May 25: The Society of Indian Automobile Manufactures (SIAM) has expressed deep concern about the impact of the steep increase in petrol prices. It says the Rs 7.50 per litre hike will not only hurt the bulk of petrol-buying consumers like two-wheeler and small car owners, but will bring back the negative sentiment in the market.
The industry body has pointed out that sales of petrol-engined cars, which are essentially in the lower end of the market, are already down due to the high price distortion between petrol and diesel; now with this record price hike, the situation will go worsen. Demand for diesel cars, which has grown substantially in the past year, will only increase.
SIAM says there is a need to look at the petroleum product pricing policy in a comprehensive manner and remove the distortions. The need of the hour is to reduce the price hike on petrol and revise the price of diesel moderately which will bring in more revenue to government as well as some level of
parity between the two competing fuels for the automotive industry.
Meanwhile, ratings agency CRISIL has said that the higher-than-expected price hike of Rs 7.50 per litre on petrol will negatively impact consumer sentiments, leading to deferment of purchases especially in the small car segment. Consequently, CRISIL Research expects passenger car demand to grow at 10 percent in 2012-13. With a further widening in the prices of petrol and diesel, it expects passenger car demand to drift further in favour of diesel vehicles. Based on its estimates of current diesel engine capacities, the proportion of diesel cars sold is expected to increase to 42-43 percent in 2012-13 from around 39-40 percent in 2011-12.
According to CRISIL, the petrol price hike is expected to benefit the OMCs, who will not incur losses on the sale of petrol. However, CRISIL Research believes that to limit the government subsidies, a 10-15 percent increase in the prices of regulated fuels (diesel, LPG and kerosene) is more critical.