The Palio just can't match the fuel efficiency of its lighter and smaller competitors and this one area where it gets left behind. The 1.2 is naturally more fuel efficient and gives 9.9kpl in the city to the 1.6's 9.5kpl. On the highway, the gap is wider with the 1.2 giving 15.1kpl to the 1.6's 14.1kpl.
  
The difference between the two Palios is much less than what we expected given the substantial difference in engine size.