India's diesel demand hits 4-year low—Here's why
What's the story
India's diesel demand growth has hit its slowest since the pandemic, with a meager 2% rise in FY2024-25.
The slowdown is due to slower economic growth and a transition to electric vehicles (EVs).
Despite diesel's continued dominance in the transportation sector, the increasing adoption of EVs in public transport and logistics is affecting its growth trajectory.
Consumption details
Diesel consumption in India for FY 2024-25
According to provisional data from the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, diesel consumption grew by 2% to 91.4 million tons in FY 2024-25.
The growth rate is much lower than the previous fiscal's growth of 4.3%, and a mere fraction of the robust 12.1% growth rate in FY2022-23.
Diesel still makes up about 40% of India's total oil consumption, reflecting economic activity levels across sectors.
EV impact
EV adoption reshapes diesel demand
Industry experts indicate that the growing popularity of EVs is heavily impacting diesel demand in India.
Even though diesel continues to fuel three-fourths of India's transport sector, its growth is being moderated by the transition toward EVs.
This transition has resulted in a slower consumption growth than petrol, mainly due to the transition toward commercial EVs.
EV adoption
Cities and companies embrace EVs
While cities like Delhi and Mumbai are quickly switching to electric buses, e-auto-rickshaws have already taken over many tier-2 and tier-3 cities.
This is directly curbing diesel consumption in urban public transport.
Further, leading companies like Amazon, Flipkart, and BigBasket are also moving their delivery fleets to EVs. This mainly affects diesel-run vans and LCVs, resulting in a dip in demand in the logistics sector.
Consumption trends
Other petroleum products experience varying demand
Unlike diesel, petrol consumption witnessed a sharp rise of 7.5% to hit 40 million tons.
LPG demand also increased by 5.6% to touch 31.32 million tons.
The aviation sector's growth was also seen in jet fuel consumption, which rose by nearly 9%, hitting about nine million tons in FY2024-25.
However, other products such as naphtha and fuel oil saw a dip in demand during this period.
Consumption slowdown
India's petroleum consumption growth slows down
Despite the varying demand for different petroleum products, India's overall petroleum consumption grew by 2.1% to touch 239.171 million tons. However, the growth rate was slower than the previous fiscal years.
The PPAC has projected 5.7% growth in oil demand for the current fiscal year, estimating diesel consumption will rise by three percent to touch 94.1 million tons and petrol by 6.5% to touch approximately 42.63 million tons.