Sharp fall in diesel demand, consumption down 3.3% in September
Diesel consumption grew barely 1.1% in the six months to September when it contracted 3.3%. Diesel makes up 40% of India’s total oil demand, which grew just 1.4% in the first half of 2019-20. In FY19, the demand was up 3% for diesel, and 2.7% for ...
Diesel consumption grew barely 1.1% in the six months to September when it contracted 3.3%. Diesel makes up 40% of India’s total oil demand, which grew just 1.4% in the first half of 2019-20. In FY19, the demand was up 3% for diesel, and 2.7% for total oil.
The fall in demand has prompted Bharat Petroleum Corp to weigh exporting 200,000 tonnes of diesel a month until March – a rare step for state-run refiners as they often need to buy the fuel from private peers to serve the local market. BPCL executives do not expect diesel demand to pick up anytime soon. Indian Oil and MRPL, two other state-run refiners, have also recently increased diesel exports.
India’s economic growth slumped to a six-year low of 5% in the June-quarter, and not many economists expect it to perk up quickly. The slowdown in consumption has weighed on diesel as well. Some structural changes in the economy are also responsible for a slide in diesel consumption, according to Hindustan Petroleum chairman MK Surana.
“Better availability of power is reducing demand from diesel generators. Second, the increase in the load of vehicles is making the same vehicle carry more load. And because of GST, time at toll booths has reduced for vehicles,” he said. Last year, the government allowed new trucks to carry about 20-25% more load than earlier, which means fewer trucks are needed on road to carry the same set of goods, cutting down on the need for the fuel.
GST has eliminated idling of trucks and unnecessary burning of oil at multiple checkpoints, sharply reducing the time taken to complete a trip, said Rakesh Misri, HPCL’s marketing chief.
Since diesel began selling at market rates in 2014, the price gap with petrol has narrowed, prompting buyers to opt for petrol vehicles, according to the oil ministry report. This has pushed petrol sales up 9.1% between April and September, despite an overall slump in vehicle sales.
Yet another structural shift building up to hurt diesel demand is the growing thrust on electrification and renewables. The railways’ plan to electrify all its tracks by March 2022 would cut diesel demand by 2.83 billion litres per annum, worth around Rs 13,500 crore. Electric cars haven’t quite taken off in India yet, but a boost can dent diesel’s prospect as solar-powered farm pumps are already doing.
An extended monsoon too hampered transportation and industrial activity this year, affecting demand for diesel. A shorter window between the end of rains and the beginning of festive season meant lesser transport opportunity and lower diesel demand, said HPCL’s Surana.