Local oil product sales in September rose an annual 6.1%, its fastest pace since December, growing on last year's low base, and indications are that consumption is likely to rise further this month due to power outages and the festival season.
Oil product sales, a proxy for oil demand in Asia's third-largest oil consumer, totalled 11.29 million tonnes in September. In the same period last year floods in parts of the country slackened demand.
Growth in diesel sales, which make up over a third of refined products consumption, rose an annual 9.8% in September mainly due to higher sales of diesel-driven cars.
Gasoil prices in India are fixed by government at a cheaper rate to protect the poor and control inflation. But gasoline is sold at market rate, widening the gap between prices of the two fuels.
Gasoline consumption last month grew an annual 6.1% -- the rate of growth is higher than last month but overall volumes have declined due to falling car sales during the month.
State-run firms in mid-September raised gasoline prices by about 5%.
India may use around 5.2% more diesel in 2011 and about the same in 2012, a Reuters survey shows, a little more than half the rate of expected economic growth.
Gasoil demand is expected to rise further this month mainly due to demand for more electricity. Floods in the eastern Orissa state, a strike at the state-run Coal India Ltd and political protests in the southern Andhra Pradesh state had hit coal supplies, leading to lower power generation.
Industrial output in August expanded less than forecast in further evidence of a slowdown in Asia's third-largest economy as soaring interest rates and persistently high inflation weigh on demand.
Industry has borne the brunt of the central bank's aggressive policy tightening. It has raised rates a dozen times over the past 18 months.
Output has slipped steadily from a double-digit annual pace last year as the Reserve Bank of India's 12 rate rises since March 2010 pushed up borrowing costs at the same time that rising prices and a stagnating global economy curbed investment and demand at home.
The country's naphtha consumption in September rose an annual 18.2% while that of fuel oil declined 19.6%, the data showed.