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Cell to study why diesel use is rising
Richa Mishra
New Delhi, Oct. 19
The Petroleum Planning and Analysis Cell, intrigued by the constant rise in consumption of diesel, despite the fluctuations in crude oil prices, plans to undertake a study on the consumer pattern of the product.
Domestic consumption of diesel, which is essentially a transportation fuel, has been seeing a growth of 18-20 per cent. For April-September of the current fiscal, diesel consumption saw an average growth of nearly 12 per cent against about 8 per cent for petrol.
Industry watchers feel that there is a need to reduce the pace of increase in diesel consumption since the revenue loss on diesel alone accounts for over 50 per cent of the total under recoveries suffered by public sector oil marketing companies on retail sale of four petroleum products - petrol, diesel, kerosene and LPG - at controlled price.
In 2007-08, revenue loss on diesel stood at Rs 35,166 crore of the total under recovery on four petroleum products of Rs 77,123 crore.
The revenue loss on diesel is estimated to go up during the current fiscal.
September sales
In September, diesel sales, which account for one-third of total petroleum product sales, are estimated to have increased by almost 17 per cent against the same month last year.
"The cell will be working out the methodology for the study," official sources told Business Line.
"It is clear that a significant part of diesel is consumed in industrial applications, as the price of the product has been kept artificially down.
Raw material
"The controlled price of the product has led to the product now being used as raw material by industrial units which find subsidised diesel cheaper than other deregulated products such as fuel oil," industry sources said.
For instance, fuel oil today costs Rs 4-6 a litre more than diesel, which a year ago was a reversed situation. Companies in the power sector have been switching to cheaper diesel in place of fuel oil.
According to industry sources, the increase in consumption of diesel by industrial users negates the very purpose of offering the product at a subsidised price.
According to estimates, subsidy to consumers on diesel stood at Rs 11.48 a litre. In fact, the OMCs are of the view that the time has come to implement differential pricing of diesel for direct consumers, by offering the product at its economic value, while protecting the vulnerable customer.
According to industry estimates, the sector-wise consumption growth of diesel showed that for the first quarter of 2008-09 (April-June), the power sector saw a phenomenal increase in demand by 152.4 per cent (53,000 tonnes) followed by fisheries at 39.4 per cent and marine at 39.2 per cent. The total consumption growth by direct consumers was 10.4 per cent compared with the same period last year, while retail sales saw a growth of 11.6 per cent. The combined growth registered in both the categories was 11.4 per cent during the period.
Domestic production
To meet the growing demand, the public sector oil refining and marketing companies have to resort to imports. The three OMCs - Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation - can indigenously meet 12-15 per cent of the growth. The domestic production of diesel by the three PSUs would be close to 50 million tonnes a year.
Related Stories:
Diesel dilemma
Industry chamber seeks diesel subsidy
Industrial users must pay more for diesel: Oil marketing cos
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