Diesel Consumption On The Rise; Demand May Surpass Supply, Fear Experts

MUMBAI:India’s diesel production will not be able to keep pace with the rapidly growing demand as the government’s pricing policy makes it cheaper than petrol – and even industrial fuels – and has triggered a tectonic shift in the automobile market with diesel cars selling more than their petrol counterparts.
Essar Oil, country’s second largest private refiner, believes that India will become a diesel-deficit nation by 2016, as demand will far outstrip supply.
“Diesel demand in the country is growing at an annual rate of 8%. At this rate India will need a brand new 9-MT capacity refinery every year, so in-case demand continues to grow this rapidly,India will become diesel-deficit by 2016,” said, Naresh Nayyar, CEO, Essar Energy. This will create big opportunity for private refiners, and we at Essar plan to utilise the opportunity by supplying diesel to oil PSUs,” he added.
Currently Essar sells around 50-60% of its total output of 14 million tonne per annum (MTPA) to oil PSU and exports the rest. “Diesel forms a bulk of our sales to PSUs,” added Nayyar.
Diesel would be in deficit despite the construction of new refineries such as Bharat Petroleum’s 6 MTPA Bina refinery and Hindustan Petroleum’s 9 MTPA Bhatinda refinery, Nayyar said.
The automobiles industry has estimated that the share of diesel in overall passenger vehicle sales crossed the 50% mark for the first time last December, largely because rise in petrol prices to Rs 65-70 per litre, while diesel prices remained at has Rs 43-45 per litre.
For vehicles that have both petrol and diesel variants, diesel has grabbed as much as 80% of the model’s sales in many cases. While sales of petrol cars and other vehicles declined by 15% in April-February 2011-12, demand for diesel vehicles surged 35% during the same period.
Oil PSUs tacitly agreed with this eventuality and painted an even grimmer picture. “Diesel is a swing fuel it could become deficit or surplus any time depending on the government’s pricing policy and ability to deregulate it completely,” said a senior official at an oil marketing company. State-run fuel retailers are currently loosing revenue of Rs 13.10 per litre on sale of diesel.
He also said, “Given that summer is around the corner and power needs are going to peak, we expect the demand to shoot up even further where nationwide demand could rise to more than 66 MT this fiscal as opposed to 59.9 MTPA last fiscal.”
According to an agency report, Indian Oil, the largest fuel retailer in the country, has recently put out a tender seeking 60,000 tonnes of diesel.