protected | Industries that have already declared earlier transition dates must keep those dates. The extension is for the remaining industries that genuinely have not yet transitioned |
The Environmental Concern Why This Is Also Problematic
| Concern | Explanation |
| Continued High-Sulphur Emissions | Every year that FO continues burning in Odisha's heavy industry, SO₂ and particulate pollution continue affecting communities near industrial areas |
| Pattern of Repeated Extensions | Odisha's fuel policy has been extended multiple times since 2021. Each extension, while individually justifiable, collectively signals that the deadline will always move, reducing incentive for the industry to invest in transition urgently |
| Delay in Climate Commitments | India's NDC commitments and Odisha's own climate action framework require reducing industrial emissions. FO-burning industry pushes this in the wrong direction |
| Health Impact on Workers and Communities | FO combustion produces SO₂, NOx, and particulate matter. Communities around Angul, Jharsuguda, Rourkela, and Keonjhar, already among India's most industrially polluted, continue to bear this health burden |
Balanced verdict: The extension is a pragmatic but not ideal decision. Given the genuine infrastructure and engineering constraints, it is defensible as a short-term operational requirement. However, it must be the final extension both OSPCB and the Forest, Environment & Climate Change Department must hold the December 2027 line firmly. The government’s parallel obligation is to accelerate gas infrastructure development so that industries have a genuine alternative to switch to.
How the Extension (and Ultimate Transition) Improves Environmental Conditions
Although the timeline has been extended, the policy continues to encourage a gradual shift towards cleaner fuels.
1. Immediate Environmental Benefit of the Policy (Regardless of Extension)
Even with the extension, the Odisha Fuel Policy is already improving the environment through its ban on new FO use:
- Every new industrial unit commissioned in Odisha since 2021 uses cleaner fuels from the start.
- As old plants retire and new plants come online, the aggregate industrial emissions profile of Odisha is progressively improving even before existing plants switch.
2. Post-December 2027 Environmental Benefits
Once all existing industries transition from FO to LSHS, LDO, or Gas:
Sulphur Dioxide (SO₂) Reduction:
- FO typically contains 1.5-4% sulphur, LSHS contains ≤0.5% sulphur, and gas contains zero sulphur.
- Industrial SO₂ from Odisha's heavy industry belt one of the most SO₂-intensive in India, will fall materially.
- Acid rain in forested and agricultural areas of Sundargarh, Keonjhar, and Angul districts will decrease.
3. Particulate Matter (PM) Reduction:
- FO combustion produces high levels of PM2.5 and PM10 compared to gas and LDO.
- Reduction in PM from industrial combustion directly improves air quality in the Jharsuguda-Rourkela-Angul industrial belt where air quality is among the worst in India by CPCB data.
4. Heavy Metal Deposition Reduction:
- FO contains vanadium, nickel, and other heavy metals that are emitted as fly ash and settle on surrounding soil and water bodies.
- Transition to cleaner fuels eliminates this heavy metal emission source.
5. Community Health:
Lower SO₂ and PM means lower incidence of:
- Respiratory diseases (asthma, COPD, bronchitis) in communities near industrial areas.
- Eye and skin irritation from acid fog
- Long-term cancer risk from PM2.5 exposure
Business Opportunities for Corpseed
The extended deadline is expected to create fresh demand for environmental, regulatory, and fuel transition support services across Odisha.
1. Environmental Compliance Advisory for Odisha Industries
The extension creates a defined, 18-month compliance window (June 2026 to December 2027), a perfect service delivery period for compliance advisory:
| Service | Target Clients | Details |
| Fuel Transition Plan (FTP) Preparation | All FO-using industries in Odisha | Audit current FO use, identify alternatives, and prepare a documented FTP for OSPCB |
| OSPCB Consent Condition management | Steel, aluminium, sponge iron, ceramics units | Update CTO conditions to incorporate fuel transition milestones |
| OSPCB Notice response and Engagement | Units that received OSPCB show-cause notices for FO use | Represent clients before OSPCB, submit FTPs, and obtain compliance relief under the extended deadline |
| Environmental Compliance Audit | Odisha industrial units | Full compliance review, including fuel policy status |
2. CTO/CTE Renewal Services for Odisha Industries
Industries whose Consent to Operate is due for renewal will need to demonstrate:
- Awareness of the extended deadline
- A committed Fuel Transition Plan
- Progress updates on transition activities
Corpseed's existing CTE/CTO services for Odisha's State Pollution Control Board (OSPCB) can be expanded to include the Fuel Transition Plan documentation as a standard add-on module.
3. Environmental Advisory for New Industries in Odisha
The absolute ban on new FO use creates a clear advisory need:
- Every new manufacturing facility in Odisha needs advice on:
- What fuel options are permissible (LSHS, LDO, Gas)
- How to design the fuel system for OSPCB consent compliance
- How to obtain PESO approvals for gas/LNG storage
- How to structure fuel supply agreements
4. Sustainable Business and ESG Services
Industries transitioning from FO to cleaner fuels, especially gas, generate:
- Quantifiable GHG reduction (SO₂, NOx, CO₂ on a relative basis)
- Scope 1 emission reduction data for BRSR and ESG reporting
- Potential eligibility for carbon offset or green finance instruments
Corpseed can help industries:
- Quantify emission reductions from fuel switching
- Document these for ESG/BRSR annual reports
- Explore linkage with green finance (sustainability-linked loans) where the fuel transition is a KPI.
Corpseed's Core Message for This Opportunity
For industries in Odisha that are still operating on Furnace Oil, the extension provides additional time, but the shift to cleaner fuels remains on the agenda. Over the coming months, many units are likely to focus on fuel conversion projects, equipment modifications, storage upgrades and discussions with fuel suppliers.
Corpseed supports industries through this process by assisting with Fuel Transition Plans, OSPCB-related documentation, CTO and CTE matters, fuel-switching assessments and environmental compliance requirements. With the deadline now set for 31 December 2027, companies have greater clarity on the timeline available for planning and execution.
About the Author
Parul Bohral
Legal Content WriterParul Bohral, a BALLB graduate and experienced legal researcher and content writer with expertise in various legal areas, including corporate law and intellectual property. I have gained valuable experience in esteemed legal environments, where I have strengthened my research skills, allowing me to approach legal writing with precision and depth.
As a legal content writer, I am committed to delivering work that not only informs but also engages readers. By staying informed about the latest trends in content marketing and regulatory developments, I ensure that my writing remains sophisticated and meets industry standards. My dedication to thorough research enables me to craft content that is both insightful and impactful.