Fuel Demand in India Drops Over 1% in January, Diesel Consumption Down 4%

India’s fuel consumption in January fell to its lowest monthly level since October, though it registered a 3.2% increase year-on-year, according to data released by the oil ministry on Friday. Total fuel consumption for the month stood at 20.49 million metric tons, offering a key indicator of the nation’s oil demand trends as the world’s third-largest consumer and importer of oil.

On a month-to-month basis, January’s fuel demand declined by over 1% from 20.73 million metric tons recorded in December, as per data from the Petroleum Planning and Analysis Cell (PPAC).

Breaking down the figures, gasoline (petrol) sales dipped slightly by 0.3% compared to December, totaling 3.3 million metric tons. Diesel consumption, a crucial indicator of industrial and transport activity, fell nearly 4% month-on-month to 7.7 million tons in January. However, diesel demand showed resilience on a yearly basis, rising by 4.3% compared to January last year.

Liquefied petroleum gas (LPG), commonly used for cooking, saw a 5.2% year-on-year increase in sales, reaching 2.84 million tons. On a monthly basis, LPG sales were up by 2.16%. In contrast, naphtha sales dropped by 12.2% year-on-year to 1.15 million tons, though they rose 7.48% compared to December.

Economic Context and Policy Measures

The dip in monthly fuel consumption comes amid broader concerns over India’s economic momentum. A recent report from the finance ministry suggested that sluggish economic growth is likely to persist into the next fiscal year, with global risks continuing to weigh on the outlook. The report urged state governments to implement business-friendly reforms to stimulate economic activity.

In response to these economic challenges, the Reserve Bank of India (RBI) cut its key interest rate on Friday for the first time in nearly five years, aiming to stimulate growth as inflation trends towards its 4% target. Additionally, the government slashed personal tax rates in its annual budget, focusing on boosting domestic demand to counteract global economic uncertainty, including potential new tariff barriers.

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