India Incs energy cost up 28% during Q1

Written by Pradip Kumar Dey | Mumbai, Sep 12 | Updated: Sep 13 2008, 08:10am hrs
Easing crude prices may breathe some optimism into India Inc. This is because the battle against rising energy prices, even in an administered price scenario, is beginning to get tougher.

A study, undertaken by FE, of 501 major companies reveals that aggregate expenditure on energy increased by 28% to Rs 10,739 crore during April-June'08 from Rs 8,390 crore during April-June'07. On the other hand, total expenditure of sample companies increased by 32.2% to Rs 69,862 crore during April-June'08 from the April-June '07 level of Rs 52,863 crore.

Since other expenses like raw materials and personnel costs also went up during the period, the ratio of energy cost to total expenditure for all the companies taken together decreased from 15.87%to 15.37% during the study period. The decreasing share of energy cost in total expenditure not only increases margins, but also encourages cost control measures, as it is difficult the cut out consumption. Moreover, larger electricity outage has also added to the woes since a lot of fuel was consumed in firing generators during power cuts.

An analyst from a rating agency said, "Power requirement depends on the type of manufacturing process. With shortage and non-reliability of grid power, many companies are focusing on captive power generation."267 companies have witnessed a fall in energy cost to total expenditure ratio, while 234 have shown a higher ratio against April-June'07.

A significant fall in the ratio was witnessed in the case of Dredging Corpn (40.38% to 24.83%), Prism Cement (46.06% to 37.79%) and AP Paper (16.81% to 8.91%). An opposite trend was witnessed in the case of Binani Cement (32.59% to 49.61%), TN Newsprint (31.05% to 41.16%) and Hind National Glass (28.05% to 36.01%).

Among the 501 companies surveyed, the top five in terms of energy cost during April-June'08 were SAIL (Rs 779 crore), Hindalco Inds (Rs 554 crore), Grasim Industries (Rs 439 crore), ACC (Rs 400 crore) and Ultra Tech Cement (Rs 386 crore). Among these, highest increase in energy cost was observed in the case of ACC (39.8 %).The energy cost to total expenditure ratio of ACC increased from 22.07% to 29.19 % during April-June'08.