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India's oil and gas sector is growing at an annual pace of a little over five per cent, the highest in about a year, fuelled by a combination of factors. These include a demand surge from the automobile sector, growing diesel demand for irrigation pumps on the back of a weak monsoon, resumption of mining activity and an increase in cargo movement.
Overall consumption of petroleum products grew 5.3 per cent in June, the highest since January last year. Petrol consumption grew 14 per cent in June, the second-highest since May 2013. Diesel consumption, declining consistently since June 2013, grew 3.4 per cent, the highest since April last year.
The surge in diesel demand comes at a time when the economy is showing signs of recovery and its price is nearing market rates, owing to monthly 50 paise a litre price increases since January 2013. The demand growth signals consumers have started warming up to the market pricing of the key transport fuel, a heartening sign for the new government.
The major decontrolled products of petrol and aviation turbine fuel together grew 7.3 per cent, the highest among all petro products. According to the petroleum ministry's planning & analysis cell, reversal of the declining consumption trend in diesel is due to the same reasons given earlier - a delayed monsoon, leading to higher usage of pumping sets for irrigation, higher vehicular movement due to increased economic activities, power deficit, resumption of mining activities and improved port traffic.
Port traffic grew 4.2 per cent in April-June and 3.3 per cent in June alone. The country's 12 major ports handled 47.1 million tonnes of cargo during the month, against 45 mt in the corresponding period last year. Goa's Mormugao port recorded the highest growth of 31 per cent. The Supreme Court had in June lifted a 19-month ban on mining in Goa, the top iron ore producing state in the country.
Experts attribute higher petroleum product consumption to other factors, too. "Diesel demand has grown because of increased usage of (power) generation sets in urban areas due to poor power availability, among other contributing factors," said Leena Srivastava, honorary executive director at The Energy and Resources Institute.
Petrol consumption grew 14 per cent in June, the second-highest since May 2013, due to continued growth in the passenger vehicle segment (12 per cent in June) and presence of more two-wheelers on the road because of less rain. "Heavy discounts and extension of excise duty reductions have raised car volumes. Also, the two-wheeler segment, that accounts for over 60 per cent of petrol consumption, grew 13 per cent in June," the analyis cell said.
Demand for petrol had continued to increase despite significant price rise due to higher disposable incomes, lack of adequate public transport and more use of private vehicles for long distance leisure transport, said Srivastava.
Data show consumption of LPG continued to grow for the 11th consecutive month. It grew 11.4 per cent in June and 11.8 per cent in the April-June period. Its price has remained low and the cap on sale of subsidised cylinders has been raised to 12 a year. Experts say the rise has encouraged the diversion of domestic LPG for automobile and commercial purposes where prices are deregulated and almost double that of subsidised domestic LPG.
