Diesel generator sets are commonly used in both domestic and industrial consumer segments for meeting backup power needs. Diesel-based generator sets are preferred over other gensets due to their fuel efficiency, cost effectiveness as compared to other hydrocarbonic fluids, lower maintenance costs and longer life. India’s diesel genset market has seen a steady growth due to power supply shortages, rising long-term infrastructure investments and unreliable grid supply. Diesel gensets are mostly operated using high speed diesel (HSD), commonly known as diesel, due to its higher thermal efficiency and lower cost compared to other fuels. Various other liquids are used as well, such as heavy fuel oil, low sulphur heavy stock (LSHS), producer gas, light diesel oil (LDO), furnace oil (FO), biodiesel and blended fuels. Power Line presents the key trends in the liquid fuel market…
Fuel trends
The total consumption of petroleum products during 2018-19 was 213.2 million tonnes (mt), which marked a growth of 3.4 per cent over the 206.2 mt consumed during 2017-18. According to the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum and Natural Gas (MoPNG), the consumption of HSD, LDO and naphtha recorded a growth of 3 per cent, 14.2 per cent and 9.6 per cent, respectively, in 2018-19 over that in 2017-18. Meanwhile, consumption of LSHS and FO/LSHS declined by 5.6 per cent and 2.3 per cent in 2018-19 as compared to that in 2017-18. Of the total fuel consumption of 213.2 mt, HSD consumption in India during 2018-19 stood at 83.5 mt. The consumption of naphtha was 14.1 mt and that of FO/ LSHS was 6.6 mt. LDO accounted for only 0.6 mt of the total consumption during the same period.
For April-December 2019, the total consumption of petroleum products stood at 160.6 mt, recording a 1.9 per cent growth over that in the corresponding period last year. Of this, diesel constituted the highest share of 39.2 per cent (62.7 mt), followed by naphtha at 6.9 per cent (9.9 mt) and FO/LSHS at 2.9 per cent (4.6 mt).
On the supply side, the production of petroleum products grew by 3.1 per cent to 262.3 mt in 2018-19 as compared to 254.3 mt in 2017-18. The production of HSD grew from 108.1 mt in 2017-18 to 111.2 mt in 2018-19, recording a year-on-year growth of 2.9 per cent, while LDO grew from 0.58 mt in 2017-18 to 0.68 mt in 2018-19, recording a year-on-year growth of 16.7 per cent. The production of FO/LSHS fell from 10.3 mt in 2017-18 to 9.97 in 2018-19, recording a decline of 3.2 per cent. Further, a decline of 2 per cent was seen in naphtha production from 20 mt in 2017-18 to 19.6 mt in 2018-19.
For April-November 2019, the overall production stood at 173.3 mt. Of the total production, diesel comprised the maximum share of 42.5 per cent (73.8 mt), followed by naphtha with a share of 7.5 per cent (13 mt) and FO/LSHS at a minuscule share of 3.8 per cent (6.6 mt).
Power market demand
As the power deficit position reduced from -0.8 per cent in March 2018 to -0.4 per cent in March 2019, diesel usage for power generation may have reduced. The power deficit in December 2019 was also low at -0.5 per cent, translating into low diesel demand by the power sector. However, there has been a growth in the consumption of naphtha by the power sector as per MoPNG.
Outlook
Although the power deficit is declining gradually, the demand for diesel is expected to stay steady due to the poor quality of power supply, frequent power outages and inadequate grid infrastructure. With the increasing number of real estate construction projects and newly launched smart city projects in India, the need for diesel gensets is expected to rise. Another key driver of diesel for power generation is the low availability of alternative fuels like domestic gas. However, diesel prices are subject to volatility in the international oil market and may see an increasing trend in the near future, owing to supply disruptions in the Middle East, which is a key source of import for India.