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Govt to study use of diesel by SUVs

Rising number of vehicles using diesel are eroding profits of oil companies. The firms are currently losing Rs 18 per litre on diesel sales, which is cheaper than petrol by about Rs 25 a litre.

S.P.S Pannu | May 30, 2011 | Updated 12:00 IST

The petroleum ministry is worried over the increasing "dieselisation" of the auto sector as rising sales of sports utility vehicles (SUVs) and diesel-run cars are eroding the profits of the oil companies.

This is seen as a bit of a paradox as the price of diesel has been kept deliberately low since it is meant for use in the farm sector and for fuelling public transport.

The oil firms are currently losing around Rs 18 per litre on diesel sales, which is cheaper than petrol by more than Rs 25 a litre.

According to sources, the petroleum ministry and the public sector oil companies have initiated steps to carry out an all-India study of the segment-wise sales of diesel at filling stations. The sample-based study will extend to all the states of the country.

The study is expected to estimate the percentage sale of diesel to each category of vehicle, such as SUVs and cars, the farm sector which includes tractors and water pumping sets and commercial vehicles covering buses as well as different categories of big and small trucks.

Captive power generation is another category that has been included in the study.

SUVs SAILING ON 'FARM FUEL'

With petrol prices on the move, sales of SUVs & diesel-run cars have shot up, leading to erosion in profits of oil companies

Diesel prices had been kept low since it is meant for use in the farm sector and for use in public transport

STUDYING DISPARITY

Petromin & the public sector oil cos have initiated steps to carry out an all-India study of the segment-wise sales of diesel

The study is expected to estimate percentage sale of diesel to each category of vehicles, such as SUVs & others including tractors and trucks

The study will include petrol sales to SUVs and cars too, so that a comparison can be made

Since no figures are currently available on segment-wise sales, it is difficult for the Centre to formulate a policy that may help to check the losses to the oil companies on diesel sales
The study will include petrol sales as well to SUVs and cars so that a comparison can be made between the two fuels.

A senior official said the study will be carried out over a year with separate figures for each quarter so that the seasonal impact gets reflected in the figures.

For instance, diesel sales shoot up to the farm sector during the sowing season of each crop and fall in the intervening months.

Since no figures are currently available on segment-wise sales, it is difficult for the government to formulate a policy that may help to check the losses to the oil companies on diesel sales to the non-priority sectors.

A senior Indian Oil Corporation (IOC) official said, "For instance, if the study throws up that most of the retail filling stations in South Delhi sell diesel mainly to cars and SUVs and for power generating sets, as there are no farms in the area, then the fuel could be priced higher at such pumps.'' However, introducing such a policy may not be an easy task as such dual pricing could trigger a thriving blackmarket in diesel with the fuel being diverted from cheaper filling stations.

The oil companies had in the past tried to sell only the more expensive branded diesel at filling stations in posh localities in Delhi but were forced to retract amid strong protests.

Some officials are of the view that with farmers getting identity cards under the new scheme being worked out by the Nandan Nilekani-headed Unique Identification Authority (UID) the country could eventually move to a system where farmers get the subsidy on diesel directly in cash.

The study is expected to eventually help the government assess the exact outgo to each segment with a view to formulating some policy to check losses.

The expression of interest for carrying out the survey has already been invited. Apart from private companies with experience for carrying out such studies, IITs, IIMs and government research institutes, such as the National Council for Applied Economic Research (NCAER), are eligible to apply.

Courtesy: Mail Today

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