New Delhi: Indian diesel demand is surging ahead at its fastest rate in a decade this year with little sign of abating soon as more companies and homeowners use it to generate emergency power supplies.
While India's endemic power shortages have been a fact of life for decades, only recently has the prospering middle class been able to afford diesel generators in order to keep their homes air-conditioned, or have domestic firms been profitable enough to buy units for fall-back electricity supplies.
And India's policy of subsidising diesel and petrol prices to control inflation - helping keep it cheaper than other types of power fuel, such as fuel oil - has helped maintain the momentum in diesel consumption, which may grow by 15 per cent this year.
As a result, state oil firms are racing to boost diesel imports, joining peers from Chile to China forced to make up for a lack of power plant capacity or to substitute for a shortage of coal or natural gas, both hard to secure at short notice.
"There is a 23-24 per cent unforeseen increase in demand because it is being used in power generation," Indian Oil Minister Murli Deora told reporters on Wednesday.
"We have called a meeting of [state] oil companies to discuss shortages in some parts like Maharashtra," he added.
Domestic diesel sales in the April-June quarter of this year, not a heavy diesel-buying season in India, rose by more than 11 per cent to around 1.1 million barrels per day (bpd), nearly a third of total oil demand in Asia's No 3 consumer.
Global boom
The global boom in demand for diesel fuel - either for transport in an increasingly diesel-driven European car market or for industrial use - is one of the last bastions of support for the world oil market, with demand for everything from gasoline to jet fuel to fuel oil deteriorating, driving prices lower.
US crude oil has slumped 22 per cent from a record high above $145 a barrel on July 11.
The premium for Singapore diesel fuel over crude stands at about $22 a barrel while the gasoline crack spread is at a discount of over $1 a barrel, despite summer being the normal peak for gasoline use and a weak period for diesel.
For a growing number of Indians who live in new housing complexes and shop in glitzy, power-guzzling malls, uninterrupted power supply is no longer considered a luxury but a necessity.
Portable diesel-power generators are the easiest and quickest way to keep the lights on even when big utilities black out vast areas for hours because of shortages.
Data on diesel usage for power generation is not available, but demand is rocketing in buzzing cities like Bangalore, which has over 1,500 outsourcing firms, most of them working round the clock, and in Mumbai, the country's financial hub, officials say.
Diesel sales in Bangalore rose 30 per cent in June, an official with HPCL said.
