Demand for petroleum products to plummet in fiscal 2021 due to Covid-19 pandemic
Demand for petroleum products will decline by 8-10% in fiscal 2021 due to the Covid-19 pandemic and its impact on economic activities. Demand for major petroleum products has plunged due to the nationwide lockdown implemented since the last week of March 2020. Petroleum products such as motor spirit (MS), high speed diesel (HSD) and aviation turbine fuel (ATF) has fallen by 36%, 33% and 80% on-year in Q1 fiscal 2021. Demand is expected to rebound gradually with relaxation in lockdownrules - as evident in lower decline in Q2 fiscal 2021 - 5%, 16% and 59% on-year for MS, HSD and ATF respectively. Even in Q3 fiscal 2021, demand for MS increased 6%, while that of HSD declined marginally by 1%. However, that of ATF witnessed a sharp fall of 45% on-year. We believe that a complete recovery is still unlikely even on the other side of the pandemic. This is because economic activities will be impacted for a longer duration due to shortage of labor as well as funds.
On the positive side, LPG and bitumen will be the only petroleum product to post growth in this fiscal due to increasing consumption from the household segment. Moreover, the governments initiative to provide free LPG cylinders in the first quarter of this fiscal to 8 crore households registered under PMUY (Pradhan Mantri Ujjwala Yojna) will also drive demand for the cooking fuel. Demand for bitumen would be supported by increase in road implementation.
Demand for most of the petroleum products is likely to recover in fiscal 2022, except for ATF which could take another 3-4 years to recuperate.
