India’s diesel consumption, the mainstay of the country’s transport sector, fell 3 per cent m-o-m to 6.7 million tonnes (mt) in August 2023 as rains, particularly in eastern India, impacted mobility. Lower demand from the farm sector to some extent also led to the decline.

However, high-speed diesel (HSD) usage in the country was higher by 6 per cent y-o-y from 6.3 mt in August last year, data from the Petroleum Planning and Analysis Cell (PPAC) showed.

On the other hand, petrol, or motor spirit (MS) consumption rose by 4 per cent m-o-m to 3.1 mt last month, while on an annual basis, the usage was almost flat at 3 mt.

The higher consumption was majorly from the personal mobility segment as weekend personal travel and tourism witnessed a slight uptick and higher demand for cooling due to heat and humidity also contributed, albeit marginally, to the increase in usage.

Interestingly, diesel consumption declined for the fourth consecutive month in a row in August, on the other hand, petrol consumption after hitting south for three consecutive months since May 2023, rose last month.

POL usage up

Overall, consumption of petroleum products (POL) rose by 2.5 per cent to 18.57 mt during August 2023. On an annual basis, the consumption rose by 6.5 per cent from 17.44 mt in August 2022. Following a usage trajectory similar to petrol, POL consumption also rose last month after declining consecutively every month since May 2023.

POL consumption last month rose on the back of higher factory activity. The seasonally-adjusted S&P Global PMI showed a robust improvement in manufacturing sector conditions across India, as new orders and output increased at the quickest rates in nearly three years during August.

Firms scale up

Firms geared up to handle rising demand by scaling up buying levels and rebuilding their input stocks at the second-strongest pace in 18-and-a-half years of data collection. Demand strength was pivotal to August’s robust performance, spurring the fastest upturn in new orders since January 2021, it added.

Despite rains, the consumption of Aviation Turbine Fuel (ATF) managed to grow by 2 per cent m-o-m and 14 per cent y-o-y to 6,76,000 tonnes, largely aided by international travel during the month. Monsoons are a lean period for the airlines.

Analysts expect India’s petroleum products demand to rise during the October-December quarter aided by rising industrial activity and preparations for the festival season.

ICICI Securities in a June 2023 report said that after the last three years (FY21, FY22 and FY23) of relative weakness, it expects Indian fuel consumption to steadily grow over the next 2 years.

This is helped by softer product prices and prices of petrol and diesel being held at the same level in the last 13-14 months. Besides, stronger economic growth predicted for the Indian economy in the next 2-3 years and the potential pass through of the supernormal marketing margins being earned on retail fuels, can spur better pricing power for petrol and diesel.

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