Core sector grows 3.4% in June, coal biggest drag

Written by fe Bureaus | New Delhi | Updated: Jul 29 2010, 05:37am hrs
Hinting at further moderation in the industrial growth as measured by the index of industrial production(IIP), countrys six core industries grew by 3.4% in June. The core industriescrude oil, petroleum refinery products, coal, electricity, cement and finished carbon steelthat has a weight of 26% in the IIP, had clocked an annual expansion of 6.3% in June last year. After expanding at a record pace of above 16% or above in three months to April, IIP fell 11.5% in May.

Coal production, which expanded by less than 1%, was the biggest drag on the core sector output for June. Countrys coal production has been remaining flat over the recent months as the mining major Coal India has not been able to get enough rail wagon combinations or rakes to transport the mined coal.

Lack of rakes to transport the coal will also have an impact on the electricity generation, say analysts. The power producing facilities have not been able to transport imported coal lying in ports due to shortage of rail wagons. June saw electricity generation growth at 3.4%, the lowest since November.

Crude oil production, which grew by 6.8%, stayed marginally lower than the petroleum ministrys projection. However the refinery output ,which grew by 4% on the back of resurgent energy demand in a recovering global economy, was in line with ministrys target.

With the monsoon rains covering all parts of the country, the growth in cement production also moderated. With some of the major projects driving the demandincluding the Commonwealth Games preparationscoming to an end the growth in cement production is expected to remain moderate till September. However, steel production remained robust on back of high demand from end use industries like automobile and capital goods production.

The accelerated pace in the moderation of monetary policy regime is expected to lead to a moderation in the pace of growth across various sectors of the economy. The government and central bank expects the economy to grow by close to 8.5%.