India's diesel demand could soon outstrip supply

Diesel fuel production in India will not be able to keep pace with rapid growing demand as the government’s pricing policy makes it cheaper than petrol and even industrial fuels which has resulted in the domestic automobile market to shift to diesel cars. Essar Oil, the second largest private refiner in the country, said they forecast that India will become a diesel deficit nation by 2016, as demand will far outstrip supply. “Diesel demand in the country is growing at an annual rate of 8%. At this rate India will need a brand new 9 million ton refinery every year, so in case demand continues to grow this rapidly, India will become diesel deficit by 2016,” said Naresh Nayyar, CEO of Essar Energy. “This will create a big opportunity for private refiners and we at Essar plan to utilise the opportunity by supplying diesel to oil PSUs,” he added. Currently, Essar sells around 50-60% of its total output of 14 million ton per annum (mtpa) to oil PSUs. “Diesel forms a bulk of our sales to PSUs,” added Nayyar. Diesel would be in deficit despite the construction of new refineries such as Bharat Petroleum’s 6 mtpa Bina refinery and Hindustan Petroleum’s 9 mtpa Bhatinda refinery, Nayyar said.”In the near-term these new refineries could lead to a surplus in diesel production but in case the demand continues to surge then going ahead all the incremental production added by these new refineries could be absorbed and the nation could become diesel deficit by 2016.” The automobile industry has estimated that the share of diesel in overall passenger vehicle sales crossed the 50% mark for the first time last December. (April 5, 2012)