Mining sector GVA to slow down to 2% in FY19 from 2.9% in FY18: Icra

Y-o-Y growth in coal output has stayed volatile, falling from 9.7% in July 2018 to a lowly 2.5% in August

Mining and quarrying GVA (gross value added) is expected to ease to two per cent in FY19, down from 2.9 per cent in the previous financial year, according to ratings agency Icra.

The outlook for mining and quarrying GVA growth would take a cue from commodity prices, as well as volume growth in key sectors such as coal, crude oil, natural gas and iron ore, the report said. The forecast stems from the sector's subdued performance in the April-September period of in 2018-19.

Year-on-year growth in coal output has stayed volatile, falling from 9.7 per cent in July 2018 to a lowly 2.5 per cent in August. It rebounded to 10.6 per cent in October. Growth in the output of Coal India Ltd (CIL) eased to a modest 1.6 per cent in November.

GVA at basic prices in Q2 in the ‘mining and quarrying’ sector declined 2.4 per cent compared to a growth of 6.9 per cent in the same period of 2017-18. Key indicators of the mining sector, namely, production of coal, crude oil and natural gas, and IIP (Index of Industrial Production) mining registered growth rates of 6.2 per cent, (-) 4.4 per cent, (-) 2.0 per cent and 1.0 per cent, respectively, during Q2 of 2018-19 compared to 8.5 per cent, (-) 0.7 per cent, 4.7 per cent and 7.1 per cent, respectively, during Q2 of 2017-18.

The country's overall GDP and GVA growth slowed down to 7.1 per cent and 6.9 per cent, respectively, in Q2 from 8.2 per cent and eight per cent, respectively, in Q1 of the current financial year.

Moreover, the pace of growth was uneven across the various sectors. Commercial vehicle (CV) and motorcycle production, services exports, passengers carried by domestic airlines, cement production, non-oil merchandise exports, financing and electricity generation had displayed a healthy performance in Q2FY19. In contrast, capacity addition in power generation and transmission, tractor and passenger vehicles (PV) output, mining, diesel consumption, foreign tourist arrivals, steel production, railway freight and ports cargo traffic recorded a subdued performance in Q2.

Icra expects electricity demand to grow about six per cent in FY19, given the strong focus of the Centre on improving household electrification and the expected increase in demand from the industrial segment. This, in turn, would boost the thermal PLF (Plant Load Factor) level from 60.7 per cent in FY2018 to around 63-64 per cent by FY20 on an all-India basis. 

The pace of growth of the total capacity addition is expected to ease to 4.5-5 per cent in FY19 from 6.5 per cent in FY18, owing to an expected slowdown in solar-based capacity addition due to the relatively subdued bidding in calendar year 2017 and the uncertainty over duty on imported PV (photovoltaic) modules till July 2018.