Wednesday, 09 Oct, 2024
By: Yash Gupte
The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP). Image Source: IANS
A decline in production was recorded in the case of Crude Oil, Natural Gas, Petroleum refinery products and Electricity.
According to the government data released on Wednesday, the combined Index of Eight Core Industries (ICI) increased by 3.5 percent (provisional) in April 2023 as compared to the Index of April 2022. The production of Fertilizers, Steel, Cement and Coal increased in April 2023 over the corresponding month of last year. A decline in production was recorded in the case of Crude Oil, Natural Gas, Petroleum refinery products and Electricity. The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).
Coal production (weight: 10.33 per cent) increased by 9.0 percent in April, 2023 over April, 2022. Its cumulative index increased by 14.9 percent during 2022-23 over corresponding period of the previous year. The Ministry of Coal has set a target of producing 1 billion ton of coal in FY2023-24, a 13 percent growth year-on-year. Recently, India added another feather to its cap as the FY 2022-23 recorded the highest ever domestic production of coal. Prime Minister Narendra Modi in a tweet, expressed his happiness over the highest ever coal production in the history of India.
Source: Ministry of Coal
The largest tranche of the commercial coal mine auctions were launched by the Ministry of Coal on November 3, 2023, under the 6th round and the second attempt of the 5th round. With several first-time bids in this round and an average revenue share of 22.12 percent, the auctions saw fierce competition. This is an indication of the sector's ongoing interest as well as coal mining's secure future in India. Coal production from commercial coal blocks was around 5.09 Lakh Ton on March 2, 2023 which was the highest ever single day production. Production from captive/commercial coal mines during current FY till February has increased by 29.8 percent over FY 2021-22. . NITI Aayog in a draft report estimated that India’s coal demand will increase to 1.1-1.3 billion tons by 2030. Coal India is expected to produce one billion tons by 2025-26.
Talking about crude oil (weight: 8.98 percent), its production declined by 3.5 percent in April 2023 over April 2022. Its cumulative index declined by 1.7 percent during 2022-23 over the corresponding period of previous year. Similar trend was witnessed in the case of natural gas. The production of natural gas (weight: 6.88 per cent) declined by 2.8 percent in April, 2023 over April, 2022. Its cumulative index increased by 1.6 percent during 2022-23 over the corresponding period of previous year. Also, the Petroleum Refinery production (weight: 28.04 per cent) declined by 1.5 percent in April, 2023 over April, 2022. Its cumulative index increased by 4.8 percent during 2022-23 over the corresponding period of previous year.
Source: Ministry of Petroleum and Natural Gas
Cumulative crude oil production during April-March, 2022-23 was 29178.56 TMT, which is 8.41 percent lower than target for the period and 1.73 percent lower than production during corresponding period of last year respectively.
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. The government has also announced fiscal incentives on new discoveries, incentives for enhanced oil and gas recovery, allowed exploration and exploitation of unconventional hydrocarbons in nomination fields, and undertaken production enhancement contracts with private players for small fields in an effort to make crude oil production appear more lucrative. Nevertheless, the nation's declining oil production pattern is still present.
The growth rate in April 2023 is the lowest since October 2022 when the sectors expanded by 0.7 percent.
Source: Ministry of Commerce and Industry
The production of fertilisers (weight: 2.63 percent) increased by 23.5 percent in April, 2023 over April, 2022. Its cumulative index increased by 11.3 percent during 2022-23 over the corresponding period of previous year. Out of all the eight core industries, the fertiliser industry has registered a record growth of 23.5 percent in April. The Government of India has been taking several steps to provide a boost to the domestic production of fertilisers. The Department of Fertilizers (DoF) has adopted the Direct Benefit Transfer (DBT) scheme for fertiliser subsidy payment in order to improve the delivery of fertiliser services to farmers. According to the DBT fertiliser scheme, fertiliser businesses receive a 100 percent subsidy on various fertiliser grades based on the actual sales that the retailers make to the beneficiaries.
In the last five years, from 2016 to 2021, the Indian fertiliser market grew by 22.6 percent. The country's production of fertilisers, however, only increased by a meagre 3.78 percent, increasing its reliance on imports, which increased by 48.22 percent in FY 2020–21 from FY 2016–17. The most widely used fertiliser in India is urea, which accounts for 57 percent of all key fertilisers (Urea, Di-ammonium Phosphate (DAP), Muriate of Potash (MOP), and Nitrogen, Phosphorous, and Potassium) (NPK).
Source: Ministry of Chemical and Fertilisers
The central government has been focusing on minimizing the import of fertilisers and increasing the domestic production of fertilisers. Five large-scale capacity fertiliser production plants (Ramagundam, 3 HURL Plants Gorakhpur, Barauni & Sindri and Matix) are planned by the government which will guarantee to decrease imports by 6.35 million tons. DAP is the major consumed fertilizer in India after Urea and NPK. According to reports, the sales of DAP fertilizers is increasing in India year over year and touched a level of 10.5 million tons in FY 2020-21, with the growth of around 19.3 percent in last 5 years. The production of DAP hit 3.8 million tons, with a 13.6 percent decline in growth over the previous five years, and imports touched 5.8 million tons, with an increase of 31.8 percent over those same five years.
Talking about the steel production in the country, it increased by 12.1 percent in April, 2023 over April, 2022. Its cumulative index increased by 8.9 percent during 2022-23 over the corresponding period of previous year. India has been eyeing to boost its steel production for a long period of time. Currently, India is the second largest producer of steel in the world after China. The government aims to double the country's annual crude steel making capacity to 300 MT from 150 MT at present. The government removed the export tariff on steel products and extended the export benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to products made of iron and steel for a set amount of time in 2022 as part of a variety of initiatives to help the steel sector.
The decision to impose a 15 percent export tax on some steel items had slowed down demand internationally. India's crude steel production would have nearly reached 130 MT in 2022 with a far greater level of exports if there had been no export tax. In October 2022, Prime Minister Narendra Modi had marked that India has set a target of nearly doubling the production of steel from 154 MT to 300 MT within the next decade. He said that a boost to steel sector and rapid increase in steel production while pave the way for country in becoming Aatmanirbhar and he also added that a strong steel sector will lead to a robust infrastructure sector as it has a significant contribution in roads, railways, airport, ports, construction, automotive, capital goods, and engineering products.
Source: Ministry of Steel
More than 80 percent of the country’s reserves are in the states of Odisha, Jharkhand, West Bengal, Chhattisgarh and the northern regions of Andhra Pradesh. Bhilai (Chhattisgarh), Durgapur (West Bengal), Burnpur (West Bengal), Jamshedpur (Jharkhand), Rourkela (Odisha), Bokaro (Jharkhand) are some of the important steel producing centres in India. Apart from providing a boost to the production of steel in the country, the government is also promoting the production of green steel. Narendra Modi had marked that, “On one hand India is expanding its capacity to produce crude steel and on the other, it is also promoting the use of environment friendly technologies. Green steel production involves producing steel without using fossil fuels.
India’s cement production (weight: 5.37 percent) increased by 11.6 per cent in April, 2023 over April, 2022. Its cumulative index increased by 8.7 per cent during 2022-23 over the corresponding period of previous year. On the other hand, the electricity generation (weight: 19.85 percent) declined by 1.4 percent in April, 2023 over April, 2022. Its cumulative index increased by 8.9 percent during 2022-23 over the corresponding period of previous year.
Sunil Sinha, Principal Economist, India Ratings and Research attributed the moderation in the core sector output in FY23 to normalisation of the statistical base. “With the weakening global and domestic demand, Ind-Ra believes that the growth in infrastructure industries would be under pressure in the ongoing fiscal year. As a result, the agency expects the core sector annual growth in FY24 at around 5 percent."
