Erratic rains this year have played spoilsport for the oil marketing companies, which have seen an unusual demand for diesel in June. At the government-capped price, this translates into an extra underrecovery bill of Rs 650 crore.
Diesel consumption should have grown only 150,000 tonnes in June, considering the 2.8 per cent growth between June 2010 and June 2011. However, it grew an unusual 11 per cent, or 667,000 tonnes, in June 2012. The companies are incurring an underrecovery of Rs 9.95 a litre.
Consumption usually starts falling June onwards, with the onset of monsoon. It was expected to come down this June, too. However, it has remained high due to inadequate rains, said P K Goyal, director (finance), Indian Oil Corportion.
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About 70 per cent of agricultural land is monsoon-dependent. Hence, rain plays a significant role in food production, as also the consumption of diesel.
Past data show diesel consumption dips in June over April. It dipped 3.7 per cent in FY11 and 2.4 per cent in FY12. However, this year, it grew 1.7 per cent in June over April.
Erratic rains have also affected hydel power generation, adding to the demand. The country's biggest hydel power producer, NHPC, generated 6,000 million units of electricity in the April-June period, lower three per cent from last year's corresponding period.
The extended summer season has also fuelled power demand.
The country had a power deficit of 7.5 per cent in May. This has also fuelled higher consumption of diesel in gensets.
Overall, rainfall had been 21 per cent below normal till July 27, with little chance of a strong recovery in the coming months. Rains in July have been 16 per cent below normal.
Large tracts of farmland in Punjab, Haryana, western Uttar Pradesh, Gujarat, Maharashtra, Karnataka and Rajasthan are in dire need of water.
States like Punjab and Haryana are seeking a diesel subsidy.
