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Economy 01-Nov, 2023

India’s eight core industries grow at 8.1 percent in September 2023: Crude oil remains an exception with a decline of 0.4 percent

By: Team India Tracker

India’s eight core industries grow at 8.1 percent in September 2023: Crude oil remains an exception with a decline of 0.4 percent

The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP). Image Source: IANS

Talking about the production of coal (weight: 10.33 percent), It increased by 16.1 percent in September 2023 as compared to the same month last year. Though the production of coal increased, its cumulative index declined by 0.4 percent during April to September, 2023-24

According to the data released by the Ministry of Commerce and Industry, The combined Index of Eight Core Industries (ICI) increased by 8.1 percent (provisional) in September 2023 as compared to the Index of September 2022. In September 2023 compared to the same month the previous year, more steel, coal, cement, refinery products, natural gas, fertilisers, and electricity were produced. Coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity are the eight core industries that ICI tracks individually and together. The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).

India’s GDP growth in the Q1 of the current financial year has brought cheers to the Indian market. According to figures released by the Ministry of Statistics and Programme Implementation on Thursday, August 31, India's gross domestic product (GDP) for the first quarter—that is, the April-June quarter of the current fiscal year accelerated to 7.8 percent. The GDP growth rate in the final quarter of the previous fiscal year was 6.1 percent.

Even though this is less than the 13.5 percent GDP growth in the first quarter of the previous year, India's economy has been expanding steadily and is anticipated to continue to do so throughout the upcoming festive season.

In comparison to September 2022, the production of cement (weight: 19.85 percent) grew by 4.7 percent in September 2023. Its cumulative index increased by 11.5 per cent during April to September, 2023-24 over corresponding period of the previous year.2023. Talking about the production of coal (weight: 10.33 percent), It increased by 16.1 percent in September 2023 as compared to the same month last year. Though the production of coal increased, its cumulative index declined by 0.4 percent during April to September, 2023-24 over corresponding period of the previous year.

Coming over to crude oil production, (weight: 8.98 percent), it declined by a marginal 0.4 percent in September 2023 as compared to the same period in the previous year.  Its cumulative index also declined by 0.4 per cent during April to September, 2023-24 over corresponding period of the previous year. In comparison to September 2022, electricity generation (weight: 19.85 percent) grew by 9.3 percent in September 2023. Its cumulative index increased by 6.0 per cent during April to September, 2023-24 over corresponding period of the previous year.

Source: Ministry of Commerce and Industry

In comparison to September 2022, fertiliser production (weight: 2.63 percent) grew by 4.2 percent in September 2023. In comparison to the same period in the previous year, its cumulative index rose by 7.0 percent during the period from April to September 2023-24. The production of natural gas (weight: 6.88 per cent) increased by 6.5 percent in September, 2023 over September, 2022. Its cumulative index increased by 4.3 per cent during April to September, 2023-24 over corresponding period of the previous year.

The production of the petroleum refinery products (weight: 28.04 percent) increased by 5.5 percent in September 2023 as compared to the same month during the last year. Its cumulative index increased by 4.0 per cent during April to September, 2023-24 over corresponding period of the previous year. Steel production (weight: 17.92 percent) increased by 9.6 percent in September, 2023 over September, 2022. Its cumulative index increased by 14.2 percent during April to September, 2023-24 over corresponding period of the previous year.

The Ministry of Coal has achieved a substantial surge in overall coal production during the month of September 2023, attaining 67.21million tons (MT), production, surpassing the figures of 58.04 MT of the corresponding month in previous year, representing an increase of 15.81 percent. Coal India Limited's (CIL) output increased by 12.63 percent in September 2023 to 51.44 MT from 45.67 MT in the same month the previous year. The cumulative coal production (up to September 2023) has seen quantum jump to 428.25 MT in FY’ 23-24 as compared to 382.16 MT during the same period in FY’ 22-23,  with a growth of 12.06 percent.

Source: Ministry of Coal

In comparison to 716.08 MT in 2020–21, the nation as a whole produced 778.21 MT of coal in 2021–22. Around 28 of the top 37 coal mines produced more than 100 percent of their total output in January 2023, and three other mines produced between 80 and 100 percent. The coal production in FY 2022-23 increased by 14.77 percent to 893.19 MT as compared to 778.21 MT in 2021-22.

Source: Ministry of Coal

India has been eyeing to boost its steel production for a long period of time. Recently, the Union Minister for Steel and Civil Aviation, Jyotiraditya Scindia announced that India has emerged as the second largest producer of steel in the world. The government aims to double the country's annual crude steel making capacity to 300 MT from 125 MT at present. The production of steel in 2018-19 was recorded at 110.92 MT. The production had dropped to 103.54 MT in 2020-21. The reason behind the drop can be attributed to the pandemic which brought the whole nation to a standstill as nationwide lockdowns were imposed to contain the spread of COVID-19.

Source: Ministry of Steel

Coming over to crude oil, there has been a decline in the production of the commodity due ot various factors. One of the important factors is that India has been importing crude oil at very cheap rates from Russia and therefore it is very profitable and pragmatic for India to import the oil rather than produce it at a high cost. According to a research by S&P Global Commodity Insights, after the US lifted sanctions on oil from the Latin American nation, Indian refiners are expected to buy crude oil from Venezuela at lower rates. Prior to the US sanctions, it was mentioned that India was a frequent consumer of Venezuelan crude oil grades. Between 2017 and 2019, India bought over 300,000 barrels per day of Venezuelan crude grades before to the imposition of sanctions, with private refiners being the main purchasers. According to S&P Global data, these imports made up between 5 and 7 percent of India's overall imports of crude oil during that period.

According to Hardeep Singh Puri, minister of petroleum and natural gas, profits for Indian Oil Corporation Limited grew from Rs 1,313 crore in 2019–20 to Rs 24,184 crore in 2021–20. Similar to this, the Bharat Petroleum Corporation Limited (BPCL) registered a profit of Rs 8,789 crore in 2021-2022 as opposed to Rs 2,683 crore and Rs 19,042 crore in 2020-21 and 2019-20, respectively. In just three years, Hindustan Petroleum Corporation Limited (HPCL) has seen a nearly threefold growth in earnings. The company's earnings increased to Rs 6,383 crore in 2021-22 from Rs 2,637 crore in 2019-20.

Source: Ministry of Petroleum and Natural Gas

Also, recently the windfall tax on domestically produced crude oil was raised by the central government from Rs 10,000 per ton to Rs 12,000 per ton. In the meantime, the government also made the decision to lower the windfall tax on the export of aviation turbine fuel (ATF) and diesel, from Rs 3.50 per litre to Rs 2.50 per litre, respectively. The center increased the windfall tax on crude oil in its most recent review, which was dated September 15, from Rs 6,700 per ton to Rs 10,000 per ton.

India produces less than one-fifth of its oil requirements and imports the rest. But even the meagre amount of oil produced in the nation is falling off every year. In 2014–15, India produced 37.5 million tons of its own oil, but by January 2021, that production had dropped to just 25.6 million tons. In the past, the government has attributed the decline in oil production on depleted fields and reservoir issues. However, there are a lot of additional factors causing the slide. According to a report by Care Ratings, the Covid-19 pandemic's technical disruptions, well closures, and delays in field development efforts are the reasons behind India’s declining crude oil production.

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