Diesel Pricing Decontrol - Will Diesel Car Demand Decrease?

June 30, 2010

The Indian Government went in for a partial decontrol of the prices of fuels, with giving a full decontrol of the price of petrol (and promising that future prices will be linked to international prices of crude); the prices for diesel have not been fully decontrolled, and the prices for cooking gas and kerosene have been kept away from decontrol although the prices may have been increased. The Government has been able to do this since politically the opposition is not at a very high pitch with the BJP still in some amount of disarray and no other opposition of any note.

Now, the Government is making noises about moving away from price decontrol over diesel. This is something that is much more serious than the decontrol of petrol. Petrol is perceived as the fuel for individual vehicles (and thus increase in the budget for those who can afford private vehicles), while diesel is the fuel used for the transport sector, for trucks, smaller carrier vehicles, and even for a number of goods trains that are not hauled by electric engines. The normal impact of a hike in the price of diesel is an increase in the rate of inflation, which is why the Government seems to be speaking about price decontrol of diesel, in order to gauge whether it can ride out the impending political storm.

If the price of diesel is decontrolled and it is increased, then a potential impact is to the sales of cars with diesel engines. Over the past many years, the quality level of diesel engines has increased to the extent that they are being used in cars without much of an impact, with performance in areas such as pollution, vibration, cleanliness, etc, being comparable to that of diesel engines, and the fuel efficiency being higher. This is however balanced by the fact that diesel engine cars are priced higher than petrol engine cars, and it is only the lower price of diesel that is a huge factor in the increasing sales of diesel engine cars.

Now, when the price of diesel could potentially get closer to that of petrol, would people still be willing to give the premium that they currently give for diesel engines. I would think not, so if you are looking to buy a new car, consider that there is a high probability that the price of diesel will get much closer to that of petrol.

Ashish is a blogger who got bit by the blogging charm a few months back, and it has hit him good. He is able to express himself through his blogs. Currently working with a software manufacturing company in NCR, India. Did a BE and then an MBA and has been working for around 12 years now. Is pretty passionate about current affairs, but did not have a vehicle to express his opinions till now. I primarily blog at Indian Political Blog, also write about Delhi, Books and movies, and Photos 1 & 2
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Diesel Pricing Decontrol - Will Diesel Car Demand Decrease?


Author: Ashish


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