India’s Fuel Consumption In FY21 Falls For First Time In Over 20 Years
A clean-up crew member scrapes oil soaked soil from a pool of crude oil. (Photographer: Ariel Jerozolimski/Bloomberg)

India’s Fuel Consumption In FY21 Falls For First Time In Over 20 Years

Energy demand in the world’s third-biggest oil importer dropped for the first time in more than two decades in the just-concluded fiscal amid the economic turmoil caused by the coronavirus pandemic.

The aggregate consumption for petroleum and related products, including auto and industrial fuels, fell 9.1% over the previous fiscal to 194.63 million metric tonnes in the year through March 2021, according to provisional data released by Petroleum Planning and Analysis Cell. That’s the first such decline since 1998-99 — the most historical data available on PPAC website.

“Overall fuel consumption has fallen in FY21 due to a drop in economic activities because of the coronavirus-induced lockdown that led to a decline in business undertakings and reduced air and road mobility,” Urvisha Jagasheth, research analyst at CARE Ratings, said in an emailed response to BloombergQuint.

The overall fall in demand comes despite a surge in March. Consumption in the reported month jumped 17.9% year-on-year and 8.7% over February at 18.77 MMT — the highest since December 2019.

“A high year-on-year growth in March 2021 is due to the base effect. The lockdown had started in the last week of March 2020 and as a result, the base numbers were unusually low due to the sudden shock to the system,” Probal Sen, oil and gas analyst at Centrum Broking, told BloombergQuint over the phone. Also, the lower number of days in February has an impact on the month-on-month growth figures, he said.

PPAC, however, expects India’s fuel demand to recover past pre-pandemic levels in the ongoing fiscal. Overall consumption of petroleum products is expected to rise 9.8% year-on-year to 215.24 million metric tonnes in 2021-22, it had said in March.

Petrol & Diesel Consumption

While consumption of retail fuels fell for the entire financial year, a low base aided demand in March.

  • Demand for petrol and diesel jumped about 27% each over the year earlier to 2.74 MMT and 7.22 MMT, respectively, in March.
  • For 2020-21, petrol and diesel consumption was at 27.95 MMT and 72.72 MMT, a drop of 6.8% and 12% over the previous fiscal.

“Petrol consumption has fallen in FY21 due to restricted movement of passengers at least till the first half of the year. But after easing of lockdown restrictions there has been a recovery in the overall fuel consumption,” Jagasheth said.

Consumption of diesel — the fuel that keeps India’s trucks, farms and factories running and accounts for almost 40% of oil-product sales—dropped during the fiscal on account of weak economic activity, and as schools and educational institutions remained closed, restricting the movement of buses and other transportation vehicles.

“Around 20% of the diesel is used for non-transportation like agriculture, captive generation that is more reflective of the economic activities. Also, transportation usage of diesel was impacted by the movement of railways and freights. Most of these factors have witnessed a slowdown down in the last year,” Sen said.

Other fuels

  • Kerosene consumption in 2020-21 declined as all union territories, barring Jammu & Kashmir and Ladakh, and states of Andhra Pradesh, Delhi, Haryana, and Punjab, have been declared kerosene free. Also, Gujarat, Bihar, and Maharashtra, Jagasheth said, have voluntarily surrendered a certain quantity of PDS allocation.
  • Demand for jet fuel plunged the most among other segments on account of restricted air travel. Covid-19, Jagasheth said, has also reduced the average passenger trip length.
  • LPG consumption rose in FY21 on increased domestic cooking and refills under the Pradhan Mantri Ujjwala Yojana. LPG coverage in India, according to PPAC, increased from 97.5% in 2020 to 99.7% as on March 1, 2021.
  • Demand for bitumen increased because of a pickup in road construction amid the government’s infrastructure push.
  • A recovery in the petrochemicals industry and usage as a feedstock in the production of urea cushioned Naptha consumption in FY21, CARE Ratings said.
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