Is Chennai fuel crunch harbinger of pan-India crisis?

By Meenakshi Mahadevan and Varun Kumar, CNBC-TV18

Even as Andhra hits upon a unique idea to battle rising crude prises, Chennai continues to struggle. The city grappled all week with a fuel supply crunch. The fuel crisis is Chennai is just the begining to a pan-India crisis.

Chennai bug

There are long queues outside most of Chennai's petrol pumps where supply is just 60% of the regular demand, leading to no-stock signs at a number of petrol pumps. Oil companies are also restricting supplies of non-premium fuels, since they fetch lower margins.

P Sankaran, Chennai Petrol Dealers Association, said, "The oil companies are the main cause for this created demand. They are not supplying us with the amount of fuel we ask for. If we ask for 12,000 kilolitres, we get only 4,000 kilolitres. There is no shortage of petrol. It is only because of the rationalising done the oil companies, that we are also forced to sell only a limited quantity to people."

But the reality goes beyond Chennai. Oil companies say it will be difficult to sustain supplies if demand continues to grow at the current levels.

SK Joshi, Director - Finance, BPCL said, "Initially, there was a very high growth beyond 20%. Managing that kind of growth will become difficult but 8-10% growth should not be a very difficult situation.

The sentiment is echoed by auto makers. Tata Motors Chairman Ratan Tata, in the company's annual report, said that if fuel demand grows at 20%, there will be a supply crunch and warned that it will hit car sales.