Rising consumption of petroleum products is a positive development for the Union government, which has sharply increased auto fuel taxes by Rs 10/litre on petrol and Rs 13/litre on diesel in early May.
Reflecting higher fuel usage with the gradual easing of travel restrictions, consumption of petroleum products in the first 15 days of June was 80-85% of the levels recorded in the same period in 2019.
Domestic consumption of petroleum products had fallen 23% year-on-year (y-o-y) to 14.7 million tonne (MT) in May, while consumption in April—when the lockdown to contain the coronavirus was the most stringent—dropped 46% y-o-y to 9.9 MT.
Rising consumption of petroleum products is a positive development for the Union government, which has sharply increased auto fuel taxes by Rs 10/litre on petrol and Rs 13/litre on diesel in early May. In mid-February, the Centre had also hiked taxes on both these fuel by Rs 3/litre to shore up more revenues.
State-run oil marketing companies (OMCs) would also welcome the higher sales as their fuel marketing margins are improving with retail prices rising for the tenth straight day on Tuesday.
According to provisional data, diesel usage dipped 29% annually to 5.5 MT in May, while demand for the aviation turbine fuel (ATF) fell 84% to 111 thousand tonne. Petrol sales fell 35% to 1.8 MT in the month. Consumption of petroleum products had moderated even before the lockdown due to extended monsoon and weak industrial activity. Domestic sales of petroleum products in FY20 had inched up 0.2% y-o-y to 213.7 MT.
Union minister of petroleum and natural gas Dharmendra Pradhan, speaking at a webinar on increasing the use of domestic steel in the country’s oil and gas sector, said the revival in consumption indicated economic activities are picking up.
Speaking in the same event, Sanjiv Singh, chairman of Indian Oil Corporation (IOCL), said that it will take about two years for product demand to resume its earlier long term growth trajectory.
Singh said that IOCL plans to procure Rs 16,000 crore of steel in the next three years as it expands its refinery capacity, adds new pipelines and buys new cylinders for LPG supply. The oil and gas sector consumes about 6% of steel used in the country.