"This year, there's no growth. Almost nothing," the official, declining to be identified, told Reuters.

"We expect a 3-4 million (tonne) cut in imports," he said, compared with OCC's original projection of 16.11 million tonnes of imports.

India's consumption of diesel has been slowing through the year after rising 3.4 percent in 1997/98 to 36.22 million tonnes, as the transport sector reflects the country's economic woes.

Growth in 1997/98, however, was the third slowest since 1971/72.

The OCC official said diesel consumption contracted in August this year -- the latest completed month -- compared with the same month a year earlier, reflecting the slowdown in demand.

Consumption in August fell four percent, the official said,compared with consumption of 2.7 million tonnes in August 1997.

Demand for diesel was especially hit in India's industrial western and southern regions -- the country's economic hubs.

The year-on-year consumption fell by six per cent in the West and by four percent in the South.

Growth projections for September 1998 have been scaled down to three per cent from an earlier expectation of 7.0 per cent, the OCC official said.

At the start of fiscal 1998/99, the OCC expected diesel demand to climb nearly 13 per cent to 40.84 million tonnes.

Expectations of flat demand and an import slowdown go along way towards explaining the result of an Indian diesel tender last weekend.

Indian Oil Corp purchased just one cargo of 40-45,000 tonnes in a tender to buy diesel for delivery during November.

The Asian oil market had expected IOC to take as many as nine cargoes following strong purchases by tender in recent months.

Market sources said that IOC appears to have overbought in August and October and needsto slow imports to draw down domestic stocks.

Diesel storage tanks in some refineries were brimful, they said.

Diesel makes up about 70 per cent of India's oil product imports. In fiscal 1997/98, India spent $4.25 billion on the import of 21.7 million tonnes of oil products.

Diesel also makes up almost half of the consumption of oil products, so trends in its consumption act as an indicator for the health of the wider economy.