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LATEST NEWS UPDATES | Petrol consumption may decelerate in FY12 by Amrit Raj

Petrol consumption may decelerate in FY12 by Amrit Raj

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published Published on Mar 13, 2012   modified Modified on Mar 13, 2012

The growth rate of petrol consumption is set to fall below 5% in the current fiscal, the first time in five years. Meanwhile, the consumption of diesel continues to grow at 7%, adding to the losses of the oil marketing companies on account of subsidies.

In India, diesel is subsidized while petrol is not, and the price difference has led to more buyers opting for vehicles driven by the cheaper fuel.

According to the data provided by the Petroleum Planning and Analysis Cell, petrol consumption in India in April-January this fiscal was 12.35 million tonnes. India is expected to end up consuming 14.82 million tonnes of petrol in the year, registering growth of 4.41% in FY12. Consumption of diesel is expected to be 63.91 million tonnes, registering growth of 6.4%.

The subsidy on diesel is aimed at farmers who use it to run pump sets, making it cheaper than petrol by about Rs.25 a litre. The subsidy bill on account of selling diesel below cost is likely to be Rs.67,000 crore in FY12.

According to data provided by the Society of Indian Automobile Manufacturers (Siam), the proportion of diesel car sales has steadily risen from 21.4% in FY08 to 28.42% in FY11. However, in the current fiscal, at least 40% of the total cars sold in the country run on diesel.

Maruti Suzuki India Ltd, India’s largest car maker, has four models—Ritz, Swift, DZire and SX4—with diesel and petrol variants. Of these, the diesel versions accounted for 80% of Maruti’s sales for these models this fiscal.

According to Siam, passenger cars account for 0.6% of the total diesel consumption in the country, while the auto industry as a whole consumes 5.41%. This conflicts with the 15% figure cited in the Kirit Parikh committee’s 2008 report on petroleum product pricing and taxation.

The head of a state-run oil-marketing firm said petrol consumption had been pegged to rise 10% until 2014, and that the price differential was responsible for the distortion. “This has led to an increase in the under-recovery of oil marketing companies,” he said. “Currently, 60% of the under-recovery is on diesel.” Under-recoveries are the losses oil marketing companies face on account of selling fuel below cost at state-mandated prices.

In the Union budget, to be presented on 16 March, the government is expected to increase excise duty by up to Rs.80,000 on diesel cars on top of the current 10% rate to stem the growth of such cars.

India’s car market has seen a slowdown in sales in the current fiscal due to higher interest rates and fuel prices. In June 2010, the government deregulated petrol prices, linking them to the global crude oil market. Petrol prices have since been revised 10 times, rising almost 28%.

Any increase in the excise duty on diesel cars will be “unfair” and hit sales, said Vishnu Mathur, director general of Siam. Any increase will be bad news for the auto industry as most companies have heavily invested in diesel-powered vehicles, he said.

Live Mint, 13 March, 2012, http://www.livemint.com/2012/03/12213611/Petrol-consumption-may-deceler.html?atype=tp


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