Indian diesel demand shrinks for first time in over 10 years

Diesel demand in India has declined for the first time in more than a decade in the current financial year on the back of increased power generation and monthly price hikes, according to Indian Oil Corp (IOC) chairman R S Butola.

''This year, there has been 0.8 per cent de-growth," Butola said of diesel sales at the World Energy Summit 2013 in New Delhi on Thursday.

Growth in diesel sales has fallen by 0.8 per cent over the current fiscal to 39.46 million tonnes. "Small adjustments of 50 paise every month has brought some parity with cost," Butola said.

Diesel prices have risen by Rs6.62 since January, with a consequent drop in demand.

The IOC chairman said another factor was better power production, which saw less burning of the fuel in generator sets.

Butola said petrol consumption had dropped when the fuel was deregulated in June 2010, but diesel continued to see a rise in consumption as it was heavily subsidised. "We believe that market forces need to be allowed to have proper interplay," he said.

In the last financial year ended March 2013, diesel sales had risen 6.68 per cent to 69.08 million tonnes. Diesel consumption in 2003-04 was 37.07 million tonnes and rose to 69.08 million tonnes in 2012-13, Butola said.

Fuel retailers are currently losing Rs9.99 a litre on diesel, Rs36.20 per litre on kerosene and Rs542.50 per 14.2-kg cylinder of domestic cooking gas.