2 min read.Updated: 12 Jan 2021, 07:18 PM ISTAnn Koh,Debjit Chakraborty,Saket Sundria, Bloomberg
Demand got an additional boost later in the year following a six-month extension of a government program providing free LPG cylinders to lower-income people and an early start to winter
A fuel primarily used for cooking has surpassed gasoline as India’s second most popular oil product following a boost from a government buying program, cold weather and stay-at-home orders due to Covid-19.
Consumption in 2020 of liquefied petroleum gas -- which is also used for heating -- was higher than motor fuel for the first time ever over a calendar year, data from the government showed. Demand got an additional boost later in the year following a six-month extension of a government program providing free LPG cylinders to lower-income people and an early start to winter.
While LPG use rose as more people cooked at home due to tighter coronavirus restrictions, India’s full-year consumption of gasoline never fully recovered from a collapse in demand during a nationwide lockdown in the second-quarter of 2020.
“Despite Covid-19 causing a major slowdown in the world economy, LPG imports into India have grown in 2020," said Sam Sng, a Singapore-based analyst at industry consultant FGE. Consumption has been fueled by greater residential demand for cooking fuel and the government providing free cylinders to lower-income people, he said.
Indian LPG consumption in 2020 was at 27.41 million tons, 4.3% higher than a year earlier, according to government data. Gasoline demand over the same period plunged 9.3% to 27.27 million tons. Diesel remained the top consumed fuel at 71.91 million tons, although 14.5% lower than a year earlier.
India has been encouraging wider adoption of LPG to replace the more polluting coal and firewood in a bid to clean up one of the world’s most toxic air. The nation imports most of its LPG supplies and the boost in demand last year led to greater tanker congestion off its ports. Ships waited about 5.5 days on average to unload in 2020 -- peaking at 11 days in July -- compared with 4.6 days in 2019, according to data intelligence firm Kpler.
“LPG consumption in the country is growing and it will continue to grow for the next 25-30 years," said N. Vijayagopal, finance director at India’s second largest fuel retailer, Bharat Petroleum Corp. “We see a lot of LPG potential in the rural side of India."
Strong LPG demand has also led to higher prices in Asia. Propane swaps were almost $632 a ton on Monday, near the highest since October 2018, according to PVM data. Prices rose 13% last year, capping a second annual gain.
Motor fuel demand, however, is expected to regain its long-standing position this year as India’s second most consumed oil product after diesel as drivers hit the roads again, according to FGE. Gasoline consumption is seen at 32.3 million tons, while LPG is estimated at 28.3 million tons.
“I think gasoline will come back this year with more people using private vehicles," said Mukesh Kumar Surana, chairman of state-run oil refiner Hindustan Petroleum Corp. “All said and done, we are still not 100% out of the pandemic, and people are still working from home."
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