On the back of rising petrol rates and increase in demand for fuel from consumers all over the country, Mukesh Ambani-led Reliance Industries Limited (RIL), one of India’s leading private oil and gas producing corporations, is experiencing a sharp incline in the sale of diesel as consumers are increasingly opting for the subsidized fuel which costs about 41 per cent lesser than petrol.
According to Petroleum Planning and Analysis Cell (PPAC) - oil ministry’s data centre - petroleum consumption recorded a monthly growth of merely 0.2 per cent in April ’12 (lowest since the last one and half years), of which nearly 47 per cent of total consumption was that of diesel. Aided by the fact that government caps the prices of diesel, which is the most preferred fuel for farmers and heavy vehicle operators, there seems to be a gradually accumulating artificial demand for the subsidized fuel. Unable to cope up with rising demand, state run oil refiners such as Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd., are being hard-pressed to seek help from private oil companies such as Reliance. PSU or state run oil companies have in fact started buying, to an amount close to 15 million tonnes of diesel per year,from private oil companies such as Reliance Industries and Essar to compensate for their deficit. “As this situation continues, we will have to buy more from the private refiners and maybe also increase imports,” noted R.K. Singh, chairman of Bharat Petroleum Corp. Ltd.
This situation, on the other hand,is greatly benefiting private oil companies which have always been pushed to the side of retail fuel market because of cheaper fuel being provided by state-run oil companies. At present, RIL is able to sell diesel at international rates that too in the domestic market without bearing revenue loss which they would have suffered had they pushed fuel sales through their own pumps.
Calling the situation to be the ‘dieselization of the economy’, PPAC has hinted at competitive struggles among fuel suppliers. As the demand growth remains strong, mainly for the reasons of fuel subsidy program, and likelihood that it will continue to remain strong in the light of current fuel price forecasts, it is likely that private and public oil companies will continue to work in tandem to fulfil the rising demand for subsidized fuel. And given automobile companies are also acclimatizing to the shift in fuel requirements and demand of consumers, the pattern is likely to stick around for some more time.