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Decontrol hits growth in petrol consumption

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Ajay Modi New Delhi
Last Updated : Jan 20 2013 | 2:34 AM IST

Following decontrol of its price, the consumption of petrol is rising at a much slower rate than used to be the case.

Till two years earlier, consumption was growing almost 14 per cent yearly. It is now doing so at five per cent, less than even the projected seven per cent growth for the current financial year. Since decontrol took place in June last year, there has seen an almost 40 per cent jump in prices. According to the Petroleum Planning and Analysis Cell (PPAC) of the petroleum ministry, consumption grew by just 4.5 per cent in August, the second lowest in recent years.

This figure was even lower than the average of five per cent witnessed during the April-August period. P K Goyal, director (finance) of the country’s biggest fuel marketer, Indian Oil, expects the trend to continue.



The trend this year is in sharp contrast to the double-digit growth that petrol had been registering in recent years, riding on the automobile sales boom. In 2009-10, consumption grew 13.9 per cent. It fell in 2010-11 but remained in double digits, at 10.8 per cent.

A PPAC report said the “growth trend for the past few months give clear indications that petrol growth is likely to remain in single digit this year”. It pointed to the substantial rise in prices, of petrol and other items. “With high inflation and significant increase in the price of food items, consumer spend on fuel is getting squeezed,” it said.

Car sales registered a 15.8 per cent dip in July, the first after a gap of 30 months. The August decline was not as much but still in double digits. Car sales are expected to remain under pressure in the near future due to factors like the high interest rate.

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While two-wheeler sales continue to grow at high double digits, data shows that, too, is declining. One would assume a shift in consumption from petrol to diesel must have taken place, given that the diesel price has increased by just about eight per cent (against 39 per cent in petrol). However, diesel growth is falling, too. While the 6.6 per cent growth last year was the lowest since 2006-07, growth so far this financial year is even lower, at 5.3 per cent.

PPAC sees the sharp decline in all-India power deficits and a good monsoon as the reason behind low diesel growth. The sales of commercial vehicles, that primarily use diesel, is growing; however, those of passenger vehicles are not. Sales of three-wheelers are also on the decline.

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First Published: Sep 20 2011 | 12:10 AM IST

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