Indians are considered to be people sensitive to pricing. Since consumers are price sensitive, usage usually drops when prices go up and vice versa. This seems to be true for oil products as well. As per Petroleum Planning and Analysis Cell (PPAC), consumption of price sensitive products has taken a hit this year. The growth in consumptions this year (January to October period) is actually much lower than what it was during the same period last year. In fact it is not just the consumption of the 'sensitive products' like diesel and LPG that has declined. Even the growth of all other oil products has been subdued this year. The price of diesel has been hiked by 50 paise since January this year. But even these small hikes have hurt the consumption of the fuel. The oil minister has recently stated that he plans to deregulate the prices of diesel completely within the next 6 months. If the trend till now is anything to go by, any further increase in diesel prices would most likely hurt its consumption in the short term at least. But the high point of this is that it would also help reduce the fiscal burden to a large extent. Oil subsidies on products like diesel and LPG have weighed down on the country's fiscal position. Therefore any taper off in consumption and/or prices would be a welcome relief.
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