Diesel consumption in FY23 to be below pre-Covid levels as use of clean fuels gains momentum

The government expects consumption of high speed diesel (HSD) to be below pre-Covid levels in FY23, beginning April 2022, at 79.3 million tonnes (mt). Analysts have attributed this to the growing popularity of electric vehicles (EVs), commercial vehicles, increased opting of CNG and higher use of biodiesel as both transport and industrial fuel.

According to the FY23 estimates, published by the Ministry of Petroleum and Natural Gas (MoPNG), diesel consumption in the Covid years — FY21 and FY22 stood at 72.7 and 76.3 mt, respectively, compared to 81.1 mt in FY18, 83.5 mt in FY19 and 82.6 mt FY20. 

However, the demand for petrol, or motor spirit (MS) is expected to surpass the pre-pandemic levels. In FY23, India is likely to consume 33.3 mt of petrol, as against 31 mt in FY22, 28 mt in FY21, 30 mt in FY20 and 28.3 mt in FY19.

Focus on clean fuels

Debasish Mishra, Deloitte India Partner & Leader (Energy, Resources & Industrials), told BusinessLine, “There is a silent shift happening in the composition of the Indian fuel market with the overall mobility segment going through a huge transformation. With railways moving to electricity, commercial vehicles changing to CNG with expansion of the gas network and gradual adapaton of EVs in urban areas have an impact on the diesel consumption.”

Similarly, ratings agency Crisil, in a November 2021 report, said, petrol and diesel demand is likely to decline to 1.5 per cent per annum this decade, compared to 4.9 per cent in the previous decade. As India targets net zero emissions by 2070, the trend will grow stronger.

Also read

Two wheeler’s prices increase 16-22% in 2 years due to BS-IV & spike in commodity prices

Ford CEO: No plan to spin off EV business, but change coming

Foresee at least 20-30 new Indian companies in the energy and tech space growing as big as Reliance, if not bigger, in

“A more than three-fold increase in the number of CNG stations, advancing of the ethanol blending target, and a significant decline in EV battery prices are likely to slash demand growth in petrol to around 1 per cent this decade from 8.4 per cent in the last. Demand for diesel will be relatively resilient (2 per cent annual growth compared with 3.9 per cent earlier) because of non-exposure to the two-wheeler segment, where the shift to EVs is sharper, and the presence of a significant proportion of freight vehicles where CNG and EV penetration would be limited. Consequently, the proportion of diesel and petrol in the consumption of petroleum products will reduce to around 44 per cent by 2030 from around 50 per cent now,” Crisil Research Director, Hetal Gandhi, explained.

Move towards EVs

India has pledged to reduce emissions intensity by 45 pert cent by 2030 and the automobile sector is a crucial link. The country’s transport sector is the largest user of oil and second largest source of CO₂ emissions world-wide, accounting for one-third of the total crude oil consumed, of which 80 per cent is consumed by road transport. 

Government is strongly promoting adoption of EVs and aims to achieve 30 per cent EV sales penetration by 2030. Retail sales of EVs in calendar year 2021 grew by over 160 per cent y-o-y to 3,11,350 units from 1,19,652 in 2020, driven by significant growth in sales of two- and three-wheelers. As of January 2022, India has a total of around 9.66 lakh EVs. At present, there are more than 55 firms engaged in EV production.

Biodiesel use growing 

Currently, public sector oil marketing companies are selling 10 per cent ethanol blended petrol. The average ethanol blending percentage in petrol for Ethanol Supply Year (December 2020-November 2021) was 8.1 per cent. Similarly 5 per cent biodiesel is blended as per availability.

Recently, the International Energy Agency (IEA) said India is on course to outshine China as the world’s third largest ethanol consumer by 2026 as it accelerates the transformation towards a clean energy ecosystem. Ethanol demand in India tripled between 2017 and 2021 with consumption expected at 3 crore litres in the last calendar year.

CNG

The government has commissioned 3,628 CNG stations across the country and has a little over 85 lakh PNG connections as of December 2021. Consequently, the share of natural gas in the primary energy mix has risen from 6.3 per cent in 2020 to 6.7 per cent last year. The government has set a target to raise the share of natural gas in energy mix to 15 per cent by 2030, which will further promote the use of CNG and PNG across sectors.

COMMENT NOW