The rate of growth in diesel demand spiked to 14%-15% in May from a mere 1.7% in April as vehicle owners tanked up with the government taking time to revise its price, early sales trend for the month available with state-run oil companies show.
A senior marketing executive of IndianOil Corporation, which controls nearly half of the fuel retail market, said even after petrol price was raised by Rs 5 a litre, demand for the fuel has shown a growth rate of 9%. In April, or before the price revision, demand had grown at 7.4%.
Cumulatively, overall demand for all petroproducts in May stood at 6%, or nearly double the 3.9% seen in April. In 2010-11, overall petroproducts demand grew at 4.2%, whereas petrol registered a growth of 10.8% and diesel 6%. "This paints a stark picture for diesel. It also shows that price increase does not affect demand," the IndianOil executive said, requesting anonymity.
One dealer in Delhi said even those who normally buy fuel for Rs 500 or Rs 1,000 at a time are tanking up, including diesel vehicle owners. "Even normally you find long queues at petrol pumps on the eve of price hikes announced by TV channels. This time the period has got longer."
"Think of transporters and other commercial establishments, in addition to private vehicle owners, who are tanking up and you have a huge inventory building up in private domain. Thruputs of our storage depots have increased and oil companies' infrastructure is being stretched," the IOC executive said.
After the petrol price hike, the government said it would decide on raising diesel price by up to Rs 4 a litre and cooking gas price by Rs 25-50 per refill. The government keeps prices of these fuels artificially low and pays state-run oil marketing firms money to make up their retail losses.
Diesel price was revised almost a year ago. The present pump price corresponds to roughly $70 a barrel of crude, which averaged $109 in the second fortnight of May, down from $112 in the preceding fortnight. Concerned over diesel price hike fuelling inflation and pushing up farming costs, the government is taking its time to see if crude falls further. This will help it to keep the increase at a minimum.
Industry figures, however, show government's concerns could be misplaced. Only 10% or so of the 45 million tonnes of the fuel is consumed by the farm sector and 30-35% is used for goods movement. Large volumes go to railways and state transport utilities, while the remaining is used by private vehicles and commercial establishments. "Except the farm and goods movement, none of the consumers are linked to price index. Why should they enjoy subsidy," the executive said.
source-Times of India
Stevenson
managemant trainee-Fundamental Analyst
Denip Consultants Pvt.Ltd
No comments:
Post a Comment