Covid curbs, manufacturing slack take toll on fuel consumption
Market data for the first fortnight of the month shows petrol sales dropping more than 5% and diesel consumption, a bellwether for economic activities, sliding almost 3% from a month ago. Consumption of jet fuel and LPG, or household cooking gas, too shrank more than 7% and sales 6%, respectively.
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Nothing captures the impact of renewed curbs than the sharp drop in petrol sales. Its demand had posted robust recovery once the unlock process began last year and has consistently grown over the previous months as people preferred personal vehicles to public transport.
That’s why the worst may not be over for refiners. Fuel consumption could decline further as more states slap weekly lockdowns or restrict movement and people prefer to confine themselves at home. Manufacturing and mining activities too remain a worry as they shrank 3.7% and 5.5%, respectively, from a year ago in February.
But still, the fall in fuel consumption will not be as drastic as last year when 70% of the demand evaporated during the countrywide lockdown.
The more optimistic in the industry say the situation may not be as bad if the current sales data is compared with the same period of 2019 when there was no pandemic, though the economy was showing signs of cooling.
Compared to the same period of 2019, the country consumed 6% more petrol in the fortnight under review but had nearly 3% less appetite for diesel. Jet fuel sales too lagged by 38% and LPG, another fuel that had consistently posted robust demand growth through the lockdown, was down 17%.
LPG consumption is certainly taking a knock as sales were down more than 3% from the last year’s level, while petrol and diesel sales posted growth of 196% and 150%, respectively, from the lockdown-hit rock bottom base of 2020.
The fall in LPG consumption can be explained by the sharp increase in price since December totalling Rs 175 per cylinder. The state-run retailers cut the price only by Rs 10 per cylinder on April 1, the first reduction in four months.