Millennium Post

Fuel demand grew at 12-year-low rate of 0.7% in FY14

India's fuel demand rose by its slowest pace in almost 12 years after monthly price increases chipped away growth in diesel consumption.
The world's fourth-largest oil consumer saw petroleum product demand growing by a meager 0.7 per cent to 158.197 million tonnes in 2013-14, according to the latest oil ministry data here.

The growth is the slowest since 2001-02 when demand had expanded by 0.4 per cent to 100.432 million tonnes. Diesel, which is India's most consumed fuel accounting for close to 45 per cent of the total petroleum product demand, recorded a 1 per cent drop in demand at 68.370 million tons, the first drop in consumption since 3.7 per cent fall in 2001-02. Indian Oil Corp (IOC) Chairman R S Butola had a few weeks back stated that the demand for diesel had fallen for the first time in more than a decade as the move to deregulate diesel rates through small monthly increases has chipped away the demand.

‘Small adjustments of 50 paise every month has brought some parity with cost,’ he had said.Diesel rates have risen by a cumulative Rs 8.33 per since January 2013, leading to drop in demand.Also, better power production which saw lesser burning of the fuel in gensets, had resulted in moderation in diesel demand. Diesel demand had risen by 6.7 per cent in 2012-13 to 69.08 million tonnes. It posted a record 11.1 per cent growth rate in 2007-08 and since then had showing near 8 per cent growth.

India had recorded a 6 per cent growth in fuel consumption in 2012-13 to 157.057 million tonnes, according to the oil ministry data. Petrol consumption in 2013-14 rose by 8.8 per cent to 17.129 million tonnes while LPG demand was up 4.7 per cent to 16.337 million tonnes.
The consumption of petrol had dropped when the fuel was deregulated in June 2010 but diesel continued to see rise in consumption as it was heavily subsidised 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 5.49 a litre lower than its cost.
Besides losing Rs 5.49 a litre on diesel, fuel retailers are currently losing Rs 34.43 per litre on kerosene sold through the public distribution system and Rs 506.06 per 14.2-kg cylinder of domestic cooking gas (LPG), according to IOC, the nation's largest oil refining and marketing company.
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