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Core sector output rose to 32-months high in March 2021

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The eight core sector output rose to 32-months high of 6.8 per cent in March 2021 chiefly on account of a negative base of -8.5 per cent in the corresponding month of the previous year. Therefore, one needs to read the core sector growth number with caution. The pick-up observed in March 2021 has been on account of significant double-digit growths witnessed in steel, cement, electricity and natural gas, where the production activity had seen a sharp decline in March 2020 on the back of the imposition of the nation-wide lockdown. The contraction witnessed in the month of February 2021 has been revised upwards to -3.8 per cent as against the previous estimate of 4.6 per cent.

For the full fiscal FY21, the core sector has contracted by 7 per cent compared with a subdued pace of 0.4 per cent in FY20. This is the first time in the last eight years when core sector output has declined. In 8 of out the 12 months during the fiscal, core sector output has seen a contraction, reflective of the adverse impact of the pandemic and the consequent lockdowns on the production activities of the 8-core sector. During the year, there has been a broad-based decline across almost all the sectors with the impact being sharp in refinery products, steel and cement sector. Fertiliser has been the only sector which has seen positive growth, which reflects unabated performance of the agriculture sector despite the lockdown while the impact on electricity production has been relatively lower as resumption of economic activities in the second half of the fiscal pushing up the growth number.

Key highlights:

  • Coal production recorded its sharpest contraction in the new series with the base year 2011-12. The de-growth of 21.7 per cent in March 2021 has come against a positive base of 3.7 per cent in March 2020 and it also reflects high level of coal inventories with coal producers. However, there has been a sequential improvement owing to healthy demand from the power steel and cement sector.

  • Crude oil production fell by 3.1 per cent in March 2021 compared with a decline of 5.5 per cent in March 2020 and this is the 40th consecutive month of negative growth for the sector. This decline can be ascribed to delays in installation of new platforms due to COVID-19 restrictions, localised lockdowns and lower planned contribution from work-over, drilling and old wells. Natural gas production rose sharply by 12.3 per cent in March 2021, its highest growth in the new series with the base year 2011-12. This is the first time the segment has recorded positive growth after 21 consecutive months of deceleration. The positive growth has been on account of a low base (-15 per cent in March 2020) coupled with production commencement of natural gas from one of the key players in the private sector.

  • Refinery production declined by 0.7 per cent in March 2021 compared with 0.5 per cent in March 2020, recording the 13th consecutive month of decline in production. Although there has been a sequential improvement, the fall can be ascribed to lower demand for petroleum products and annual maintenance and installation shutdown for some plants.

  • Fertiliser production continued to decline for the second consecutive month. The fall in production has been sharper in March 2021 by 5 per cent compared with 3.7 per cent in February 2021 but is better than 11.8 per cent decline in March 2020. The YoY decline is the sharpest in the last one year.

  • Steel (23 per cent), cement (32.5 per cent) and electricity (21.6 per cent) have registered positive growth of above 20 per cent during March 2021 and is primarily on account of a statistical base effect. However, year-end phenomenon of infrastructure projects being on track coupled with State governments and Central government expediting capex plans have provided the impetus and the same is reflected in the numbers. Sequentially too all three sectors have registered a notable pickup. In case of steel, producers ramped up production backed by higher export demand and realisations.

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The March, April and May 2021 growth numbers for core sector and industrial growth was expected to be high on the back of sharp declines registered last year. The core sector growth numbers for the next two months are likely to be elevated as the decline in April and May 2020 were sharper than March 2020. Hence, we must be cautious in reading the growth numbers for the next two months also as the theme of March 2021 is likely to carry forward. IIP growth for March 2021 is likely to be closer to double-digit mark given the decline of 16.7 per cent last year.

Courtesy: CARE Ratings

ABOUT THE AUTHOR:

The article is authored by Sushant Hedem who is Associate Economist with CARE Ratings. He can be contacted at: sushant.hede@careratings.com | +91-22-6837 4348.

Disclaimer: This report is prepared by CARE Ratings Limited. CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis / inferences / views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report.

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Concrete

Indian Railways Plans Green Fly Ash Transport Network

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Specialised rail logistics will move fly ash from power plants to infrastructure industries.

New Delhi

Indian Railways is planning a large-scale green logistics initiative to transport fly ash from thermal power plants to industries where it can be reused in infrastructure and construction activities.

The initiative was discussed during a review meeting chaired by Union Minister for Railways Ashwini Vaishnaw. Union Ministers of State for Railways V Somanna and Ravneet Singh Bittu were also present.

India generates nearly 340 million tonnes of fly ash every year from thermal power plants. The proposed initiative aims to create an efficient rail-based transport system using specialised containers and dedicated logistics arrangements to move fly ash safely from power plants to end-use industries.

Fly ash is widely used in road construction, cement manufacturing, brick production, concrete, blocks and boards. By improving its movement through the railway network, the initiative is expected to support better utilisation of this industrial by-product while reducing environmental concerns linked to storage and disposal.

The move also aligns with India’s circular economy goals by converting waste from thermal power generation into a useful raw material for the construction and infrastructure sectors. Wider availability of fly ash can help reduce material costs in areas such as bricks and cement, supporting more affordable infrastructure and housing development.

Through this initiative, Indian Railways aims to provide a cleaner, safer and more organised transport solution for fly ash, turning an environmental challenge into an infrastructure resource.

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ACC To Expand Cement Capacity Amid Strong Infrastructure Demand

Chairman signals calibrated growth and sustainability focus

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ACC will continue to expand its cement capacity in a calibrated manner, deepen its ready-mix concrete (RMC) footprint and accelerate the adoption of low-carbon technologies, the company chairman conveyed in the latest annual report. The note emphasised a balanced and disciplined approach as the business pursues growth while maintaining environmental safeguards.

He argued that the long-term growth outlook for the Indian economy remains strong but that demand conditions in the near term were likely to stay moderate, necessitating cautious expansion. He pointed to India’s relatively low per capita cement consumption compared with global averages as an indicator of significant long-term potential and highlighted the rise in public capital expenditure to Rs 12 trillion (Rs 12 tn), which he said accounted for about four point four per cent of the GDP.

Against this backdrop, ACC and the wider Adani Cement business are positioning themselves as integrated building materials solution providers rather than traditional commodity suppliers, prioritising capability creation over consolidation. The chairman framed cement as the ingredient and concrete as the performance and said that infrastructure and real estate development increasingly demand engineered solutions delivered at site.

He described how deeper integration across energy, logistics and digital systems is intended to improve responsiveness and efficiency across manufacturing, transport and market operations. The company intends to strengthen technical engagement, mix optimisation and application support to improve project timelines, reduce wastage and enhance structural durability while embedding data analytics and predictive systems.

On sustainability, ACC affirmed its commitment to reducing its environmental footprint through greater use of blended cement, renewable energy, alternative fuels and improved thermal efficiency, presenting industrial growth and environmental responsibility as parallel objectives. The message positioned the group to supply engineered concrete solutions at the point of application as it scales capacity and service offerings.

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Ambuja Sees Cement Demand Easing To Around Five Per Cent In FY27

Company Cites Housing, Infrastructure And Government Capex

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Ambuja Cements has said in its latest annual report that cement demand in India is likely to moderate to around five per cent in fiscal year twenty seven, marking a slowdown from the estimated six point five to seven point five per cent growth anticipated for fiscal year twenty six. The company described this as a transition to a more measured pace of expansion after several years of strong momentum in the sector.

It said that underlying demand drivers such as housing, infrastructure development, urbanisation and government capital expenditure remain intact and are expected to sustain cement consumption across regions. The report noted that global geopolitical uncertainties and weather risks, including forecasts of a below normal monsoon, could influence near term demand, while emphasising that the longer term infrastructure story for India continues to provide a solid foundation for the sector.

Industry observers have said that the sector may move towards mid single digit growth rates in fiscal year twenty seven after stronger performances in recent years. The company outlined a calibrated expansion strategy with capacity additions phased to match project pipelines, regional demand patterns and market absorption, seeking to avoid oversupply and pressure on pricing.

Ambuja has crossed the 100 million tonnes per annum capacity milestone (100 mn t per annum) following acquisitions and organic expansion, strengthening its position in the competitive market. The outlook in the report broadly aligns with other market assessments that placed demand at around five per cent in fiscal year twenty five, a recovery to six point five to seven point five per cent in fiscal year twenty six and an easing in fiscal year twenty seven as capacity increases. Executives remain focused on long term demand fundamentals driven by infrastructure and housing.

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