Fuel demand to go up after govt allows some industries to resume operations

Petrol and diesel sales dropped by more than 66% and ATF consumption collapsed by 90% after the nationwide lockdown shut factories, stopped road and rail transportation and suspended flights

Petrol and diesel consumption, which saw its biggest ever decline in the aftermath of a nationwide lockdown, is likely to pick up in the second half of the month after the government on Wednesday allowed trucks to ply and permitted farmers and industries in rural areas to resume operations after April 20.

Petrol and diesel sales dropped by more than 66 per cent and aviation turbine fuel (ATF) consumption collapsed by 90 per cent after the unprecedented nationwide lockdown shut factories, stopped road and rail transportation and suspended flights.

"The government has allowed inter and intra-state movement of goods traffic by road as well as rail. Also, farming operations, as well as industries outside municipal limits, have also been allowed to operate from April 20. All these will involve fuel consumption," a top industry official said.

Trucks are the biggest consumers of diesel, which is also used as fuel in harvesters nd other agricultural equipment. Some goods trains also run on diesel.

All these activities, the official said, will allow diesel demand to pick up in the latter part of the month.

Moreover, vehicles used by e-commerce operators will also be allowed to ply and these vehicles largely use petrol.

"There isn't much hope for ATF, but petrol and diesel demand certainly will go up if all the industries and activities permitted by the government resume operations from April 20," the official said.

The government is yet to allow resumption of domestic and international flights.

However, road construction and work on projects in industrial clusters has been allowed, which too would require fuel, he said.

As part of a plan to exit the world's biggest lockdown and revive stalled economic activity, the government on Wednesday allowed makers of information technology hardware, farmers and industries in rural areas to resume operations after April 20.

This came a day after Prime Minister Narendra Modi extended a nationwide lockdown to May 3 to prevent the spread of coronavirus. The lockdown was first imposed on March 25 for 21 days.

From April 20, the government will lift restrictions on e-commerce companies, goods movement by roads and restart port and air cargo operations.

Factories beyond municipal limits including those in the food processing industry, mining, packaging material, oil and gas exploration and refineries will be allowed to operate. Road construction, irrigation projects, construction work and projects in industrial areas such as SEZ and EoUs will be allowed to operate.

The official said both public and private sector oil refineries had cut down their run-rate following the drop in demand.

Petrochemical plants too had shutdown as products like polymers they produced were not being lifted by user industries such as plastics and packaging unit. Now with packaging industry allowed to operate, some of the products from packed godowns will move, allowing resumption of petrochemical units, he said.

The collapse of demand in the world's third-biggest consuming nation during April came on the back of worst fuel sales in more than a decade recorded in March 2020.

The country's petroleum product consumption fell 17.79 per cent to 16.08 million tonnes in March.

Diesel, the most consumed fuel in the country, saw demand contract by 24.23 per cent to 5.65 million tonnes. This is the biggest fall in diesel consumption the country has recorded as most trucks went off-road and railways stopped plying trains.

Petrol sales dropped 16.37 per cent to 2.15 million tonnes in March as the 21-day nationwide lockdown enforced to prevent the spread of coronavirus (Covid-19) took most cars and two-wheelers off the road.

With flights grounded since mid-March, ATF consumption fell 32.4 per cent to 4,84,000 tonnes.

The only fuel that showed growth was LPG as households rushed to book refills for stocking during the three-week lockdown period. LPG sales rose 1.9 per cent to 2.3 million tonnes in March.