Indian Oil refineries hit 100% capacity in November3 min read . Updated: 11 Dec 2020, 08:15 AM IST
- While petrol and domestic cooking gas sales in November had been higher than last year, diesel sales were 9% less on a year-on-year basis
Indian Oil Corp. Ltd (IOC), the country’s largest fuel retailer, on Thursday said that’s its refineries are operating at 100% capacity.
This assumes importance as the Indian economy has been severely hit by the covid-19 pandemic. Energy consumption, especially electricity and refinery products, is usually linked to overall demand in the economy. The development also comes in the backdrop of other economic indicators such as electricity, GST collections and railway freight registering a recovery.
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“The crude oil throughput of Indian Oil refineries rose to 100% in November 2020, as consumption of all petroleum products has almost reached pre-covid. In October 2020 this figure was 88%, and last year for the same period it was 99%," the country’s largest refiner said in a statement.
This is a significant improvement from when India imposed the world’s largest and strictest lockdown to contain the virus that originated in Wuhan, China. Capacity utilization of IOC had shrunk to around 35% at the beginning of the lockdown due to India’s petroleum product demand nosediving on account of the restrictions to prevent the spread of coronavirus.
“The Indian economy continues to witness the green shoots of revival. As we get closer to the covid-19 vaccine roll-out, the fundamentals of the economy being strong, we see a rapid V-shaped recovery in the overall consumption of petroleum products," said Indian Oil chairman S.M. Vaidya in the statement.
While the nation’s largest fuel retailer’s petrol and domestic cooking gas sales in November were higher than last year, diesel sales were 9% less on a year-on-year basis. Also, even as the aviation turbine fuel (ATF) clocked a 4% growth as compared to last month, it was still 45% less than the corresponding period last year due to the reduced number of flights operating.
“During November 2020, the sale of Motor Spirit (Petrol) was 1.06 MMT, which is higher by 4% as compared to the same period last year. In the case of LPG, the demand has gone up by approximately 1.4% to 1.09 MMT as compared to the corresponding period last year. On the other hand, although HSD has registered a growth of 2% as compared on a month-on-month basis, it is still 9% less when compared on a year-on-year basis. ATF has also registered a growth of 4% as compared to October 2020 but is still 45% less when compared on a year-on-year basis," the statement said.
IOC clocked an average refinery run of 77% during April-September period. This capacity utilization had increased to around 93% in the first week of July, but later come down to 75% as many state governments reimposed lockdowns.
“As the Indian economy prepares to bounce back, Indian Oil has gradually raised the throughput of its refineries to the maximum capacity in six months from about 55% of rated capacity at the beginning of May 2020," the IOC statement added.
This comes at a time when petrol prices in India are set to touch the all-time-high level. With the announcement of several vaccines being successful, there has been a bounce in international crude oil prices. This has also added pressure on the government to cut taxes on fuel.
Rising energy prices will stoke inflation in the world’s third-largest oil importer’s economy even as the government tries to pull India out from a recession. India’s retail inflation based on Consumer Price Index (CPI) has already hit a nearly six-and-a-half-year high of 7.6% in October, with food inflation registering a steep rise.
The pace of contraction in the Indian economy slowed in September quarter to 7.5% from a historic high of 23.9% contraction in June quarter.