Lube to see 15% growth on industrial boom

Ongoing industrial boom in the country is likely to lift the lubricant segment, with analysts expecting the area to see 15 per cent growth this year.

At present, the Indian lubricant market is estimated at Rs 5,500 crore, producing 1.05 million kilolitre per annum. But the installed capacity is 1.6 million kilolitre a year.

In India, the level of lube oil consumption is lower vis-a-vis the developed economies because of lower penetration of automobiles against much higher population, said Aditya Sah, joint managing director, Sah Petroleums.

However, currently, demand for lube oil in developed countries is stagnant due to industrial saturation and competition in the segment.

"Asia is expected to emerge the biggest market for lubes in the near future. Now, 25 per cent of the world sales take place in Asia, up from 22 per cent in 1993. With the demand for lubes in the major part of the world being stagnant, and given that India is the third-largest market in Asia, global companies are setting up shops in India," Sah added.

While the per capita lube consumption in the US is 31 kg and in western Europe 14 kg, it is a meagre 1 kg in India.

Even in China, the per capita consumption is low at 2 kg. While Europe consumes 35 per cent of total global production, Asia Pacific including Australia consumes 25 per cent. Further, North America and Central-Southern America consume 28 per cent and 12 per cent, respectively.

Worldwide, the demand for lubes is high in the automotive sector that consumes 22 billion litre a year. For industrial purposes, 17 billion litre was used last year. The marine segment consumed 2 billion litre, according to a study.

The lubes market was a regulated market till 1993, dominated by public sector companies such as Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum and IBP. Deregulation had encouraged foreign majors to start operation in India, and the number of private players immediately increased to about 25.

With this, competition became intense.

"Due to stiff competition, most players are considering strengthening retail marketing. Sah Petroleum, too, is thinking on the same lines, and is expected to begin the process very soon," Sah said.