India's fuel demand continues to fall in August as monsoon sets in

Diesel demand in India fell for the second month in a row as the onset of monsoon chipped away consumption in key sectors like agriculture, preliminary industry data showed Tuesday.

Petrol and diesel demand had fallen month-on-month in July. While petrol consumption is almost flat in the first half of August, diesel - the most widely used fuel in the country - saw demand drop 11.2 per cent during August 1-15 to 2.82 million tonnes from 3.17 million tonnes in the same period of the previous month.

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The arrival and intensity of monsoon weigh heavily on diesel demand in the country and consumption traditionally is lower in July-September than in April-June. Monsoon restricts mobility and demand from the farm sector, which uses diesel in irrigation pumps and trucking, also drops with the onset of rains.

Diesel demand was, however, 32.8 per cent higher year-on-year, supported by strong economic growth and a relatively low baseline for the same period in 2021 when the second wave of Covid-19 had impacted the economy.

Consumption of diesel was 58.2 per cent higher than the 1.78 million tonnes demand during August 1-15 in 2020. It was 23 per cent more than pre-Covid August 2019, the data showed.

Petrol sales inched up 0.8 per cent to 1.29 million tonnes in the first half of August when compared to 1.28 million tonnes of consumption in the same period of the previous month.

The consumption was 30.6 per cent higher than August 2021 and 43.4 per cent more than the first fortnight of August 2020. It was 36 per cent more than pre-Covid August 2019.

Auto fuel demand in June was supported by a surge in summer travel to colder areas of the country to escape from the heat and vacations during annual breaks at educational institutions. Thereafter, it fell in July and now in August.

As the aviation sector opens up, India's overall passenger traffic (both domestic and international) at airports inched closer to pre-Covid-19 levels.

Accordingly, jet fuel (ATF) demand grew by 42.2 per cent to 2,48,100 tonnes from August 1 to 15 when compared year-on-year. It was 121 per cent higher than August 2020 but 18 per cent lower than pre-Covid August 2019. Month-on-month, sales fell 0.75 per cent.

With strong economic growth of 7.1 per cent, India's oil demand has been rising steadily since the country eased pandemic lockdowns.

"Monsoon months traditionally are low consumption months but overall oil demand will continue on its growth trajectory during the rest of the year," an industry official said.

The government on March 25, 2020, imposed a nationwide lockdown to control the spread of coronavirus. The complete lockdown, which halted mobility and crippled business, was slowly eased after two months.

Cooking gas LPG sales were up 8.19 per cent year-on-year to 1.14 million tonnes in the first half of August.

LPG consumption was 15.3 per cent higher than in August 2020 and 5.5 per cent more than in August 2019.

Month-on-month too, the demand fell 7.8 per cent when compared to 1.24 million tonnes of LPG consumption during the first half of July, the data showed.