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Slowdown: Diesel, petrol consumption drop sharply

Kalpana Pathak in Mumbai | February 13, 2009 01:47 IST

Here is another sign that the economy is slowing. The growth rate of diesel and petrol consumption is down sharply, though it is still in the positive territory.

Year-on-year growth in diesel consumption in December 2008 was down to a mere 1.5 per cent as against 10.7 per cent growth in December 2007. Consumption of petrol grew 5.5 per cent in the month compared with 9.5 per cent in December 2007.

Preliminary data for January showed that diesel consumption grew only 2 per cent.

"The slump is mainly because of slowdown in the economy. Industrial activity has suffered and so have diesel sales," GC Daga, director (marketing), Indian Oil Corporation [Get Quote], said on the sidelines a press conference in Mumbai.

The economy recorded a significant fall in manufacturing output in December at -2.5 per cent as against 8.6 per cent growth in December 2007.

Cumulatively, from April 2008 to January 2009, while diesel sales grew 8.8 per cent, they grew a much higher 9.6 per cent in April-December 2008.

Industry experts say diesel sales have been hit significantly as the power deficit in southern India has eased, leading to lower demand from captive power plants.

Users are also shifting to compressed natural gas for automobiles. CNG, which costs Rs 18.90 per kg in Delhi and Rs 21.70 per kg in Mumbai, is cheaper than petrol and diesel. Petrol and diesel in New Delhi cost Rs 40.62 per litre and Rs 30.86 per litre, respectively, against Rs 44.55 per litre and Rs 34.45 per litre, respectively, in Mumbai.

Sales of branded or premium auto fuels, which are more expensive, have also seen a sharp dip in the past couple of months.

In January, IOC recorded a fall of 18 per cent in diesel sales. This fall was 7.7 per cent in November-December 2008.

"There has been a significant dip in branded fuel sales. We are trying to push them and may look at cost reduction as well," said Daga.

Oil marketing companies have already reduced prices of branded petrol and diesel between Rs 1 and Rs 2.50 per litre.

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