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India's Fuel Demand Up 2.1% YoY in December, Despite Ongoing EV Transition Efforts

India's fuel demand grows despite the transition to electric vehicles and fossil fuel subsidy reforms

Fuel Consumption

India's fuel demand in December increased by 2.1 per cent Year-on-Year (YoY), reaching 20.67 million metric tonnes, according to data released by the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry on January 7.

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Sales of gasoline (petrol) rose 10.8 per cent Y-o-Y to 3.3 million tonnes, while diesel consumption grew by 6 per cent to 8.1 million tonnes. In addition, sales of cooking gas (LPG) increased by 5.8 per cent to 2.78 million tons. However, naphtha sales dropped by 22.7 per cent to 1.07 million tons. On the other hand, bitumen and fuel oil usage saw modest increases of 6.6 per cent and 1.1 per cent, respectively in December, reported Reuters.

EV Transition in Sight

Despite India's ongoing efforts to transition from traditional fuel-based transportation, there remain questions about whether these efforts will be sufficient to reduce fuel dependency in time to meet its sustainability goals.

A report by the Council on Energy, Environment, and Water (CEEW) indicated that a 30 per cent penetration of electric vehicles (EVs) in new vehicle sales by 2030 could lead to a 15 per cent decline in potential petroleum tax revenues for both central and state governments, compared to a business-as-usual (BAU) scenario, due to reduced fossil fuel consumption.

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By the end of 2025, an estimated 500,000 electric vehicles (EVs) are expected to be on Indian roads, including approximately 370,000 battery electric vehicles (BEVs) and 129,500 plug-in hybrid electric vehicles (PHEVs), according to ET Energyworld. This reflects the concentrated efforts to accelerate the transition to electric vehicles.

Fossil Fuel Subsidy Reforms
In parallel with the push for electric vehicles, India has been gradually reforming its fossil fuel subsidies to achieve a sustainable energy future and address the challenges of climate change.

Since 2010, the government has implemented a "remove, target and shift" approach, reducing fiscal subsidies in the oil and gas sector by 85 per cent, according to the Ministry of New and Renewable Energy. This has freed up resources that are being redirected towards clean energy solutions, including EV infrastructure and renewable energy projects.

These subsidy reforms align with India's long-term goals of transitioning away from fossil fuel dependency and fostering clean energy solutions. This is a key component of the country's broader plan to achieve its net-zero emissions target by 2070.

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