Consumption growth short of estimate

The consumption of petroleum products in India is growing at a rate much lower than the conservative projection of 4.58 per cent made for this year by the Petroleum Products Planning and Analysis Cell (PPAC), a wing of the petroleum ministry.

In the first six months of 2011-12, consumption grew a mere 3.61 per cent. The trend is much lower than the growth witnessed in recent years and is in line with the global trend. All leading international agencies such as EIA, IEA and OPEC have been revising petroleum demand down every month during the year, because of sluggish economic growth and macro-economic concerns.

The 3.61 per cent growth, while being lower than the projected rate, is marginally better than the 2.9 per cent growth of 2010-11, said an industry official. September growth was robust at 6.1 per cent, led by good growth in LPG, naphtha, aviation turbine fuel (ATF), diesel, bitumen, PetCoke and moderate growth in petrol. However, this rate was unlikely to be sustained and so, full-year growth could moderate further, said another executive.

The sluggish growth rate is attributed to lower consumption demand for both petrol and diesel, that together account for half of petroleum products’ consumption. Diesel, accounting for 40 per cent of overall petro products’ sale, grew by 5.9 per cent in the first half against last year’s full year growth of 6.6 per cent. Petrol is growing at 4.8 per cent against 10.7 per cent in 2010-11. This is also one of the rare years when diesel has grown at a higher rate than petrol. Data for the past 15 years (with an exception in 1996-97 and 2004-05) show a higher growth rate for petrol. Naphtha and furnace oil are also growing sluggishly.

PPAC sees the sharp decline in all-India power deficits and a good monsoon as the reason for low diesel growth. Petrol consumption has taken a beating due to regular price increases, up 39 per cent since April last year following its decontrol. Experts say the rising prices are prompting consumers for judicious use.

However, consumption growth is being supported by strong LPG growth, rising 10 per cent against 9.1 per cent in 2010-11, riding on expanding coverage. LPG has a 10 per cent share in petro products’ consumption. ATF growth is also well over 10 per cent.