To squeeze diesel imports on slow demand

Indian Oil Corporation, the country's largest crude oil refiner, is likely to import lesser diesel than it planned this financial year as demand for the fuel fell unexpectedly in August.

The company is likely to import up to 900,000 tonne of diesel till March 2009, lower than the planned 1.2 million tonne, but imports are still likely to be 34.32 per cent higher than the 670,000 tonne of diesel bought from overseas markets in 2007-08.

Demand for the fuel oil slipped in August as industrial consumers found non-subsidised oil less expensive to power their back up power units, especially after the price fell by 20 per cent from its peak.

“Demand for diesel has come down in August and is usually at its lowest till November. We have enough stocks to meet the demand,” Narasimhan said, without divulging the amount of diesel consumed in August.

The company is not likely to import any more diesel till December, but may import 500,000-700,000 tonne between January and March 2008. It has already imported 200,000 tonne of diesel so far this financial year.

The country consumed 10.3 per cent more diesel in July as compared to the same period last year, latest data released by the petroleum ministry showed.

Till July, diesel demand was growing at a rate of over 18 per cent, resulting in shortage of the fuel oil in India, said the oil marketing companies, IOC, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.

The country’s refiners have the capacity to meet around a 14 per cent growth in diesel demand.

Demand for the fuel grew at over 18 per cent as prices climbed almost 60 per cent to a record of $ 147.11 per barrel in early July.

This resulted in fuel oil, which was cheaper than subsidised diesel in India before the price spike, becoming more expensive.

Industries, including power plants, thus shifted to subsidised diesel to fire their plants, driving up demand.

Oil prices dipped by around 22 per cent from the July records-levels to below $110 per barrel. As a result, fuel oil has again become cheaper than diesel that has prompted industries

“Diesel demand traditionally rises in January. We may need to import some diesel then,” Narasimhan said.