Diesel Demand Dips as Extreme Heat Hits Travel, Sales Decline by 4% in June

New Delhi: India witnessed a significant slump in diesel demand during June due to extreme heat conditions in various parts of the country, according to preliminary data from state-owned firms released on Monday.

Despite the usual surge in fuel sales during election seasons, this year has seen a consistent decline in sales month after month, even after the conclusion of the general elections.

Sales of petrol, managed by three state-owned firms controlling 90 per cent of the market, remained almost stagnant at 1.42 million tonnes in the first half of June compared to the same period last year. However, there was a 4.6 per cent drop in month-on-month consumption.

Diesel sales experienced a more pronounced decline, dropping by 3.9 per cent to 3.95 million tonnes during June 1-15 compared to the previous year. This decline follows a similar trend from previous months, with diesel demand falling 2.3 per cent in April, 2.7 per cent in March, and 1.1 per cent in May.

Despite expectations of increased fuel consumption during electioneering and the summer harvest season, the scorching heat has curtailed travel and suppressed demand for petrol and diesel. The reduction in petrol and diesel prices by Rs 2 per litre in mid-March, after a nearly two-year hiatus in rate revisions, also failed to stimulate sales.

Petrol sales declined by 3.6 per cent month-on-month, while diesel demand remained flat compared to the first half of May.

Diesel remains India's most consumed fuel, accounting for nearly 40 per cent of all petroleum product consumption. The transport sector, which relies heavily on diesel, accounts for 70 per cent of all diesel sales in the country. Additionally, diesel is extensively used in the agriculture sector for harvesters and tractors.

In contrast, jet fuel (ATF) sales saw a modest increase of 2.3 per cent year-on-year during June 1-15, 2024. However, there was a 4.5 per cent decline in month-on-month sales compared to May.

Cooking gas (LPG) sales witnessed a slight increase of 0.1 per cent year-on-year in June, reaching 1.24 million tonnes. However, there was a 5.2 per cent decline in month-on-month consumption compared to May.

Despite these fluctuations, ATF demand has surpassed pre-Covid levels, indicating a gradual recovery in the aviation sector.

Overall, the data reflects a complex interplay of factors influencing fuel consumption in India, with extreme weather conditions, economic activities, and government policies all playing significant roles.