Petrol intake drops for first time after slowdown

Consumption of petrol slipped into negative territory for the first time in 40 months in November, but that of diesel grew 16 per cent, the highest in two years.

According to the Petroleum Products Planning and Analysis Cell (PPAC), a wing of the petroleum ministry, petrol consumption dropped 2.4 per cent in November, while growth in April-November was 4.3 per cent, the least in 16 years. Notably, petrol consumption had been growing annually at double digits in recent years.

“Petrol consumption growth has been subdued for the past few months due to regular price increases, following a decontrol in June 2010,” said an industry official.

“However, the negative growth is an exception. This can be attributed to the anticipation of price cuts during the month, which prompted dealers to maintain a bare minimum inventory to avoid loss.”

Since the price was revised downwards twice during November, inventory management by dealers continued through the month and had a major impact on companies’ sales.

While the December data is yet to be compiled, PPAC expects petrol sales to be relatively better in December, as dealers are expected to bring back their inventories to the normal level.

Consumption of diesel, which is sold at government-regulated prices and accounts for nearly 60 per cent of the total oil subsidy, grew by 16 per cent in November.

As a result, the cumulative growth for April-November shot up to 7.4 per cent, compared to 5.9 per cent during April-October.

“Against the backdrop of pessimistic economic scenario and falling gross domestic product growth projections, such high growth in diesel is a matter of concern,” PPAC said in its report. Currently, government-owned oil marketers bear a loss of Rs 11.30 on every litre of diesel.

Since the decontrol, petrol prices have risen nearly 37 per cent to Rs 65.64 a litre in Delhi. During the same period, diesel prices rose a marginal 7.4 per cent to Rs 40.91 a litre.

The gap between petrol and diesel price, that used to be 25.80 per cent prior to decontrol, has widened to over 60 per cent.

The main reason behind the strong diesel demand is the worsening power situation, resulting in significant use of the fuel for captive power generation. Power deficit has been increasing month on month due to coal shortage. Another factor was the robust commercial vehicle sales in November at 35 per cent. In several states, industries are using diesel instead of furnace oil due to the price advantages.

Petroleum products saw growth of 11.3 per cent in November, the highest monthly growth rate this year, led by diesel, liquefied petroleum gas, naphtha, aviation turbine fuel and PetCoke.