Petrol demand seen growing 6.6% in FY26, diesel consumption may rise 2.8%

Diesel consumption is projected at 94.12 million tonnes, higher by 2.77% than the 91.57 million tonnes estimated for FY25. (Photo: Bloomberg)
Diesel consumption is projected at 94.12 million tonnes, higher by 2.77% than the 91.57 million tonnes estimated for FY25. (Photo: Bloomberg)

Summary

  • During calendar year 2024, India witnessed the fastest growth in oil demand growth, surpassing China, according to S&P Global Commodity Insights, and this trend is expected to continued in 2025

New Delhi: India's petroleum product demand continues to remain robust with consumption seen at a record 252.9 million tonnes for the next financial year (FY26), according to data from the Petroleum Planning and Analysis Cell.

This is 4.65% higher than the 241.8 million tonnes projected for FY25, driven by key transport fuels petrol and diesel. Demand for petrol is projected to grow 6.64% in FY26 to 42.6 million tonnes from 39.98 million tonnes projected for this fiscal. Diesel consumption is projected at 94.12 million tonnes, higher by 2.77% than the 91.57 million tonnes estimated for FY25.

This would be the third year in a row of India's petroleum product consumption hitting a record high.

At a time when global oil demand is expected to taper down in the years ahead amid economic slowdown concerns and the transition towards electric mobility, India has emerged as among the few outliers.

To be sure, the transition to electric mobility, having started only recently, is expected to gain pace and penetrate the automobile market in a significant way.

Also read: Budget: CII seeks excise duty cut in petrol, diesel, hike in minimum wages

The demand growth in India is already higher than in China, the world's second largest oil importer. During calendar year 2024, India witnessed the fastest growth in oil demand growth, surpassing China, according to S&P Global Commodity Insights, and this trend is expected to continued in 2025.

In line with the growth in demand, oil refining capacity in the country is also expected to grow. The S&P report noted that India is set to see significant refining capacity growth in 2025 as India's first greenfield integrated refinery complex in nearly a decade is expected to be launched this year.

Oil refining capacity

India's oil refining capacity is expected to reach 309.5 million metric tonnes per annum by 2028, from the current 256.8 MMTPA. India is also an exporter of petrol and diesel among other petroleum products. The government's aim to make India a petrochemical manufacturing hub is also driving the focus on refining.

Meanwhile, consumption of domestic cooking gas or liquefied petroleum gas (LPG) is expected to grow 4.69% in the next fiscal to 33 million tonnes, from the projected 31.52 million tonnes in the current fiscal.

Also read: Kuwait Petroleum explores storing crude in Indian strategic reserves

The increase in LPG consumption has grow with the expansion of the Pradhan Mantri Ujjwala Yojana, under which the government provides cylinders at subsidized rates to people below the poverty line. As of 23 December, 2024, a total of 103.34 million LPG connections were provided under the scheme launched in 2016.

The high demand for petroleum products has largely been met by Russian crude available at deep discounts post sanctions by the West in 2022. During the April-October period of FY25, India imported crude oil worth $31.86 billion from Russia—about 38.5% of India's total oil imports during the period. China and India have been among the top importers of Russian crude in the past few years as the West has halted imports from Russia and resorted to sanctions.

However, the recent sanctions imposed by the US on two Russian oil producers along with several tankers may lead to India looking at further diversifying at sources.

On 13 January, Mint reported that the fresh sanctions are unlikely to have an immediate impact on India for the next two months as the crude required for this period has already been loaded on vessels and is in transit. However, after this period, refiners will have to realign their supply arrangements.

Given the high consumption of petroleum products, India imports about 85% of its annual oil requirement.

Also read: Mint Quick Edit | Windfall tax is gone but other fuel taxes need reform

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

topics

MINT SPECIALS