Diesel deregulation will favour petrol: car makers | business | Hindustan Times
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Diesel deregulation will favour petrol: car makers

business Updated: Jun 28, 2010 22:19 IST
Sumant Banerji
Sumant Banerji
Hindustan Times
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The government’s decision last week to partially deregulate the price of diesel is likely to fuel demand for petrol cars, as the difference between the prices of the two fuels is likely to come down further.

The introduction of new-age diesel technology and the lower cost of running passenger cars, especially smaller cars such as the Tata Indica and Maruti Suzuki Swift, has seen demand for diesel cars go up significantly. Almost all the cars that have diesel and petrol variants sell more diesel units.

“The pricing of diesel always gave it an advantage over petrol but now the difference is narrowing,” said GK Acharya, deputy general manager, Indian Oil Limited. “Earlier diesel consumption was five times that of petrol, but now it is down to four. In Europe, it is 2-2.5 times that of gasoline.”

In 2002, the price of petrol was around Rs 29 per litre while diesel cost Rs 18, a difference of 38 per cent. Today, petrol costs Rs 51.4 per litre while diesel is at Rs 40.1, a difference of 22 per cent. Deregulation of diesel will increase its price to around Rs 45 per litre, cutting the price difference to just 12.5 per cent.

Car manufacturers said the attractiveness of diesel is getting eroded, “There is no clear winner between the two fuels, but it does appear that petrol has a slight edge now,” said Shashank Srivastava, chief general manager (marketing), Maruti Suzuki India Ltd.