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India's fuel demand rose by its slowest pace in almost 12 years after monthly price increases chipped away growth in diesel consumption. The world's fourth-largest oil consumer saw petroleum product demand growing by a meager 0.7 Percent to 158.197 million tonne (mt) in 2013-14, according to the latest oil ministry data. The growth is the slowest since 2001-02 when demand had expanded by 0.4 Percent to 100.432 mt.

Diesel, India's most consumed fuel accounting for close to 45 Percent of the total petroleum product demand, recorded 1 Percent drop in demand at 68.370 mt, the first drop in consumption since 3.7 Percent fall in 2001-02. Indian Oil chairman RS Butola had a few weeks back stated that the demand for diesel had fallen for the first time in more than a decade as the move to deregulate diesel rates through small monthly increases has chipped away the demand. "Small adjustments of 50 paise every month has brought some parity with cost," he had said. Diesel rates have risen by a cumulative INR 8.33 per since January 2013, leading to drop in demand.

Diesel demand had risen by 6.7 Percent in 2012-13 to 69.08 mt. It posted a record 11.1 Percent growth rate in 2007-08 and since then had showing near 8 Percent growth. India had recorded 6 Percent growth in fuel consumption in 2012-13 to 157.057 mt, according to the oil ministry data.

Petrol consumption in 2013-14 rose by 8.8 Percent to 17.129 mt while LPG demand was up 4.7 Percent to 16.337 mt. The consum-ption of petrol had dropped when the fuel was deregulated in June 2010 but diesel continued to see rise in consumption as it was heavily subsidised thereby discouraging people to use it optimally. Now, petrol is on a par with its cost of production but the current selling price of diesel is still INR 5.49 a litre lower than its cost.

Besides losing INR 5.49 a litre on diesel, fuel retailers are losing INR 34.43 per litre on kerosene sold through PDS and INR 506.06 per 14.2-kg cylinder of LPG, according to IOC.

Source-On Request