FY18 saw furnace oil sales plummeting as the government took the decision to phase out fuel oil based power plants; high speed diesel and motor gasoline continued their growth journey. However, FY19 has seen an overall decline in volumes of petroleum products sold by the oil marketing companies amid drastic economic slowdown; squeezing industrial activity and demand; rising inflation and hence rising prices; and last but not the least the all-of-a-sudden booming grey market in FY19.
The petroleum products volumes sold by the oil marketing sector witnessed a decline of 29 percent year-on-year in the last month of FY19. June-19 volumes for FO were down by 57 percent year-on-year; the month-on-month decline in FO volumes however was in single digits in June-19 because of the demand from the power sector in the peak summer season. Motor gasoline volume also came down by around 8 percent and 7 percent, year-on-year and month-on-month, respectively. Whereas, HSD volumetric sales also weakened by 24 and 37 percent, on a year-on-year and month-on-month basis.
Overall in FY19, petroleum products witnessed a decline of 26 percent. Furnace oil dropped even more drastically in FY19 versus FY18 (58% YoY), and is expected to continue becoming diminutive as coal power generation comes online and RLNG imports pick up pace to replace FO in FY20.
What’s worrying is the falling volumes of diesel by 20 percent year-on-year. Economic slowdown has hit HSD sales significantly, while higher diesel prices have given way to diesel smuggling along the Iranian border, which has further dented local sales. The negative volumetric growth is likely to continue in FY20 as economic slowdown continues. Plus, the monsoon season will further dent any growth prospects.
After showing a growing trend, motor gasoline (petrol) sales remained flat in FY19. Key factors behind slowing down of petrol sales include rising pump prices in FY19. Though petrol sales are likely to be the only breather for the OMCs when it comes to the three key POL products in FY20, the degree of increase or decrease in sales depends on whether demand shifts to CNG amid rising petrol prices, or the other way around as CNG prices climb as well.
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