Oil marketing companies, burdened with under-recoveries on the fuel sold by them, have got a much-needed breather as growth in diesel consumption moderated for the third month on the trot in November.
Consumption for the month came in at 5.8 million metric tonne (mmt) as against 5.7 mmt in November 2011, a growth of a mere 1.7%, according to data from the Petroleum Planning and Analysis Cell, a statistical body under the petroleum ministry.
That’s the slowest pace of growth this fiscal and brings down the cumulative growth rate in consumption to below 10%.
Diesel accounts for the bulk of the sales of oil companies. The fuel finds widespread usage, ranging from transportation, mobile towers and power generators.
Hence, any change in its consumption pattern has a direct bearing on the financials of these companies.
“This is good for the country as this will not only help in bringing down the under-recovery of companies, but also reduce the subsidy bill of the government and also have a positive impact on inflation,” said a senior oil & gas expert from an international consultancy firm, requesting anonymity.
Though a continued drop in consumption is unlikely considering India’s hunger for the fuel, some government measures have helped the country, said the expert. These include a reduction in the rampant adulteration of kerosene and furnace oil for use in generators.
Diesel consumption started moderating in September, with annual growth falling to 7.6% – the first it went below 10% this fiscal.
In October, consumption growth fell even lower, said the PPAC report. “Growth in diesel consumption was 6.8% for October, which has brought down the cumulative growth in diesel consumption for April-October below double digit for the first time this fiscal.”
The fall in the cumulative growth number to below 10% is a good signal for companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum. Year-to-date, the three have a cumulative under-recovery of around `52,711 crore on sale of diesel.
