Statsguru: Six charts explain declining diesel consumption in India

The consumption of the most widely used multi-purpose fuel, diesel, is on a decline in India. Its monthly consumption, which had stagnated for a long time, is now falling (chart 1). This is happening at a time when the economy is recovering. Petrol consumption, on the other hand, has been on a gradual rise for many years, and it has not moved from its path. 

A more surprising fact is that diesel use in India has declined at a rate never seen before. Diesel consumption fell at a compounded annual growth rate of 2.6 per cent between 2017 and 2021 in the April-September period (chart 2). While petrol consumption has grown, the rate of growth at about 3 per cent is nowhere near its historical growth levels. 

This poses an important question: Who could have reduced diesel use? But before that it is imperative to know the sectors that are diesel guzzlers. Chart 3 shows that transport, and in that vehicles on road, contribute the most to diesel use in India. This data was last recorded in 2013 by the Government of India, and no study has been undertaken over the last eight years to ascertain how diesel use has changed. This makes it difficult to gauge where diesel demand has been affected. 

With available data, commercial vehicles, most of which run on diesel, are the top users. They are followed by private and commercial cars, buses, and smaller transport vehicles. Have they reduced their diesel use?

Probably, as the demand for diesel vehicles has recovered only 64 per cent from its peak—poor compared to 76 per cent recovery in petrol-run vehicles (chart 4). Most of the weakness in petrol vehicles is due to poor two-wheeler sales, and a bounce back will further push up petrol consumption. 

It is likely that weak diesel demand from small industry, local transporters, and individuals, preferring petrol, CNG and electric variants over diesel for personal cars are the reason for falling diesel use. 

The agriculture sector is also a major diesel consumer. Sales of tractors in India have been growing for three years (chart 5). In fact, farm mechanisation gathered pace during the pandemic. So, demand from the farm sector is unlikely to have reduced.

Demand from smaller users has not recovered to pre-pandemic levels yet. Also, if we look at the distance traversed by Indian Railways, it completed about 550 million kilometres in the latest 6-month period, April-September 2021. It ran nearly 660 million kilometres in October 2017-March 2018 (Chart 6).
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