Petrol, diesel demand dips as prices rise

Last Updated: Wed, Aug 03, 2011 04:54 hrs

In what seems to be a sign of overall slowdown, the growth rate in the consumption of petrol and diesel has slowed by more than a half during the first three months of the current financial year.

The consumption of the two fuel variants rose by 5.3 and 5 per cent respectively, against a growth rate of 12 and 10.6 per cent, respectively, in the corresponding period a year ago.

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Consumption of liquefied petroleum gas (LPG) improved from 8.1 per cent to 10.5 per cent, as domestic LPG coverage continues to rise. Aviation turbine fuel also reported an increase in consumption, from 8.7 per cent to 11.3 per cent. Overall, the consumption of petroleum products grew just 3.4 per cent in the first quarter compared to 4.6 per cent growth in the corresponding period last year.

Explaining the decline, G C Daga, director (marketing), Indian Oil, the country's biggest oil marketing company, said the sharp price change in petrol had affected its consumption. "So far as diesel is concerned, it is directly related to sectors like transportation and power generation and its consumption has been affected by a decline in demand from these sectors," he said.

Petrol retailed at Rs 58.37 a litre for the first half of the first quarter this year and at Rs 63.37 for the second half, significantly more than Rs 47.93 that prevailed for most of the first quarter last year. Industry experts are of the view that rising prices of petrol have affected the consumption pattern, prompting consumers to go for judicious use and in several cases shift to cheaper options like CNG or diesel.

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"Perhaps, the decline indicates that consumers are feeling the pinch and reacting to higher prices," said an oil industry executive.

Diesel, which accounts for 40 per cent of the overall sales of petroleum products, is used by diverse sectors - trucks (37 per cent), passenger cars (15 per cent), buses (12 per cent), agriculture (12 per cent), industry (10 per cent), power generation (8 per cent) and railways (6 per cent).

Industry watchers say though auto sales have grown during the first quarter, there has been a slowdown in the transportation sector that accounts for 37 per cent of diesel consumption.

An official at the Petroleum Planning and Analysis Cell pointed out that better monsoon meant lower demand for diesel in power and agriculture sector, thereby impacting consumption growth.

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