Fuel demand to expand 10% next year as Covid intensity reduces: Govt

Demand for diesel and petrol seen rising 13%, modest 5% increase in LPG

The country’s fuel consumption is expected to shrug off the Covid-19 pandemic hit in the next fiscal year (FY22) and rise 9.85 per cent, according to the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry. The forecast, however, trails the initial estimates.

Demand for diesel is expected to reach 83.68 million tonnes (mt) in FY22, from 73.86 mt in FY21 — an increase of 13.30 per cent.

This optimism is on the back of a steep economic recovery, resulting in more heavy (and commercial) vehicles such as trucks plying on the roads. There is a similar growth estimate for petrol consumption that is forecast to hit 31.35 mt in FY22, a rise of 13.32 per cent from 27.67 mt in FY21. This reflects increased personal mobility (two and four wheeler vehicles) as the Covid-19 pandemic induced lockdowns are expected to completely cease next year.

The consumption of Liquefied petroleum gas (LPG or cooking gas) is estimated to grow modestly at 4.79 per cent from 27.71 mt to 29.03 mt in FY22. This is on the back of an expected saturation in LPG connectivity with almost 290 million households using cooking gas.

The LPG demand growth also seems lower than its peers because the government had offered three free cylinders to 80 million. This move significantly frontloaded the LPG demand early in FY21 during the thick of the pandemic lockdowns.

Earlier estimates

PPAC’s latest demand forecast is lower than the initial estimates it had drawn up for FY22. Earlier, it expected diesel consumption to hit 110.79 mt in FY22, which has been slashed 32.40 per cent in the new forecast. Petrol consumption, which was expected to touch 33.65 mt earlier, is now seen at 7.33 per cent lower in FY22.

The new forecast expects LPG consumption to outpace the initial estimate.

These initial estimates hosted on the PPAC website are from the Working Group Report on demand estimates of the petroleum products-12th and 13th five-year plan.