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Diesel Prices To Climb Post De-Control
Decontrolling diesel prices has been a long standing demand of oil companies who have been suffering losses due to the huge subsidies offered to the heavy fuel. We had earlier reported about the government plans to increase diesel prices by one rupee a month in the next 10 months.
The central government will have a say in how much diesel prices can be hikes but the power to decide any hike in diesel prices will now be with oil companies. The oil companies suffer losses close to Rs.10 per litre of diesel sold. Now with the available freedom to increase prices, it is highly unlikely that they will stick to the current price.
The government's decision will reduce the price gap between petrol and diesel cars. Car buyers are already showing more interest in petrol cars following reports about the possible hike in diesel prices. Car manufacturers had also welcomed the possible diesel price hike as it would provide a balance in the car market which in recent months has tilted heavily in favour of diesel cars.
However, we have to wait and watch how car makers will react to the revised diesel prices. Some carmakers will be happy as there was a sharp decline in their petrol car sales. There will be mixed feelings among carmaker who have both petrol and diesel cars. While Maruti Suzuki saw a marked decrease in sales of small cars that are powered only by petrol engines, it could compensate it by selling more numbers of diesel powered Swifts and Swift DZires.
Mahindra is yet another carmaker that is most likely to be affected by deregulated diesel prices. All its cars apart from the Verito are available with just diesel engines. Mahindra's sales has increased significantly in the past two years when buyers started buying its SUVs instead of similarly priced petrol powered sedans.
If we have to name one carmaker that will be really happy with the government's decision, then the name will be Honda. Honda's sales had declined considerably only after buyers started favouring diesel cars. Honda does not have a single diesel car in the Indian market.
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