India's fuel demand likely to rise 7.3% in FY17

After registering the fastest pace of growth in 15 years, India's fuel demand is likely to rise by 7.3% in 2016-17 fiscal, lead by robust expansion in consumption of petrol and diesel. 

Fuel consumption, which rose 10.9% in 2015-16 to 183.5 million tonnes, is projected to rise to 190.03 million tonnes, according to demand estimates made by Oil Ministry. Diesel demand, which soared 7.5% to 74.6 million tonnes last fiscal, is projected to further go up by 7.7% to 78.11 million tonnes.

The consumption of petrol is projected to rise by 12.4% to 24.14 million tonnes. Petrol consumption was up 14.5% at 21.8 million tonnes in 2015-16, its highest level in two decades as automobile sales grew at their fastest pace in five years on narrowing price differential between petrol and diesel.

Indian Oil Corp (IOC) Director (Finance) A K Sharma said the narrowing price difference between petrol and diesel has led to people preferring petrol driven vehicles. 

While petrol price was free or made market driven in June 2010, diesel was linked to market only in November 2014. Subsidy on diesel meant it costed about Rs 20 less than petrol. But now, a litre of petrol in Delhi costs Rs 61.13 while diesel is priced at Rs 48.01 per lire. The higher rate for petrol is a result of more taxes on it than diesel.

Naphtha consumption is projected to rise by 5.5% to 13.6 million tonnes in 2016-17, an indication of greater demand from industry because of economic activity picking up, the ministry's demand estimate showed.

ATF or jet fuel sale is projected to rise 3.9% to 6.18 million tonnes. So is cooking gas LPG whose consumption is projected to rise by 9.3% to 21.16 million tonnes. Kerosene sale, however, is projected to fall 10% to six million tonnes as government pushes for use of cleaner LPG in households instead of the heavily subsidised kerosene. Kerosene demand fell to 6.82 million tonnes in 2015-16 from 7.02 million tonnes.

Also in 2015-16, LPG sales were up 8.6% at 19.5 million tonnes while Naphtha consumption was 20.9 per cent higher at 13.4 million tonnes. ATF or jet fuel consumption was up 8.7% at 6.22 million tonnes in 2015-16, indicating robust growth in air traffic.