‘Petrol, diesel consumption to grow by 14% and 10% in FY22’
NEW DELHI: In an indication of Indian economy’s revival, the country’s petrol and diesel consumption is expected to grow by 14% and 10% respectively in FY22, according to rating agency Icra.
This assumes importance given that energy consumption, especially electricity and refinery products, usually linked to overall demand in the economy.
“Benefitting from the anticipated rise in mobility and economic recovery aided by an acceleration of the coverage of Covid-19 vaccines, Icra has forecast the year-on-year (y-o-y) growth in the consumption of MS and HSD in FY22 at ~14% and ~10%, respectively, on the low base of FY21. Our forecasts suggest that consumption in FY22, relative to the pre-Covid level of FY20, will be 6.7% higher for MS, and 3.3% lower for HSD,” Aditi Nayar, chief economist, ICRA Ltd said.
This comes in the backdrop of India, the world’s third-largest oil importer witnessing an upward trajectory of transportation fuel prices. Diesel and petrol prices have already breached the ₹100-mark in several parts of India.
“Benefitting from the revival in consumption of fuels, the aggregate revenue generated from the cesses imposed by the Government of India (GoI) on MS and HSD is estimated by ICRA to expand by 13% to ₹3.6 lakh crore in FY22. If this additional revenue is foregone, it can support a reduction in cesses by ₹4.5/litre each on MS and HSD, the rating agency opined,” the statement said.
Any increase in global prices can affect its import bill, stoke inflation and widen trade deficit. Following the Covid outbreak, crude prices for Indian basket of crude had plunged to $19.90 in April last year during the first wave before recovering to $66.95 a barrel in May, data from the Petroleum Planning and Analysis
Cell showed.
“Such a revenue neutral cut in cesses on fuels would shave off a modest 10 bps from ICRA’s forecast of 5.25% for the CPI inflation for July 2021, in terms of the first-round impact, with a similar second round impact likely with a moderate lag,” the statement added.
Global crude oil prices are expected to be in the $75-80 per barrel range till September, Care Ratings said.
“The favourable prospects of a global rebound brought on by the vaccine rollout optimism, have resulted in a nearly uninterrupted increase in the international crude oil prices since January 2021. Reflecting this, a weaker INR, higher cesses imposed by the GoI and the increase in value added tax rates by more than three-fourths of the state governments in 2020, have seen the average retail selling prices (RSP) of MS and HSD in the four metro cities increase to ₹99.54/litre and ₹92.03/litre,” the Icra statement added.