Diesel demand growth falls to lowest since pandemic

Diesel demand growth falls to lowest since pandemic

Growth in demand for diesel, India's most consumed petroleum product, fell to its lowest since the pandemic in the financial year ended March 31 as the economy expands at a slower pace and consumption shifts to cleaner fuels.

Diesel consumption rose 2 per cent to 91.4 million tonnes in 2024-25 (April 2024 to March 2025) fiscal, according to provisional data released by the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry.

The growth in demand for diesel, which is used to power trucks and farm machinery, in 2024-25 was slower than 4.3 per cent in the previous fiscal and 12.1 per cent in 2022-23.

Diesel accounts for about 40 per cent of oil used in India. Softness in demand growth mirrors economic activity in the country.

But more than the economy, it is Electric Vehicles (EVs) which are starting to reshape diesel demand in India.

Industry officials said diesel still powers three-fourth of India's transport sector but the growth is moderating due to the EV shift. The slower consumption rise compared to petrol was largely due to the commercial EV shift.

Electric buses are being rapidly adopted in cities like Delhi and Mumbai, and electric auto-rickshaws (e-rickshaws) have become dominant in many tier-2 and tier-3 cities, directly cutting diesel use in urban public transport.

Also, companies like Amazon, Flipkart, and BigBasket are switching their delivery fleets to EVs. This shift primarily affects diesel-driven vans and LCVs (Light Commercial Vehicles), reducing demand in the logistics sector.

Petrol consumption rose 7.5 per cent to 40 million tonnes while LPG demand was up 5.6 per cent to 31.32 million tonnes.

Reflecting boom in the aviation sector, jet fuel consumption was up nearly 9 per cent at about 9 million tonnes in 2024-25.

Demand for naphtha, which is used as a fuel in industries, fell 4.8 per cent to 13.15 million tonnes while fuel oil consumption was down nearly a per cent at 6.45 million tonnes.

Bitumen, used in road construction, saw consumption fall 5.4 per cent at 8.33 million tonnes. Petroleum coke demand was up 8.6 per cent and so was that of lubricants and greases whose use rose 12.3 per cent.

Overall, petroleum production consumption in India was up 21 per cent at 239.171 million tonnes. This growth was slower than the 5 per cent rise in 2023-24, 10.6 per cent in the preceding year and 3.8 per cent in 2021-22.

Oil consumption growth in 2024-25 was the slowest in a decade if the two Covid-marred years of 2019-20 and 2020-21 are excluded. During 2019-20 and 2020-21, oil demand fell as the country was under lockdown in most parts to prevent the spread of the pandemic.

For the current fiscal which started from April 1, PPAC has projected a 5.7 per cent growth in oil demand to nearly 253 million tonnes. Diesel consumption is projected to rise by 3 per cent to 94.1 million tonnes and petrol by 6.5 per cent to 42.63 million tonnes.