Consumption of petroleum products in India dropping

Vol 10, PW 21 (22 Feb 07) People & Policy

Bad news for oil and gas marketing companies: Indian consumers are buying less oil products than before.

Figures compiled by the oil ministry, seen by this report, clearly reveal the trend. During the country’s 10th Five Year Plan period, which ends on 31st March 2007, estimates are that consumption of petroleum products will have registered a 2.7% compounded annual growth rate.

This is a full one percent lower than the official expectation of 3.7% consumption growth. The 10th Plan figure is sharply lower than that of the 9th Plan when petroleum products consumption grew 4.9% at a compounded annual rate of growth.

Even more interesting about the 10th Plan figure is that GDP registered an impressive 7.8% compounded annual rate of growth. In the 9th Plan, GDP growth was very low at 5.5% due to drought in large parts of the country.

Numbers for the previous five-year plan periods also clearly show a downward trend in petroleum products consumption figures. In the 8th plan period petroleum products consumption grew at a compounded annual rate of 6.8% while GDP grew 6.8% annually.

A similar pattern is seen in the previous five-year plan period when petroleum products consumption was recorded at a compounded annual rate of 6.9% while the economy showed a compounded annual growth rate of 6%. Logically, with the rise in GDP numbers, consumption of petroleum products should increase.

More interesting is that the share of industry in GDP has risen from 21.9% in 1990-91 to 26.1% in 2005-06. Ditto for services, which was 47.8% of GDP in 1990-91 and 54% in 2005-06.

What explains this decline in petroleum products consumption Oil ministry bureaucrats feel this is due to increased efficiency in the use of petroleum products as well as conservation. “India is not very efficient in the use of hydrocarbons but it is getting better,â€‌ says a ministry source.

“It is possible for India to achieve more efficiency to neutralise demand growth.â€‌

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