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Petrol, LPG consumption up 10% in India; diesel, kerosene sees sluggishness

The pace of growth in petroleum consumption slowed this year, but private retailers are getting ready to open more and more outlets, Fitch Ratings said.

Consumption of petroleum products, such as diesel, petrol, LPG and kerosene, has been increasing at a rate of about 5% in India over the last three years, Fitch said.

However, this slowed to 2.6% in Apr-July period, compared to the same four months of 2016.

Ratings agencies like Fitch keep an eye out on corporate and economic trends that may affect the debt repayment ability of companies that are tracked by these agencies.

“We expect petroleum product consumption to increase by around 5% in the near to medium term due to continued growth in auto sales (led by passenger vehicles and two-wheelers) and strong GDP growth of around 7.4%-7.6% over the next two fiscal years,” the ratings agency said.

Part of the slowdown was because of a sharp fall in the consumption of kerosene, which is being substituted by LPG on a large scale.

Similarly, lower price arbitrage between petrol and diesel has led to the re-emergence of petrol cars at the cost of diesel cars.

Not surprisingly, the consumption of petrol and LPG increased by more than 10% in the same four months when compared to the year-ago period.

Despite the dip in overall growth, private petroleum players such as Reliance Industries, Shell and Essar continued to increase their share of the total number of fuel outlets.

The total number of fuel outlets in India rose to about 59,700 at the end of March from about 56,200 a year ago and about 53,300 in March 2015.

In the same period, the share of private players increased to about 8% from about 5% in March 2015.

“We expect the daily price revision to intensify retail competition. The three state-owned OMCs account for about 92% of retail outlets.

“The private players have so far been cautious about outlet growth, but we expect the private companies to increase investments in retail over the medium term,” it added.

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