Diesel demand growth in India slumps to the lowest since Covid-19 pandemic

Growth in demand for diesel, which is the most consumed fuel in India, slumps to its lowest since the Covid-19 pandemic in FY25, which ended on March 31. The slowdown in the growth of diesel consumption comes amid the sluggish economic expansion as well as the transport sector's shift to cleaner fuels.

Diesel consumption rose two per cent to 91.4 million tonnes in the last financial year, between April 2024 and March 2025, reveals the data released by the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry. The growth in demand for diesel, which is heavily used in the transport sector as well as in the farm machinery segment, was slower in the last fiscal compared to the 4.3 per cent growth recorded in the previous financial year FY24 and 12.1 per cent in FY23. This reveals a continuous decline in the growth pace for diesel demand over the last three financial years.

On the other hand, petrol which powers the largest chunk of passenger vehicles and two-wheelers has witnessed its consumption rise 7.5 per cent to 40 million tonnes in the last fiscal.

Why is diesel witnessing softening demand growth?

Diesel accounts for about 40 per cent of fuel used in India. The slump in demand growth for this fuel mirrors economic activity in the country. However, more than the economy, this trend shows how electric vehicles have started reshaping the diesel demand in India.

Diesel still powers three-fourths of India's transport sector, but the growth is moderating owing to the rising number of electric vehicles. The slower consumption growth for diesel compared to petrol in the last fiscal was largely due to the commercial vehicles' shift to electric mobility, stated PTI. In major cities like Delhi and Mumbai, electric buses are being adopted at a rapid pace. Electric auto-rickshaws have become dominant in many lower-tier cities, directly impacting the diesel vehicles' share in the urban public transport sector.

Companies that have continued significantly in the growth of diesel-run commercial vehicles, including Amazon, Flipkart and BigBasket are switching their delivery fleets to electric vehicles. This shift has been affecting diesel-powered vans and light commercial vehicles, reducing demands in the logistics sector.

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