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Rediff News  All News  » Business » Diesel may cost Rs 57 a litre for industrial users

Diesel may cost Rs 57 a litre for industrial users

August 25, 2008 14:48 IST

State-run oil firms have proposed a Rs 57 per litre price for diesel they sell to industrial users as against Rs 34.80 a litre currently, as use of the fuel in sectors like power generation had seen an unprecedented growth.

Three oil companies have submitted a concept paper to the petroleum ministry for differential pricing of diesel for direct consumers like Railways and power producers who they want to charge market price and limit subsidised sales to transport and agriculture sectors, sources said.

Industrial units like power generators find subsidised diesel cheaper than freely priced fuel oil and naphtha, pushing demand that has forced refiners import the fuel to meet the requirement.

Last week, an industry brainstorming meeting with Oil Minister Murli Deora was informed that diesel demand in April-July had grown by 18 per cent, with bulk of the growth coming from industrial users like power plants.

Sources said the power sector had seen a whopping 152 per cent rise in demand in the first quarter to 53,000 tons, while fisheries and marine sector had seen a near-40 per cent growth.

Differential pricing of diesel would reduce the revenue loss by Rs 27,202 crore (Rs 272.02 billion) in 2008-09.

Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum currently lose Rs 16.22 per litre on diesel sales. Half of the projected Rs 184,801 crore (Rs 1,848.01 billion) revenue loss on sale of petrol, diesel, LPG and kerosene in fiscal 2009 is because of diesel.

The petroleum ministry was examining the proposal, sources said and it was being deliberated if Cabinet approval would be required for implementing differential pricing scheme.              

"During the first four months, diesel demand has grown at 18 per cent," IOC Chairman Sarthak Behuria had said last week. 

This unprecedented demand growth has seen domestic output fall short of the requirement and a total of 4.14 million tons of diesel may be required to be imported in 2008-09. Of this, 1.267 million tons has been imported in April-July.

While transport and agriculture demand for diesel had grown by 10-12 per cent, consumption by power producers and other industries had risen 30 per cent, Behuria said.

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