Diesel Demand: Slowest increase in diesel demand after the Corona crisis

New Delhi| The growth in demand for diesel, the most consumed petroleum product in India, was the lowest since the pandemic in the fiscal year ending March 31. The reason for this is the slow pace of the economy and increase in clean fuel consumption. According to provisional data released by the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, diesel consumption increased by 2 percent to 91.4 million tones in FY 2024-25 (April 2024 to March 2025).

Growth in demand for diesel used to drive trucks and agricultural machinery slowed significantly in 2024-25 against 4.3 percent in the previous fiscal year and 12.1 percent in 2022-23. Diesel accounts for about 40 percent of the oil used in India. Softening of demand gives trends related to economic activities in the country. In the last few years, electric vehicles (EVs) have started reshaping the demand for diesel in India.

According to industry experts, diesel still operates three-fourths of India’s transportation sector. However, due to increased use of EVs, the growth in demand for diesel is slowing down. The main reason for the decline in diesel consumption compared to petrol is the increasing use of EVs.

Electric buses are increasingly being 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 reducing diesel usage in urban public transport.

Additionally, companies like Amazon, Flipkart and BigBasket are converting their delivery fleets to electric vehicles. This change mainly affects diesel-powered vans and LCVs (Light Commercial Vehicles). This reduces the demand for diesel in the logistics sector.

Petrol consumption rose by 7.5 per cent to 40 million tones, while demand for LPG rose by 5.6 per cent to 31.32 million tones. Reflecting an uptick in the aviation sector, jet fuel consumption increased by nearly 9 percent in 2024-25 to nearly 9 million tones.

Demand for naphtha used as fuel in industries declined by 4.8 per cent to 13.15 million tons, while fuel oil consumption declined by nearly one per cent to 6.45 million tons. Consumption of bitumen used in road construction declined by 5.4 per cent to 8.33 million tons. Demand for petroleum coke increased by 8.6 per cent and so did demand for lubricants and grease, which increased by 12.3 per cent.

Overall, petroleum production consumption in India increased by 21 per cent to 239.171 million tons. This growth was slower than the growth of 5 per cent in 2023-24, 10.6 per cent in the previous year and 3.8 per cent in 2021-22. Oil consumption growth in 2024-25 was the slowest in a decade if the Covid-hit two years of 2019-20 and 2020-21 are excluded. During 2019-20 and 2020-21, demand for oil declined as more parts of the country were under lockdown to prevent the spread of the pandemic.

For the current fiscal year, which began on April 1, PPAC projected a 5.7 percent increase in oil demand that could stand at about 253 million tons. Diesel consumption is projected to increase by 3 per cent to 94.1 million tons and petrol consumption by 6.5 per cent to 42.63 million tons.