India's diesel demand declined by 9pc from a year earlier in the first half of February, the biggest such fall since August, while gasoline sales dropped for the first time in nearly six months, figures from state-controlled refiners show.
Sales of diesel, which accounts for around 40pc of total Indian fuel consumption, fell to 1.4mn b/d over 1-15 February while gasoline use slipped by 2.4pc from a year earlier to 580,000 b/d, the country's biggest refiner IOC said. Jet fuel demand slumped by 41pc from a year earlier but LPG use rose by 5pc. The data from state-controlled refiners cover about 90pc of India's fuel market.
Fuel dealers have blamed the decline in consumption on high taxes, which have helped send retail fuel prices to record levels. India's BJP government has more than tripled gasoline taxes and raised duties on diesel ninefold since it came to power in 2014. Federal taxes on gasoline have risen to around 33 rupees/litre (45c/l) from Rs9.5/l while diesel taxes have increase to about Rs32/l from Rs3.6/l over the period, leaving retail motor fuel prices higher now than they were when crude prices hit a record $147/bl in 2008.
The government has refused to cut taxes as global oil prices have risen, unlike in October 2018 when it reduced duties ahead of federal elections. Fuel taxes were raised substantially in March and May 2020 to raise funds to combat Covid-19.
Instead, prime minister Narendra Modi yesterday blamed previous Congress governments for India's oil import dependency. And oil minister Dharmendra Pradhan attributed the record pump prices to Opec+ output cuts.
"I am sorry to say oil rich countries are not looking into the interest of consuming countries. They created an artificial price mechanism. This is pinching the consuming countries," Pradhan said yesterday.
"The rising oil prices during the last few weeks are hurting the fragile global economic recovery, leading to significant demand contraction," he said.
But India's crude import dependency has risen from 77pc in 2014 to 85pc now, despite Modi's ambitions to cut imports, while natural gas import dependency has doubled from 29pc to 60pc over the period. Declining crude and gas production in the last few years because ageing fields and a lack of new discoveries has raised India's import reliance.
Indian diesel demand fell by a record 15pc to 1.47mn b/d in 2020 from 1.72mn b/d a year earlier. Gasoline use dropped by around 10pc to 630,000 b/d from 696,000 b/d while jet fuel demand fell by almost half to 92,000 b/d from 177,000 b/d in the same comparison.
