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India's FY2021-2022 transport fuel consumption to remain expansionary as COVID-19 fears ease


Jet fuel recovery to lead growth

Reliance on private cars to boost gasoline

Economic recovery to aid gasoil recovery

Singapore — India's domestic consumption of transportation fuels is expected to grow robustly between April 2021 and March 2022, as focus on the country's economic expansion returns to center stage, after COVID-19 fears ease.

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Demand for aviation turbine fuel, or jet fuel, is expected to lead the growth in India's transport fuel, which is forecasted to total 6.495 million mt over the April 2021 to March 2022 financial year, up 52.24% from the 4.266 million mt consumed in 2020, latest forecasts from the Petroleum Planning and Analysis Cell showed. India's financial year begins in April.

In its forecast for FY2020-2021, the PPAC had expected India's jet fuel demand to total 3.729 million mt.

According to India's Credit Ratings Agency, or ICRA, domestic passenger traffic has been increasing steadily since May 25, 2020, when domestic airlines had first resumed services after lockdown, peaking at 313,668 passengers on Feb. 28.

"Domestic civil aviation operations continue steadily, 249,267 passengers on 2,356 flights," India's aviation minister Hardeep Singh Puri said in a tweet on March 9. The data is as of March 8.

That said, international flights remain suspended and this was extended until March 31, 2021, according to India's Directorate General of Civil Aviation -- a move that could potentially further stifle air travel and suppress aviation fuel prices, industry sources said.


In addition to jet fuel, other transport fuels such as gasoline are also expected to see robust growth. Gasoline demand is expected to grow 14.98% from 2020 to total 31.352 million mt during FY2021-2022, the PPAC forecasts showed.

"A growing middle class as well as an increased reliance on private vehicles as a result of the COVID-19 pandemic will fuel India's gasoline growth," one Indian-based source said.

The PPAC had forecast gasoline consumption to total 27.666 million mt over the previous financial year April 2020-March 2021.

"India's gasoline demand overall has been very robust. Their own refineries have been expanding production, while at the same time, the expansion of the car industry is also boosting demand," another Singapore-based source said.

In fourth-quarter 2020, India's vehicle production jumped 15.41% year on year, with 15.503 million vehicles sold, data from the Society of Indian Automobile Manufacturers showed earlier.


Meanwhile, an expansion in India's gasoil consumption will likely be led by its industrial and manufacturing sectors as the recovery in economic activity has been stronger than expected following the easing of COVID-19 related restrictions in H2 2020.

The stronger-than-expected recovery led the Asian Development Bank to revise its 2020 GDP forecast to an 8% contraction, from its earlier estimate of minus 9%.

"With the pandemic possibly having peaked in mid-September, many high-frequency indicators are better than a year ago, or back to pre-COVID levels, indicating accelerating economic normalization," an ADB report in December 2020 showed, adding that "India's growth projection for FY2021 is kept at 8.0%."

S&P Global Platts Analytics also noted in its earlier reports that a $35 billion package announced by the government last November to stimulate the economy -- by boosting jobs, consumer demand, manufacturing, agriculture and exports hit by the pandemic -- should see the country's oil demand poised for a recovery as its economy picks up.

"India's oil demand is expected to grow by 480,000 b/d in 2021 after a sharp contraction last year, with gasoil to account for close to half the growth as the economy rebounds," JY Lim, oil markets adviser at S&P Global Platts Analytics said.

Apart from being channeled into the manufacturing, agricultural and industrial sectors, analysts have also said that up to 85% of India's gasoil demand comes from the road sector, with the country's massive transportation network of inter-state buses and freight trains fueling much of gasoil demand. To that end, PPAC has forecast FY2021-2022 gasoil consumption to total 83.677 million mt, a 16.36% increase from 2020 and a 13.30% increase from its previous forecast for FY2020-2021.

"The role of liquidity and overall dollar weakness... I think the role it has played in the entire commodity complex [globally] clearly we have all seen and this is not something likely to go away in a hurry because the overall recovery in many of the economies is still going to take some time," Rahul Prithiani, director of CRISIL Research, said at the S&P Global 8th Asian Refining Virtual Summit last week.