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Energy: Better times expected?

Jan 17, 2001

The petroleum sector is not expected to register significant gains this fiscal. The fuel price administrator, Oil Co-ordination Committee (OCC), has scaled down its yearly demand projections to 99.4 MMT from 104.9 MMT.The slower growth in demand could be due to the spiraling energy prices and a slow down in industrial growth. The OCC now expects the consumption to remain stagnant at the previous year's level. However, other estimates put consumption of petroleum products at 102 MMT for this fiscal.

Currently, the country's refining capacity stands at 114 MMT with a crude throughput of 120 MMT. This will result in an excess of petroleum products to the tune 10 - 15 MMT. Consequently, domestic refiners will have to look at exporting the surplus.

India, which till now was one of the largest buyers of diesel, will export the fuel over FY01 and FY02. Exports of diesel and petrol are estimated to be 2.3 MMT and 1.8 MMT this fiscal. The turn in fortunes is largely due to the commissioning of the Jamnagar refinery by Reliance Petroleum (RPL). The company it is believed is planning to augment capacity from the current 27 MMTPA to 33 MMTPA.

With the Indian economy expected to register tiger growth rates the energy sector will stand to benefit significantly. Further, the sector seems to be gathering momentum with the Government serious on disinvesting from oil public sector units (PSUs). In fact the Government has called for submission of expression of interest (EoI) from concerned parties for the sale of Indo Burmah Petroleum (IBP). Also doing the rounds is the talk of bringing forward the scheduled deregulation date from March 2002. All these factors could positively affect the industry and the markets as a whole.

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