Core sector growth contracts by 15% in June 2020

Core sector growth contracted by 15 per cent in June. It had seen negative growth of 22 per cent in May. The marginal improvement was owing to the relaxation of lockdown.

Coal production growth contracted to 8-month low of 15.5 per cent in June 2020 compared with 2.9 per cent growth recorded in the same period last year. This was mainly due to low offtake of coal by power plants, high inventory pile up and low demand from user industries.

Crude oil production contracted by 6 per cent in June 2020 compared with 6.8 per cent in June 2019 owing to closure of wells due to lower offtake and restriction in movement or field operations.

Natural gas production recorded a negative growth of 12 per cent in June 2020, which was also the 15th consecutive month of contraction.

Refineries, which recorded a contraction for the 5th consecutive month saw production fall by 8.9 per cent in June 2020 owing to subpar capacity utilisation (85 per cent in June 2020 versus 99 per cent in June 2019).

Fertiliser production recorded a positive growth of 4.2 per cent in June 2020 compared with 1.6 per cent last year. This can be ascribed to higher demand at the onset of kharif season and increased operational activities due to relaxation of lockdown.

The contraction in steel production is the highest amongst the 8-core industries at 33.8 per cent in June 2020 as against a growth of 10.8 per cent in June 2019, and can be attributed to subdued construction activities. However, there has been a notable improvement since April and May on account of large integrated steel players increasing production for exports.

Cement production contracted by 6.9 per cent in June 2020 compared with negative growth of 1.9 per cent last year. However, the degrowth has notably improved in June than April-May owing to easing of lockdown and pick-up in rural demand for cement.

Electricity production, which recorded negative growth for 4th consecutive month, witnessed a contraction of 11 per cent in June 2020 as against a growth of 8.6 per cent last year. The contraction in June has eased from the previous two months with improvement in electricity demand due to resumption of economic activity.