New Delhi: India’s fuel demand increased in November amidst the domestic economy battling a severe demand slowdown.
According to data from the Petroleum Planning and Analysis Cell (PPAC), the consumption of petroleum products last month increased to 18.76 million tonnes (mt); a 10.5% jump from 16.98 mt in November last year. The increase was primarily on account of transportation fuel such as diesel and petrol.
Also, the consumption of bitumen used in road construction in Asia’s third-largest economy went up in November as compared to the corresponding month last year.
India’s economy grew 4.5% in the second quarter, its slowest pace since March 2013, due to a sharp contraction in manufacturing output. Official data released on Thursday showed that the industrial sector remained weak with output shrinking by 3.8% in October. Although the contraction was less intense than in the previous month, the worrying factor is that production of consumer goods such as cars and air-conditioners contracted sharply by 18% in October, the fifth consecutive month of deceleration.
While diesel demand increased by 8.80% to 7.55 mt in November, petrol demand increased by 9.22% to 2.53 mt. This comes in the backdrop of India’s fuel demand dropping amid the domestic economy battling a severe demand slowdown, which has also reduced commercial vehicle traffic on India’s highways.
The transport sector accounts for a substantive consumption of the transportation fuel in the country. The transport sector in turn gets impacted by other sectors.
Interestingly, this comes amid the worst slump in almost two decades for the country’s auto sector, with the industry majors expecting green shoots of a recovery. Energy consumption, especially electricity and refinery products, is usually linked to overall demand in the economy.
The Narendra Modi administration has taken a series of steps to reverse the slowdown, including a cut in the corporate tax rate in September from 30% to 22% for companies not availing tax breaks, and from 25% to 15% for new manufacturers.
The cost of the Indian basket of crude, which averaged $47.56 and $56.43 per barrel in FY17 and FY18, respectively, was $62.54 in November 2019, according to data from the PPAC. The average price was $64.43 a barrel on 11 November. The Indian basket represents the average of Oman, Dubai and Brent crude.