The country’s steel output tumbled 13 per cent in March, its steepest fall during the past eight years. In the same month of last year, steel production had grown by 6.3 per cent.
A study by CARE Ratings attributed the fall in steel production to the nationwide lockdown imposed in March this year to curb the spread of the Covid-19 pandemic. The lockdown threw economic activity off kilter, leading to a production halt in most industries absorbing steel, primarily automobiles and construction.
However, for the whole of FY20, steel output moved up by 4.2 per cent, registering the best performance among eight core sectors, the others being coal, crude oil, natural gas, refinery products, fertilisers, cement and electricity. However, there has been sustained decline in the steel production since FY17 as muted construction activities on account of delayed monsoons, high real estate inventories and slowdown in the automobile sector lowering demand for steel led to lower production in this segment.
The lockdown had a profound impact on coal production, which contracted for the first time in eight years. In FY20, production of coal declined marginally by 0.5 per cent as against 7.4 per cent growth achieved in FY19.
“Coal production remained low during the first eight months of FY20 due to the extended rainfall and labour strikes at one of the largest coal mining companies in the country. Post the withdrawal of monsoon, the production picked up having grown between 6-11 per cent during December 2019 to February 2020 before moderating in March 2020”, read the report from CARE Ratings.
Quoting figures from the Office of the Economic Advisor, Government of India, the report said crude oil production tanked for the eighth successive year in 2019-20. However, the contraction of 5.9 per cent was the sharpest for the fuel commodity in the past eight years as loss of output in old and ageing fields weighed on overall production during the year. In addition, sustained decline in the crude oil prices and high inventories globally have weighed on the domestic production during the year.
Natural gas output after witnessing two previous years of growth shrunk 5.7 per cent due to depreciating output in old and ageing fields.
After registering a healthy double-digit growth of 13.3 per cent in FY19, cement production was down 0.8 per cent in FY20. Weakness in housing demand, prolonged rains in many parts of the country and decline in demand from the infrastructure segment due to lack of funding and halting/ temporary stoppage of state projects following change in government post state elections has affected the production of cement in the domestic markets.
“The coronavirus-led lockdown which has brought industrial activities to a near standstill in whole April 2020. Despite some ease in industrial activities has been permitted by the government post April 20th, the production activities have remained muted with labour shortages and other issues. As result, in April 2020 as well, we may see a further contraction in eight core sectors and in the industrial output,” the report noted.