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India’s rising obsession with diesel worries govt

business Updated: Apr 17, 2012 10:56 IST
Anupama Airy
Anupama Airy
Hindustan Times
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The growing preference for diesel by car buyers and industrial users over petrol and furnace oil has the government worried.

The reason: the yawning gap between the prices of diesel and petrol has prompted a clear shift towards the former.

A senior official in the Prime Minister’s Office told Hindustan Times: "High consumption of diesel is posing a serious threat to the environment and is encouraging a shift from costlier fuels to diesel."

The growing “dieselisation” is also bloating government’s subsidy bill. For every litre of diesel sold at Rs 40.91 a litre (in Delhi), the government and oil companies foot Rs 14.

Rising diesel consumption, which now stands at 175 million litres a day, translates into a daily subsidy of Rs 245-crore to keep retail prices at current levels.

The Reserve Bank of India has also advocated deregulation of diesel prices to reduce the stress on the fiscal system.

This year, diesel consumption is set to grow by over 7% compared to a 4% growth in petrol. Petrol, whose daily consumption stands at about 57 million litres a day in India, is sold at R65.64 a litre, implying it is 60% cheaper to tank up a diesel car. This is highlighted by sales figures.

Diesel car sales in India grew by over 25% in 2011-12 at the cost of their petrol counterparts — which fell by 11% during the same period.

This has fuelled a diesel bias among carmakers as well. The country’s largest carmaker, Maruti Suzuki, for instance, is expanding its diesel engine capacity by 65% this year from 2.4 lakh units to 4 lakh units.

“Last year the demand for diesel cars skewed the overall growth of the industry and posed a lot of challenges for us,” said Mayank Pareekh, managing executive officer, Maruti Suzuki India. “This year we are expanding our capacity substantially as we believe diesel cars will continue to do well.”

Likewise, Hyundai is also planning to set up a diesel engine plant this year.