The demand for diesel, the most widely used fuel in India, has experienced a significant decline, reaching its lowest growth rate since the Covid-19 pandemic in the fiscal year 2025, which concluded on March 31. This decrease in diesel consumption growth is occurring alongside a sluggish economic recovery and a transition within the transport sector towards cleaner fuel alternatives.

According to data from the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, diesel consumption increased by only two percent, totaling 91.4 million tonnes during the last fiscal year from April 2024 to March 2025. This growth rate is notably lower than the 4.3 percent increase observed in the previous fiscal year (FY24) and the 12.1 percent rise in FY23, indicating a consistent decline in the growth rate of diesel demand over the past three fiscal years.

Conversely, petrol, which fuels the majority of passenger vehicles and two-wheelers, has seen a consumption increase of 7.5 percent, reaching 40 million tonnes in the last fiscal year.

Why is diesel witnessing softening demand growth?

Diesel constitutes approximately 40 percent of the fuel consumption in India. The decline in demand growth for this fuel reflects the overall economic activity within the nation. However, more significantly than economic factors, this trend indicates the impact of electric vehicles on diesel demand in India.

Currently, diesel fuels about three-quarters of the transport sector in India, yet its growth is slowing due to the increasing prevalence of electric vehicles. The reduced growth in diesel consumption relative to petrol in the previous fiscal year can be attributed primarily to the transition of commercial vehicles towards electric mobility, as reported by PTI. In major urban centers such as Delhi and Mumbai, the adoption of electric buses is accelerating. Additionally, electric auto-rickshaws have gained prominence in numerous smaller cities, directly affecting the share of diesel vehicles in urban public transportation.

Companies that have historically contributed to the growth of diesel-powered commercial vehicles, such as Amazon, Flipkart, and BigBasket, are now transitioning their delivery fleets to electric vehicles. This change is impacting the demand for diesel vans and light commercial vehicles, leading to a decrease in requirements within the logistics sector.

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