Diesel consumption declines for the first time in 14 years

With narrowing of price gap between petrol and diesel prices, it has been noted that petrol cars are back in the reckoning. During fiscal year 2013-14, 58% cars sold in India were petrol powered. This was the result of a close margin between petrol and diesel prices coupled with the fact that customers are now shying away from paying a premium for diesel engined vehicles.

Diesel consumption declinesAs per statistics received, diesel car sales have seen a 14% decline in demand in the past financial year. This decline will be even more prominent once the new Government accepts proposal pending in the Cabinet for an increase in prices of diesel by INR 3-4 per litre. This will also be further augmented once the government aligns pump prices with market rates along with deregulation of diesel as was seen in the case of petrol which was deregulated by the UPA government in 2010. Diesel is currently sold at INR 56.7 in Delhi, while petrol is priced at INR 71.4. The price gap between diesel and petrol may go down even further to just INR 10, once the new policies come into effect.

Despite a prolonged slowdown in the auto sector, petrol engine vehicles are receiving a boost. Diesel models have lost their lustre, primarily due to their higher price tag of nearly INR 1 lakh more than petrol variants and for the fact that there is a narrowing gap between prices of the two fuels. Buyers in urban areas are also opting for petrol engine vehicles.

diesel vehicles in indiaIt is for this reason that automakers in the country are revamping their portfolios in favor of petrol vehicles. Honda, which had a 82% diesel share for Amaze sedan in 2012 has seen a steady fall to 60% while Tata Motors has also recently launched the Revotron petrol engine eager to take on an increased market share with changing fuel preferences by buyers.

All this has resulted in a decline of diesel consumption. For the first time in fourteen years, India’s diesel consumption has declined. As per Petroleum Planning and Analysis Cell, the consumption of diesel declined by 1.0% for the fiscal 2013/14. This has benefited the government as the subsidy on diesel they paid for last fiscal stood at Rs 110,000 crores, as compared to Rs 140,000 crores paid during 2012/13 fiscal.

via ET Auto