Tuesday, July 3, 2012


Diesel demand boosted by controlled lower prices
Diesel consumption for April-May’12 jumped 14% over full year FY12 (up 8.5% YoY). We believe that controlled prices are fuelling the strong demand for diesel led by dieselisation of cars and substitution of FO by diesel due to the continued substantial price advantage. 15% YoY decline in April-May’12 FO demand substantiates our point.

Petrol demand impacted by high prices
April-May’12 petrol demand declined 1% YoY as higher petrol prices impacted driving demand. The growth level is expected to remain low as long as petrol price remains high with huge difference in HSD selling price, a derived benefit of de-control. Petrol demand growth peaked in FY10 at 14% and post decontrol in June 2010, demand growth has slowed down to 5.6% in FY12, lowest in six years.

Diesel price hike seems to be the only solution
With gap between diesel and petrol prices further widened post petrol price hikes in May'12, diesel usage is expected to be further boosted, leading to increased u/r for the sector. We have built a diesel demand growth of 5% in FY13e, for estimating u/r at INR1,376bn, which may be increased by INR30bn if diesel demand growth remains ~10%.

SKO demand falling due to rationalisation of allocation
SKO demand fell 17% YoY in April-May’12 due to rationalisation of PDS Kerosene allocation to states, considering expansion of domestic LPG through release of new connections. LPG growth was moderate at 7.2% in April-May’12 due to availability constraint in the product adversely affecting consumption.

To read report in detail: INDIAN DIESEL CONSUMPTION