India witnessed the lowest demand for petroleum products in the month of September this year on the back of a drastic fall in consumption of petrol and diesel. The consumption levels for both petrol and diesel in September were at its lowest in the last two years, showed data released by Ministry of Petroleum and Natural Gas.
Consumption of petroleum products fell to 16.01 million metric tonnes in September, its lowest since July 2017. Petrol consumption saw its lowest decline in two years and fell 8 per cent from August to 2.3 million metric tonnes. The most commonly used fuel, diesel, also saw a drop in demand of 3.2 per cent year-on-year to 5.8 million metric tonnes. Other petroleum products that are consumed include naphtha, motor spirit, aviation turbine fuel, superior kerosene oil (SKO), light diesel oil (LDO), lubricants and greases, bitumen, petroleum coke, furnace oil and low sulphur heavy stock (LSHS) fuel.
The fall in consumption of petroleum products has also led to the decrease in crude oil imports by 15 per cent in September. Consumption of fuel is likely to remain low in the coming months as well.
Production of total petroleum products in the same month fell to 19.8 million metric tonnes, the lowest in two years. Production of petrol fell to 2.9 million metric tonnes, the lowest since April 2017 and a decline of 4 per cent from September 2018. Diesel production in September fell 14 per cent from August and witnessed a fall of 9 per cent from the same period of the previous year.
The fall in fuel production has come amid a fall in consumption.
Crude oil imports declined to 16.8 million metric tonnes in September from 19.8 million metric tonnes in August. Crude oil imports touched the lowest in two years too and saw a decline of 8 per cent. It dropped by 6.2 per cent in September and 1.3 per cent during the period from April to September 2019 over the same period of the previous year.
The decline in consumption comes amid one of the worst slowdown periods for the auto sector. In September, passenger car sales saw a decline of 33.4 per cent and two-wheelers saw a dip in sales by 22.09 per cent from the same period in the previous year. Commercial vehicles registered a decline of 22.95 per cent, while light commercial vehicle sales dropped by 14.69 per cent in April to September over the same period last year. Medium and heavy commercial vehicles declined by 35.79 per cent.
Another factor contributing to the drop in consumption is the reduction of prices of compressed natural gas (CNG). CNG prices reduced to Rs 38 per litre from Rs 51 per litre last year. Demand for CNG has also increased by 50 per cent in four years. As petrol and diesel prices increase, sales of CNG cars have also perked up. A cut in petrol and diesel prices is likely to boost consumption. It is estimated that CNG would make for 50 per cent of all vehicle sales by 2030.
Additionally, government subsidies on petroleum products have decreased over the years. It has reduced to Rs 26,700 crore from Rs 1.3 lakh crore in 2012.