Rain and sluggish economy hit diesel sales

Vol 17, PW 3 (05 Sep 13) Midstream & Downstream

This year’s heavy monsoon rains might be good for crops but are not so good for diesel retailers, who are seeing sales fall.

IndianOil, the country’s largest fuel retailer with about 49% market share, says total diesel sales were down 0.9% to 23.8m tonnes during April to July over the same period last year. Good rains mean dams are full so there’s an increase in hydroelectric power generation, but a fall in diesel demand.

“Industrial and commercial customers who were using diesel gensets to meet power shortages are buying less diesel as more power becomes available from the (electricity) grid,” says IOC. Diesel sales are also down following the government’s decision in January 2013 to deregulate prices.

Diesel, which accounts for 45% of India’s fuel basket, was selling in Mumbai on January 1 this year at Rs53.14/litre ($0.79). But the price had risen to Rs58.23/litre ($0.86) by August 1.

“Before this diesel was cheaper than furnace oil so a lot of industrial users had shifted to diesel,” we learn. “Now as diesel prices are market-linked, furnace oil is cheaper.

” Yet another reason for falling diesel sales is the slowing economy which has reduced demand for diesel as transport fuel. Investment bank BNP Paribas on August 28 forecast that India’s economy will grow only 3.7% in 2013-14, and not 5.2% as forecast earlier, making this the lowest growth for the past decade.