NEW DELHI (Reuters) - India expects its refined products demand growth to rebound to 3.8% in the financial year beginning April, tracking improved economic growth, according to government estimates that were made in January before the coronavirus broke out.
India’s economy expanded at its slowest pace in more than six years in the last three months of 2019, and analysts predict further deceleration as the global coronavirus outbreak stifles growth in Asia’s third-largest economy.
Consumption of refined fuels, a proxy for oil demand, is expected to total 222.79 million tonnes in 2020/21, according to the initial estimates released on Monday by the Petroleum Planning and Analysis Cell of the federal oil ministry.
Fuel consumption in the world’s third biggest oil importing nation is expected to slow to 1.3% this fiscal year ending March 2020, the lowest growth rate in six years, government estimates showed.
The projections for 2020/21 were finalised in January and do not factor in the likely impact of the coronavirus outbreak on the local industry and fuel demand in the country, a government official said.
Analysts, however, say that India may have to revise down its fuel demand growth projection for 2020/21.
“(The) Indian economy and oil demand are already facing headwinds. With corona impacting the regional oil demand, India will weather a slowdown as well. We expect oil demand to grow by 2.6% over April 2020 to March 2021,” said Sri Paravaikkarasu, director for Asia oil at consultancy FGE.
India reported two more cases of coronavirus on Monday, taking the number of people who have tested positive in the country to five.
Diesel demand, accounting for about two-fifths of refined fuel consumption and directly linked to industrial activity, is estimated to rise 2.8% compared with the expected five-year low of 0.9% growth in 2019/20, the data showed.
Gasoline demand is expected to slow to 8.4% in 2020/21 from the projected 9% for this fiscal year, the data showed.
While gasoline is used by passenger cars, diesel is used by trucks and heavy vehicles for transporting goods and in industrial activities like mining and powering generators for industries.
India’s vehicle sales are expected to stay under pressure due to rising cost of vehicle ownership and slower economic growth, the president of automobile lobby group the Society of Indian Automobile Manufacturers (SIAM) said last month.
Diesel demand is expected to remain subdued until the second half of 2020, when analysts expect various policy measures aimed at stimulating industrial activity to kick in and soak up excess fuel.
Reporting by Nidhi Verma; Editing by Muralikumar Anantharaman and Emelia Sithole-Matarise