Despite the Centre?s move to reduce fuel prices, India Inc?s energy cost has increased significantly during the third quarter. A study by FE reveals that the aggregate expenditure of 518 major companies, including power and airline companies, on energy increased 26% to Rs 24,386 crore during Oct-Dec 2008 from Rs 19,346 crore during Oct-Dec 2007. On the other hand, the total expenditure of the sample companies increased 22.7% to Rs 91,557 crore, from Rs 74,598. And the ratio of energy cost to total expenditure increased from 25.93% to 26.63% during the study period.
An increase in share of energy cost in total expenditure, not only decreases margins but also disturb cost-control measures of the corporates.
An analyst from a rating agency said, ? On December 5, 2008 and January 28, 2009 the UPA government cut the prices of petrol, diesel and LPG. The step taken was in view of sustained decrease in international crude prices. The oil-dependent industries such as power, airlines, automobiles, commercial vehicles, logistics will get full benefit in the coming months. This is not reflected in the energy cost of these industries in Q3.?
During third quarter of 2008, 254 companies have witnessed a fall in energy cost-total expenditure ratio, while 264 companies have shown a higher ratio, against Oct-Dec 2007.
A significant fall in the ratio was witnessed by Tata Chemicals, Dredging Corpn, Hind Fluro Carbon and BOC India. An opposite trend was witnessed in the case of TN Newsprint, Guj Sidhee Cement and KCP. Among the sample companies, some reduced their energy cost during Oct-Dec 2008. Mention may be made of Sunflag Iron, Bakelite Hylam and Indokem.
On the other hand, significant increase in energy cost was observed in the case of Binani Cement, FACT and Sirpur Paper. The top five firms, in terms of energy cost during Oct-Dec 2008, are NTPC, Reliance Infra, Tata Power, Jet Airways and SAIL. Among these companies, highest increase in energy cost was seen in by Reliance Infra (66.1%). The energy cost to total expenditure ratio of Reliance Infra decreased from 65.31% to 62.02% during Oct-Dec 2008.
Among industries studied, significant increase in power and fuel cost was observed in the case of fertilisers, glass products, aluminium, power, airlines and cement & products. The aggregate power & fuel cost of fertiliser companies increased 12.4% to Rs 1,140 crore during Oct-Dec 2008.
A significant decline in the ratio of power & fuel cost to total cost was seen by chemicals, glass, steel, airline, petrochemical and fertilier industries. An opposite trend was seen in the case of aluminium, cement & products, paper, sugar and textile sectors .