Why India’s Diesel Demand Is Contracting, And What It Means

Why India's Diesel Demand Is Contracting, And What It Means

Slowing factory output also stymied diesel demand.

Mumbai: 

India’s demand for diesel is slowing as the country’s car fleet shifts predominantly to gasoline, trucks get more efficient and solar pumps displace diesel-fed units across the countryside. (Also read: Diesel Demand To Remain Subdued Till 2020 Second Half: Analysts)

The combination of these changes has led analysts, academics and company officials to speculate that diesel demand growth in the world’s third-largest crude oil consumer may have peaked, with significant repercussions for the firms that produce and sell the fuel.

Why Has Diesel Demand Fallen?

In addition to the longer term trends mentioned above, 2019 diesel demand was also curtailed by a prolonged monsoon which brought rural demand to a near standstill this autumn.

Widespread flooding hampered mining, construction and freight movement across parts of the country.

Slowing factory output also stymied diesel demand.

India’s industrial output fell at the fastest pace in more than six years in September, while power demand in October posted its steepest decline in over 12 years.

New legislation that has allowed truckers to carry 10-15 per cent higher loads has also reduced the number of trips they need to make.

Who Are The Major Diesel Consumers?

India consumed 83.5 million tonnes of diesel in the 2018/19 fiscal year, according to Ministry of Petroleum and Natural Gas data.

Most of it was produced and sold by state refiners – Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd and Mangalore Refinery and Petrochemicals Ltd