Insulating consumers from oil price gyrations key for India's demand growth: minister

India's oil and gas consumption is growing at a rapid pace and to ensure that the upward trajectory is sustained it is crucial that domestic consumers remain insulated from surging international oil and gas prices, petroleum minister Hardeep Singh Puri said.

"While we talk about growth, we have been mindful of inflation and prices. We have successfully insulated the common man from the surge in international prices, and our policies have ensured sustained availability of fuel at the most reasonable prices," Puri told a recent industry seminar.

Latest data from the Petroleum Planning and Analysis Cell showed that India's oil demand rose 5.7% year on year to 116.44 million mt, or 5.1 million b/d, in the first half of 2023. India's diesel demand rose 7.4% in the first half of 2023 from the same period in 2022, while gasoline demand rose 8.2%. Demand for jet fuel and naphtha rose 24.4% and 6.4%, respectively, over the same period.

"Refining activities are expected to be robust in the second half of the year, driven by strong domestic demand," said Sumit Ritolia, refinery economics analyst at S&P Global Commodity Insights.

"As we enter the second half of the year, demand typically increases with the start of the festive and wedding season. Additionally, in the first and second quarters of 2024, India will have its central election, and the government is placing significant focus on infrastructure activities, further driving increased demand and consumption," he added.

Economic outlook brightens

Puri quoted World Bank's prediction for a robust 6.3% GDP growth rate for India in 2023-24 (April-March), saying it was a reflection of the country's robust economic fundamentals.

"Our growth, undeniably, has been fueled by our voracious energy consumption, a by-product of rapid urbanization and industrialization," Puri said, adding that a quarter of the global energy demand growth between 2020 and 2040 was projected to originate from India.

"We have not merely survived, but thrived, with the highest growth rate amongst the top five economies worldwide. Even in the face of global slowdown, we are projected to contribute to around 15% of global growth in 2023," Puri added.

As the economy continues to outshine on the global stage, the petroleum sector will continue to play a crucial role in fueling the country's growth, the minister said.

"A growth-energy correlation is manifestly visible as India stands today as the world's third-largest energy consumer, the third-largest consumer of oil, the third-largest LPG consumer, the fourth-largest LNG importer, the fourth-largest refiner, and the fourth-largest automobile market in the world," Puri said.

He said that New Delhi's resolve to bring reforms in the energy sector is unwavering, and the cabinet's recent approval of critical gas pricing reforms is testament to this commitment.

"The benefits of these reforms have helped the public, with a noticeable reduction in the average cost of piped natural gas and compressed natural gas," the minister said.

India said in late March that a unified tariff for all interconnected gas transmission pipelines owned and operated by authorized entities -- Indian Oil Corporation Limited, Oil and Natural Gas Corporation Limited, GAIL (India) Limited, Pipeline Infrastructure Limited, Gujarat State Petronet Limited, Gujarat Gas Limited, Reliance Gas Pipelines Limited, GSPL India Gasnet Limited and GSPL India Transco Limited -- came into effect April 1.

The crucial reform has been hailed by many market participants as positive, with the reform set to usher more price transparency, boost gas-related infrastructure, and provide access to remote areas.

Supply diversification

Puri said India was taking crucial strides towards diversifying its energy supplies and increasing the share of alternate energy sources like biofuels, ethanol and CBG. It was also boosting domestic oil and gas production, as well as setting new energy targets through electric vehicles and hydrogen.

"We have diversified our import basket from 27 countries in 2006-07 to 39 in 2023," Puri said.

He added that India increased its ethanol content in petrol from 1.53% in 2013-14 to more than 11.5% by March 2023.

India has set a roadmap for ethanol blending, with the aim to achieve a blend comprising 20% ethanol in petrol by fiscal year 2025-26. Puri said E20 was rolled out on Feb. 8, ahead of its April target. The number of outlets retailing E20 stood at almost 600 and will cover the entire country by 2025.

"We are relentlessly pursuing these initiatives and targets with the belief that it will usher in a new era of sustainable and secure energy for India, bolstering our economic growth while safeguarding the environment for our future generations," Puri said.

"Indigenous solutions like compressed bio-gas are not just providing us cleaner fuels but also giving an additional source of income to our farmers, thus providing a paradigm shift in our efforts towards rural prosperity," he added.