The demand for petrol powered cars has increased significantly over the last one year and the major factor is the closing gap between the price of diesel and petrol. A report from ET suggests that 58 per cent of all cars sold last years were petrol powered and that diesel powered cars saw a 14 per cent drop in total sales as compared to the previous car.
A major revelation in the report says that the new government, which took power yesterday, may clear a pending proposal to hike the price of diesel by Rs 3 to Rs 4 to align pump prices with market rates thereby deregulating it completely. Petrol prices were deregulated in 2010 and then in the January of last year the government after partial deregulation allowed oil companies to raise the price of diesel by 50 paise every month in a bid to close the gap between both fuels.
Statistics from the Petroleum Planning and Analysis Cell say that diesel consumption recorded a negative growth of -1.8 per cent and an overall decline of -1 per cent in the period 2013-2014. This fall in consumption has also resulted in the reduction of fuel subsidy significantly.
The closing gap in fuel prices means that our market is moving back towards petrol powered cars. We are a price sensitive market and if the gap between the two fuels is a very small amount then no consumer will want to shell out an extra lakh just to buy a car as well as bear all the extra running costs involved. Such a development also means that the current fuel prices will soon become a base, below which the rates will not drop.
