NEW DELHI: While higher crude prices and consequent inventory losses weighed heavily on India’s three state-run oil marketers in the second quarter, the ongoing economic slowdown has made matters worse.
According to data released by Indian Oil (IOCL), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL), diesel consumption during the period has taken a beating with demand for the primary freight transportation fuel contracting during August and September.
Data from the petroleum ministry’s Petroleum Planning and Analysis Cell (PPAC) shows that diesel demand grew just 0.1 per cent during the quarter, with August and September seeing volumes contracting by 1.1 per cent and 3.3 per cent respectively.
The fall in diesel consumption is a problem for India’s OMCs since the fuel accounts for nearly 40 per cent of India’s petroleum product consumption.
“With freight transportation making up a large portion of that demand, any slowdown in economic activity has a cascading impact on diesel consumption since freight movement slows down proportionally,” noted a senior OMC executive.
Heavy monsoons in many parts of India also affected freight movement and diesel consumption during the period, added Indian Oil chairman Sanjiv Singh.
HPCL has said the contraction in demand has forced it to export a portion of its diesel to maintain sales and production.
The OMC saw diesel demand falling by 2.4 per cent during the quarter. “Diesel demand not growing is a matter of concern for us as almost 50 per cent of our production and our market is diesel. If this fuel doesn’t move domestically, we will have to export,” said its director of finance N Vijayagopal.
The company has exported 2 lakh tonnes of diesel in September alone, with more exports planned in the future since it doesn’t “anticipate growth to pick up immediately”.
According to the Indian Foundation of Transport Research and Training, truck rentals have fallen again post the festive season spike, with S P Singh, senior fellow at the foundation pointing out that the increase in rentals over the past two months was only driven by harvests, festivals and a shortage of drivers.
Diesel demand grew just 0.1%
Data from the petroleum ministry’s Petroleum Planning and Analysis Cell shows diesel demand grew just 0.1 per cent during the quarter, with August and September seeing volumes contracting by 1.1 per cent and 3.3 per cent respectively.