India fails to institute subsidy cuts to lower fuel demand

Failing to introduce a comprehensive energy subsidy cut program, India’s oil minister instead called on his countrymen to embrace carpooling, public transport and cycling as well as staggered working hours in a bid to curb fuel consumption in the country.
The struggling Asian economy — the world’s fourth-largest user of energy — is battling against a weak rupee that has increased the price of oil products while economic growth has halved to 4.4%, down from the 8-9% during the boom years.
Delhi is also seeking to rein in a record current account deficit that is in part fueled by energy imports.
Minister of Petroleum and Gas M. Veerappa Moily said he hoped to save USD5 billion from fuel conservation measures while he failed to entertain notions such as raising diesel and other fuel prices before the election slated for May 2014.
“As of now there is no proposal to raise prices,” Moily said, referring to diesel subsidy changes.
India, where energy consumption per person is among the lowest in the world, has little room to cut fuel use as it tries to power exports and agriculture.
Diesel accounts for more than 40% of fuel demand, or around 1.4 million barrels per day, the bulk of which is used by trucks, farmers and industry.
The USD5 billion savings is part of a campaign outlined earlier in September to save up to USD25 billion in 2013, although the weak Indian currency and rising global oil prices already mean that rupee price hikes for diesel have failed to match the dollar price gains for oil.
The government realistically aims to save about USD12-15 billion, a source familiar with the plans said, after Moily’s press conference.
“The biggest concern right now is inflation. Any kind of fuel hike will trigger an upside on inflation, so what they are trying to do is appealing to the people to sort of cut down on consumption,” said Praveen Kumar, who leads the South Asia oil and gas research team at FGE in Singapore.
Moily was widely ridiculed for earlier plans to close petrol stations at night in a bid to curb demand, a plan that has since been dropped.
Instead Moily said he had requested, “[S]taggered office timings for government offices, which will help in decongesting road traffic” and issued a plea for Indians to drive safely, share cars, and use public transport at least one day a week. He also proposed a free cycle plan to get more people to use bicycles.
A plea for safer, more fuel conscious driving in a country whose choked city roads and highways saw 138,258 people die in vehicle accidents in 2012, according to government data, looked set to fall on deaf ears.
A television campaign featuring star batsman Virat Kohli will seek to educate India’s drivers to “avoid frequent application” of brakes and “avoid riding the clutch.”
Despite the energy conservation measures, Kumar said he expected Indian diesel consumption growth for the 2013/14 fiscal year to be “somewhere between 3.5 and 4%” from a year earlier.
(September 24, 2013)