Core sector index falls to 3% in November

The index of six infrastructure industries witnessed a slowdown during November, registering 3 per cent growth compared with 5.7 per cent during November 2004.

Except petroleum refining which grew 1.3 per cent this November compared with 1 per cent in November 2004, the other five sectors reported poorer performance this month.

In fact, crude petroleum output fell 8.6 per cent in November 2005 to 2.56 million tonne, as against a growth rate of 0.9 per cent during the corresponding period last year, when production was estimated at 2.80 million tonne.

The index for the six industries grew 4.9 per cent during October 2005.

According to the provisional data released by the commerce and industry ministry today, the six infrastructure industries grew 4.4 per cent during April-November this year, compared with 6.7 per cent during the corresponding period last year.

Only cement production growth was higher at 10.6 per cent during April-November this year, compared with 6.7 per cent during the corresponding period last year, while the other sectors put up a poorer show. The eight-month period this year saw a fall in the production of crude oil and petroleum refining.

The poor show is expected to affect the index of industrial production (IIP) as the performance of the six core sectors has 26.68 per cent weight on the IIP. "A slowdown in the core sector can also affect manufacturing because there are linkages. If the trend continues, then it is a worrying trend," said D K Joshi, senior economist at rating agency Crisil.

"This is a cause for real concern. We have been talking about infrastructure constraints. But if the power sector situation does not improve, then it is going to pull down manufacturing and industrial output," said CII Chief Economist Rajiv Kumar.

He said cement and steel have not fared as badly in comparison to the other sectors. "The other sectors have price controls and dominant presence of the public sector. This is a growing dichotomy which needs to be looked at as it can affect the economy," he added.

Icra Economic Advisor Saumitra Chaudhri said the six sectors have not been performing well, but did not comment on its impact on the IIP.

During November this year, petroleum refining activity rose 1.3 per cent and production was estimated at 9.84 million tonne, compared with 9.71 million tonne during the corresponding period last year. Refining had grown 1 per cent in November 2004.

During April-November this year, petroleum product refining dropped 0.7 per cent to 77.94 million tonne, compared with 78.46 million tonne during the corresponding period last year.

A senior executive in a state-owned oil marketing company said that while demand for petroleum products was sluggish, the closure of the Reliance refinery for maintenance led to lower refining activity at the industry level.

Crude output during the eight-month period fell 5.7 per cent to 21.4 million tonne, compared with 22.68 million tonne during April-November last year. Crude production dipped for the fifth consecutive month due to disruption in supplies from Mumbai High after a major fire in July.

Oil & Natural Gas Corporation executives said production was lower in November as Mumbai High was operating at 80 per cent of its capacity due to the fire and production in Assam had also been disrupted due to law and order problems. At 2.56 million tonne, production in November was lower than the target of 2.88 million tonne.

The government has identified coal production and electricity generation as the problem areas. Electricity generation, which has 10.17 per cent weight on the IIP, grew 2.7 per cent during November this year to 49.06 billion kilowatt hour.

It had grown 3.4 per cent during November 2004. During April-November 2005, power generation rose 4.9 per cent to 406 billion units. The data also included power imported from Bhutan.

Power ministry officials said fuel shortage "" coal and gas "" was affecting production. Coal production was up 7.1 per cent to 34.8 million tonne during November this year, while it rose 5.6 per cent during April-November this year to 244.2 million tonne.