Diesel consumption accounts for 40% of overall refined fuel sales in India and is one of the key parameters linked to overall economic growth.

Asia's third largest economy shrank by a record 23.9% in June quarter. Some private economists forecast a contraction of nearly 10% in 2020/21, the worst performance since India won independence from British colonial rule in 1947.

State-refiners sold 4.26 million tonnes of diesel in August, a drop of 13% from July and a 22.3% fall from a year earlier, data compiled by Indian Oil Corp (IOC) showed.

State companies, IOC, Hindustan Petroleum Corp and Bharat Petroleum, own about 90% of India's retail fuel outlets.

Falling local sales and subdued refining margins have forced refiners to curtail crude processing and undertake maintenance turnarounds of units during July.

Local fuel demand had gathered pace from May when India, the world's third-biggest oil importer and consumer, partly eased lockdowns to bolster its sagging economy.

Monthly growth however has softened since July, as a spike in domestic coronavirus infections has led to renewed lockdowns. Also, floods caused by rains have displaced and affected millions of people in some states and hit industrial and construction activity in the country.

India has not yet published industrial output data for August.

Petrol sales by state companies however recovered to 2.14 million tonnes, a growth of fell 5.3% from July and a decline of 8.4% from a year earlier, the data showed.

State retailers sold 0.4% more liquefied petroleum gas in August from July at about 2.29 million tonnes and posted a decline of 4.1% from a year ago.

Jet fuel sales in July rose 8.3% from July to about 240,000, but fell 61.9% from a year ago as curbs on air travel continued.

By Nidhi Verma