Petrol consumption dives into negative zone

According to the Petroleum Products Planning and Analysis Cell (PPAC), the consumption of petrol in India has slipped into the negative zone for the first time in 40 months, recording a growth of negative 2.4 per cent in the month of November as against 5.4 per cent seen in the month of October. On a cumulative basis the growth has now fallen to 4.3 per cent in the petrol category.

The major reasons noted for the negative growth for petrol was that the dealers had maintained a bare minimum inventory of the product to avoid any losses arising from the downward revision of petrol prices on two occasions in the month of November. Hence, going forward, in anticipation of normalcy, dealers are expected to ramp up their inventory levels and help spur consumption growth in the month of December. Another reason was the high base effect from November 2010 petrol consumption growth of 17.1 per cent.

However, in respite, the consumption of all petroleum products grew at a healthy 11.3 per cent in the month of November 2011, which is the highest monthly growth rate seen in the current year led mainly HSD, LPG, Naphtha, ATF and Petcoke. This current set of data has come far better than the dismal 3.8 per cent growth seen in the month of October 2011.

Moving on to individual product consumption, the sale of diesel grew by a whopping 16 per cent in the month of November 2011 as against 7.9 per cent seen in the month of October 2011. In fact, the current growth is one of the highest recorded in the past two years. On a cumulative basis diesel consumption now stands at 7.4 per cent. Yet again, it must be noted that the consumption of diesel has outpaced that of petrol, this time by a much higher margin. However, as against the backdrop of a pessimistic economic scenario and the falling GDP growth projections, such high growth in diesel is a matter of concern.

The major factors contributing to high diesel consumption is the prevailing power deficit scenario which has gone from bad to worse and helped in the significant use of diesel for captive power generation. Another reason can be attributed to the high sales growth seen in the commercial vehicle segment which is predominantly known for using diesel as its main source of fuel.
 
Meanwhile, as expected by us, LPG has bounced back from its October month lows of 1.6 per cent growth and now stands at a robust 10.7 per cent in November. While domestic LPG recorded 12.4 per cent growth, non-domestic LPG consumption grew at 3 per cent this month. Naphtha continued to maintain its high-growth trajectory with the latest figures suggesting that it grew at 7.8 per cent in November. On a cumulative basis, growth in Naphtha consumption stands at 8.1 per cent. ATF consumption continues to surprise at 10.9 per cent growth in November even as the aviation industry continues to face turbulence as a result of the cancellation of flights by certain airline operators.

In conclusion, the consumption of petrol is expected to bounce back into the positive zone though it may remain pretty much muted for the remainder of the fiscal year owing to sluggishness in economic development activity. The December auto sales’ growth of 7.5 per cent may also provide for some further impetuous consumption of petrol and diesel in the short run.