Oil PSUs begin export of diesel as domestic demand contracts

Fuel impacted by extended monsoon and slowing auto sales

An Indian petrol pump attendant serves a customer at a gas station in Kolkata on June 16, 2017. India is to begin revising national petrol and diesel prices daily at 6am, moving away from the practice of revising rates at midnight every fortnight / AFP PHOTO / Dibyangshu SARKAR

State-owned refiners Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) began exporting diesel for the first time as demand for the fuel has registered a contraction year-on-year (also for the first time), in the second quarter ended September amid a slowdown in the Indian economy.

N. Vijayagopal, Director-Finance, BPCL, told The Hindu , “For the first time, we had to export diesel in September as [the fuel] registered a negative demand of 2.4% year-on-year. We exported 2,00,000 tonnes of diesel. Going forward, we have to keep exporting diesel for the next six months or so due to demand destruction. We are likely to come out with a tender for export of diesel soon.” Diesel, which accounts for more than one-third of the overall oil product demand in India, is following a negative trajectory due to an extended monsoon and slowing auto sales.

“As a thumb-rule, if India grows at 8%, diesel demand grows at 4%. So, diesel demand is directly linked with the growth of the economy. With economy growing sub-5%, diesel demand had gone into the negative trajectory. With all refineries expanding capacities, we have surplus diesel in the system and have no other option but to export. About 80% of the diesel demand in the country comes from the transportation sector,” a board member of an oil marketing company (OMC) said.

India’s diesel demand has been consistently falling from 7.78 million metric tonnes (MMT) in May this year to 5.83 MMT in September, a steep fall of 25%, according to government data. Demand for petrol has also been falling since May 2019 to 2.37 MMT in September but has grown about 5-6% year-on-year.

61% rise since April

India exported diesel worth ₹14,149 crore in September alone compared with exports of ₹8,771 crore in April this year, registering a growth of over 61%.

India’s largest refiner IOCL had to shut down some of its refineries in the second quarter due to excess supply and has become one of the largest exporters of diesel among OMCs.

Private sector refiners Reliance Industries Ltd. (RIL) and Nayara Energy (erstwhile Essar Oil) export most of their products as OMCs command about 90% of the petrol and diesel market share in India.