Indian diesel price hike - does it change anything?

Published at 23:00 13 Sep 2012 by . Last edited 11:17 22 Aug 2019.

The Indian government raised the price of diesel by Rs 5.6 (14%) to around Rs 47 (89 US cents) per litre on 13 September 2012, although it left the price of gasoline unchanged. In our view, despite the recent change, the price disparity between diesel and gasoline still remains considerable, and hence we expect to see continued growth of diesel vehicle numbers in the automobile sector. However, the diesel price hike, together with the fall in fuel oil prices over the past few months, swings the differential substantially in favour of fuel oil, and is thus likely to reduce diesel's substitution with fuel oil in the industrial sector. Moreover, temporary supportive factors like the black out and limited monsoon rainfall have also started to fade. Overall, we expect Indian diesel demand to continue growing strongly, supported by continuing industrialisation and rising usage of diesel cars, but for the pace of growth to slow from the recent average of 13% to a more tractable, but still solid 7-8%.

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