India’s diesel consumption slipped to its lowest in the last two years during September 2024 due to subdued manufacturing activity and above-normal rains impacting mobility as well as lower requirement of mechanised irrigation.

Consumption of diesel, which accounts for over 40 per cent of the country’s refined production usage, declined by roughly 2 per cent both on a monthly and annual basis to 6.36 million tonne (mt) last month, data from the Petroleum Planning and Analysis Cell (PPAC) showed.

This is the lowest since September 2022 when consumption of the fuel stood at 6.25 mt. Diesel is the mainstay of transport and logistics sectors.

The decline in diesel consumption can be attributed to the monsoon season, which traditionally witnesses reduced mobility from June to September. Rains also have a bearing on industrial and mining activities, which subsequently impact the transport sector involved in ferrying minerals and goods.

Both August and September this year have witnessed a decline in manufacturing and industrial activity coupled with lower demand for diesel from the farm sector due to widespread rains, particularly in northwest and central India.

Subdued activity

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell from 57.5 in August to 56.5 in September 2024, the lowest in the last eight months.

September data revealed a mild setback in manufacturing growth across the country. For the third straight month, rates of expansion in factory production and sales receded, both of which were at their weakest since the turn of the year but above their respective long-run averages.

Pranjul Bhandari, Chief India Economist at HSBC, said: “Momentum in India’s manufacturing sector softened in September from the very strong growth in the summer months. Output and new orders grew at a slower pace, and the deceleration in export demand growth was especially evident as the new export orders PMI was the lowest since March 2023.”

According to the Indian Meteorological Department (IMD), rainfall over the country as a whole in September was 112 per cent of the Long Period Average (LPA). The rainfall during the second half of the season was also above normal at more than 106 per cent of LPA.

Most noticeable feature of rainfall distribution during September was the large excess rainfall over West Uttar Pradesh, West Madhya Pradesh, Gujarat and Telangana. Region-wise, Northwest India (129 per cent of LPA) and Central India (132 per cent of LPA) experienced excess rainfall.

Jet fuel usage grows

According to PPAC data, the consumption of aviation turbine fuel (ATF) appreciated. Jet fuel usage grew by almost 10 per cent y-o-y to 7,20,000 tonnes in September 2024. On a monthly basis, the consumption was higher, albeit marginally by 0.6 per cent.

The growth in consumption of jet fuel is led by a substantial uptick in domestic air travel as well as growth in international travellers.

However, the consumption of petrol, the main consuming fuel for personal vehicles, rose by almost 3 per cent y-o-y to 3.14 mt. However, it fell by 6 per cent on a monthly basis.

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