Diesel demand drops for the first time in a decade

New Delhi: For the first time in more than a decade, diesel demand has declined this fiscal as monthly price hikes and increased power generation clipped consumption, Indian Oil Corp. Ltd (IOC) chairman R.S. Butola said on Thursday.
Diesel, which is India’s most consumed fuel accounting for close to 45% of the total petroleum product demand, has seen sales growth of 6-8% since 2003-04.
But this year, it has fallen by 0.8% over last year to 39.46 million tonnes.
“This year there has been 0.8-1% degrowth,” Butola said at the third World Energy Summit.
The deceleration in diesel demand, he said, was due to better power production which saw lesser burning of the fuel in gensets.

But the bigger reason is the move to deregulate diesel rates through small monthly increases. “Small adjustments of 50 paise every month has brought some parity with cost,” he said.
Diesel prices have risen by a cumulative Rs.6.62 per litre since January, leading to a drop in demand.
Butola said petrol consumption had dropped when the fuel was deregulated in June 2010 but diesel continued to see rise in consumption as it was heavily subsidized thereby discouraging people to use it optimally.
Now, petrol is at par with its cost of production but the current selling price of diesel still is a Rs.9.99 a litre lower than its cost.
“We believe that market forces need to be allowed to have proper inter-play (on demand and consumption),” he said.
While diesel sales dropped in first seven months of the fiscal year that

Pradeep K Shukla
PGDM 1 Sem