India's petroleum consumption growth in the first nine months of the current fiscal has slowed to 5.4 per cent as compared to 9.6 per cent in fiscal 2015-16, a report said on Friday.

"Domestic petroleum consumption grew moderately by 5.4 per cent in nine months of FY17 as compared to a robust 9.6 per cent in FY2016, excluding petcoke volumes, led by moderation in growth of diesel, naphtha and bitumen," Kotak Institutional Securities said in a report.

"Overall petroleum consumption growth was robust at 8.8 per cent in nine months of FY17, albeit lower than 11.6 per cent in FY2016, driven by 40 per cent growth in petcoke and 11 per cent growth in gasoline, LPG and ATF (aviation turbine fuel)," it said. 

"Our analysis is corroborated by evident reduction in public sector undertakings' (PSUs) share of domestic petroleum volumes over the past few years."

Kotak said the country's growth in demand for auto fuels moderated in the April-December period, with diesel demand growing by a modest 3.7 per cent year-on-year, as compared to 7.5 per cent growth in the last fiscal. 

Gasoline, or petrol, demand during the period in consideration grew by 11.2 per cent although it was lower than 14.5 per cent growth in fiscal 2016, it added. 

"Kerosene off-take declined sharply by 17 per cent during April-December, as compared to a decline of 3.7 per cent in the FY2016, impacted by a reduction in allocation under the public distribution system," the report said.

According to Kotak, PSUs' share of volumes has reduced, led by loss in market share of auto fuels and rising imports

"Growth in domestic sales volumes by oil marketers has fallen short of growth in domestic petroleum consumption over the past few years, driven by 2-3 per cent loss of market share in auto fuels to private players since deregulation of diesel and substantial increase in imports of fuels such as petcoke by consuming industries directly or through trade channels," it said. 

Instead, petroleum coke demand remained strong, growing at a steep 40 per cent over the same period last year, as compared to 33 per cent growth in the whole of the previous fiscal "led by continued increase in off-take by cement plants and aluminum smelters". 

Petroleum coke imports have increased significantly since April 2014 as domestic production fell short of sharply rising demand, Kotak said. 

"We note that OMCs (oil marketing companies) rarely import petroleum fuels to sell in domestic markets," it said. 

On the stocks of the state-run OMCs, Kotak said the Indian Oil Corp shares were being given preference over those of Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL). 

"We continue to prefer IOC over BPCL and HPCL, given expected strength in underlying earnings driven by robust margins and improvement in contribution of Paradip refinery and relatively inexpensive valuations as compared to BPCL and HPCL," it said.