Essar Oil, the second largest private refiner in India, predicts that the country will become a diesel fuel-deficit nation by 2016 because demand for diesel fuel will far outstrip supply."Diesel demand in the country is growing at an annual rate of 8%. At this rate India will need a brand new 9 million ton refinery every year, so in case demand continues to grow this rapidly, India will become diesel deficit by 2016," said, Naresh Nayyar, CEO of Essar Energy. "This will create a big opportunity for private refiners and we at Essar plan to utilize the opportunity by supplying diesel to oil PSUs," he added.
Government's pricing policy results in massive shifts in Indian auto industry
The demand for diesel fuel is growing rapidly because the government's pricing policy makes it cheaper than petrol and other industrial fuels. This has in turn triggered a massive shift in the automobile market, resulting in more sales of diesel cars compared to petrol cars. The company sells around 50-60% of its total output of 14 million tons per annum (mtpa) to oil public sector units (PSU) and the rest are exported. "Diesel forms the bulk of our sales to PSUs," said Nayyar. He explained that diesel fuel would remain in deficit despite the construction of new refineries, including Bharat Petroleum's 6 mtpa Bina refinery, and Hindustan Petroleum's 9 mtpa Bhatinda refinery. "In the near-term these new refineries could lead to a surplus in diesel production but in case the demand continues to surge then going ahead all the incremental production added by these new refineries could be absorbed and the nation could become diesel deficit by 2016." The automobile industry said figures show that the share of diesel in the overall passenger vehicle sales has already crossed the 50% mark for the first time last December. Petrol prices in India are about Rs65-70 (US$1.15-1.24) per liter, while diesel fuel prices remain at about at Rs43-45 (US$0.76-0.80) per liter. Diesel now accounts for as much as 80% of the market for vehicles that have both petrol and diesel variants. While demand for diesel vehicles surged 35% from April 2011 to February 12, there has been a decline of 15% in the sales of petrol cars and other vehicles during the same period. The Petroleum Planning and Analysis Cell (PPAC) said that in the overall growth in fuel consumption in the country between April 2011 and January 2012, diesel fuel accounted for 68%. (April 5, 2012)