Branded petrol and diesel are set to post their first-ever decline in annual sales as price-conscious consumers have started shifting to regular fuels.
Regular (non-branded) fuel sales have also slowed but are still showing healthy growth of 8-9 per cent. Branded fuels are sold at a marginal premium to regular fuels.
Though some industry officials expected the demand for branded fuels to perk up with falling prices, the increasing price gap between regular and branded fuels has led to a sharp 13 per cent decline in the average monthly sales of branded diesel for the current year. The contraction in demand is much lower for petrol — at 2 per cent.
Sales of branded diesel for the April-January period of the current financial year stood at 4.23 million tonnes (mt) as compared to 5.84 mt for the whole of 2007-08. The monthly average for the current year is pegged at 423,000 tonnes vis a vis 486,000 tonnes in the previous year, implying a decline of nearly 13 per cent. In contrast, overall diesel consumption during the April-January period grew at nearly 9 per cent.
Branded petrol sales, however, declined by a marginal 2 per cent from a monthly average of 274,000 tonnes in 2007-08 to 268,000 tonnes in the current year. Contrary to it, the overall petrol consumption grew by almost 8 per cent during the April-January period in the current fiscal.
Besides the general slowdown in demand, sales have fallen this year due to higher excise duty, which had increased the price gap between branded and unbranded fuels.
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In June 2008, the government reduced the excise duty on non-branded diesel and petrol by Re 1 a litre while keeping it unchanged for branded products.
The price of branded fuels — which were introduced in the market in 2003 — is free from government control. The controlled price, however, acts as a natural check on branded fuel prices since too wide a gap leads to customers switching to non-branded fuels.
Branded petrol and diesel were the first products on which oil companies started registering profits once crude oil prices were back in the double-digit zone after touching a peak of $147 a barrel in July last year.
“The cumulative figure for the year is showing a decline since excise duty is high on branded fuels. However, we have cut prices recently and February sales are higher than January,” said GC Daga, director (marketing), at IOC.