India's April Fuel Consumption Up 6.1% YoY: Oil Ministry Data

India's fuel consumption saw a significant uptick in April, recording a 6.1% year-on-year increase, according to data released by the Petroleum Planning and Analysis Cell of the oil ministry.

This rise in fuel consumption, totaling 19.86 million metric tons (4.85 million barrels per day), is indicative of the country's oil demand and reflects its status as the world's third-largest oil importer and consumer.

"As per the Ministry of Commerce and Industry, in volume terms, the share of crude petroleum imported from Russia jumped to ~36% in 11M FY2024 from 2% in FY2022, while that from West Asian countries (Saudi Arabia, the UAE, and Kuwait) fell to ~23% from ~34%, respectively; discounts on the former generated savings in the oil import bill," ICRA said.

One of the key factors driving this increase, as noted by Prashant Vasisht, Vice President and Co-head of Corporate Ratings at ICRA, is the heightened activity in the lead-up to elections across the country. This surge in demand is expected to continue, with ICRA projecting Indian fuel demand to grow by 3%-4%, primarily driven by increased consumption of petrol and diesel. Additionally, the growth in air travel within India has also contributed to this rise in fuel consumption.

"With India's oil import dependency expected to remain high, if the discounts on purchases of Russian crude persist at the prevailing low levels, ICRA expects India's net oil import bill to widen to $101-104 billion in FY2025 from $96.1 billion in FY2024, assuming an average crude oil price of $85/bbl in the fiscal. Additionally, any escalation in the Iran-Israel conflict and an associated rise in crude oil prices could impart upward pressure on the value of net oil imports in the current fiscal year," according to ICRA report.

Sales of diesel, primarily used in trucks and commercially run passenger vehicles, rose by 1.4% year-on-year to 7.93 million tons in April. Similarly, sales of gasoline surged by 14% from the previous year to 3.28 million tons. This growth in gasoline sales indicates an increase in the use of private vehicles, reflecting a broader trend of rising consumer spending and economic activity.

"As per ICRA's calculations, a $10/bbl uptick in the average crude oil price for the fiscal year pushes up the net oil imports by ~$12-13 billion during the year, thereby enlarging the CAD by 0.3% of GDP. Accordingly, if the average crude oil price rises to $95/bbl in FY2025, then the CAD is likely to widen to 1.5% of GDP from our current estimate of 1.2% of GDP for the fiscal year (over 0.8% projected for FY2024)," ICRA stated.

However, not all fuel types experienced growth. Demand for bitumen, which is used in road construction, fell by over 5% annually. This decline could be attributed to various factors, including changes in infrastructure projects or shifts in construction practices.

On a monthly basis, fuel consumption in April saw a 5.8% decline from March, where consumption totaled 21.09 million metric tons. This dip is likely due to seasonal factors or changes in economic activity between the two months.

Looking ahead, India's economic growth remains strong, with the GDP expected to expand by 6.5% this fiscal year. The country's manufacturing sector, a key driver of economic growth, showed marginal slowing in April but maintained robust performance. This growth has led firms to increase their purchases of raw materials at a near-record pace, further supporting the overall demand for fuel.

India's fuel consumption in April reflects the country's growing economy and increasing consumer activity. While certain sectors experienced declines, overall demand for fuel remains strong, driven by factors such as increased election-related activity, growth in air travel, and robust economic expansion.