While petrol engines have seen a cost increase of ₹20,000-25,000 due to transitioning to BS IV to BS VI emission norms, diesel engines have seen costs rise upwards of ₹75,000
MUMBAI: The preference for personal mobility over private transport in view of the surge in covid-19 cases has resulted in higher petrol sales, forcing oil marketing companies (OMCs) to import the fuel for the first time in a year.
State-run Indian Oil Corp. Ltd (IOCL) and Bharat Petroleum Corp. Ltd (BPCL) are buying petrol from the spot market to meet the increasing demand, officials said. “We are buying petrol now as demand for ti has outpaced that of diesel. Due to mismatch between the demand of diesel and petrol, our crude throughput has been impacted. So, we have had to buy it from the spot market," said a senior OMC official requesting anonymity.
BPCL has bought 20,000 tonnes of petrol, IOCL bought 30,000 tonnes.
Refineries reduced crude throughput, or the capacity of refining crude oil, after India imposed one of the world’s strictest nationwide lockdowns on 25 March, which impacted demand and brought the economy to a near standstill.
As throughput is low, the production of diesel and petrol is also low. The country began unlocking in phases from 8 June, but fuel demand is not back to the pre-covid levels and this has prompted refineries not to increase crude throughput.
Indian refiners operated at 76.1% of their overall capacity in August compared with 83.3% in July, according to data from the petroleum planning and analysis cell.
IOCL, India’s largest fuel retailer, on 21 September said petrol sales were up by 1% in September compared to the year ago, on account of the increasing preference for personal mobility, as lockdown restrictions were eased.
Consumption also rose following the sale of more petrol cars. India sold 98% petrol cars against 2% diesel cars in July and August, compared with 84% petrol cars and 16% diesel cars last August, and 86% petrol and 14% diesel cars in July 2019, according to data from the Society of Indian Automobile Manufacturers.
“Diesel consumption in cars saw sharp reduction because Maruti Suzuki India Ltd exited the diesel segment completely under the BS-VI regime. Similarly, leading carmakers, such as Volkswagen Group and Renault, too, moved away from diesel in the small car category," said Gaurav Vangaal, associate director, light vehicle production forecasting, IHS Markit, referring to the higher prices following the transition to BS-VI norms.
Petrol engines cost Rs20,000-25,000 more under the new emission standards, diesel engines witnessed a cost increase of Rs75,000 or more. This made small diesel cars too expensive for most customers. Besides, environmental factors, such as the ban on diesel cars older than 10 years in Delhi-NCR, also forced car buyers to prefer petrol variants.
“You have seen the market move away from diesel and towards petrol in India year-on-year. I think the challenge to make diesel engines meet BS-VI emission standards made that move towards petrol stronger in small cars," said Zac Hollis, director, sales, service and marketing, Skoda Auto India Pvt Ltd.
“If you look at the business case of diesel and petrol cars, the case of the former is much weaker now. One has to do, I think, more than 20,000 km a year to make the diesel car worthwhile as a business case," Hollis said. Diesels were preferred because of their torque and other performance parameters but new petrol engines are also offering good torque and power along with fuel efficiency, he said.
Meanwhile, the two-wheeler segment, which completely runs on petrol, has seen a sharp recovery with commuters moving away public transport. In August, more than 1.5 million two-wheelers were sold, a 3% growth year-on-year. September-November are expected to be good months on the back of festive demand.
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