Railways bring sobering tidings

by Yash Shah

Railway freight traffic available for the month of April 2020 provide insights into the possible economic activities during the month. Our interest is not in assessing the performance of the railways per se, but it is to read the railway freight movement to assess the performance of other industries. Therefore, we use data on tonnes of freight movement rather than the net tonne kilometre data also published by the Railways.

Overall railway freight movement in April 2020 at 65.4 million tonnes was 35.3 per cent lower than it was in April 2019. Coal is the biggest freight movement on railways. Its movement dropped by 34.5 per cent y-o-y in April 2020.

Coal freight for thermal plants was down 37.4 per cent, y-o-y, or just 14.7 million tonnes. We know that power generation by utilities had declined by 8.7 per cent in March and coal-based thermal power generation which accounts for 79 per cent of total power generation was down by 12.4 per cent. Railway freight data tell us that we can expect thermal and total power generation to drop further in April 2020. However, water levels in large reservoirs as of early May 2020 was over twice the level it was a year ago. This could give help improve hydel power generation to fill the vacuum in thermal power generation.

Railway freight movement data can provide some insights into steel production. It provides data on coal movement to steel plants, iron movement to steel plants, raw materials for steel plants other than iron ore and coal and also movement of pig iron and finished steel from steel plants.

In April 2020, coal for steel plants was down 37.2 per cent compared to such movement in April 2019. By a similar comparison, iron ore movement was down 32.2 per cent and other raw materials were down 39.2 per cent. Movement of pig iron and finished steel from steel plants was down by 50.6 per cent.

As per index of eight core industries (ICI), cement production recorded 24.7 per cent fall in March 2020. This was its worst recorded fall since the beginning of the series in April 2012. During March 2020, cement traffic through railways also fell by 26.3 per cent. But, the real fall was in April 2020. Cement traffic through railways fell by 90.6 per cent in April 2020. It is logical to conclude that cement production could have fallen similarly sharply in April 2020.

As per data released by the Ministry of Chemicals and Fertilisers, sales of fertilisers recorded 53.4 per cent y-o-y increase during April 2020. This is the highest recorded growth since March 2012. Union Minister of Ministry of Chemicals and Fertilisers said that there is no problem in the fertiliser industry and state governments have sufficient stocks during the lockdown. He added that sales are ramped up to ensure fertilisers are available to farmers before the sowing season begins. Fertilisers account for 2.6 per cent of ICI and 1.1 per cent of IIP.

However, the railways freight data tell us a very different story. Movement of fertilisers over railways during April 2020 was 17.9 per cent lower than it was a year ago.

Crude oil production accounts for approximately nine per cent of ICI. Petroleum refinery products industry accounts for 28 per cent of ICI. Production of these fell by 0.4 per cent during March 2020.

In contrast, on the demand side, consumption of petroleum products recorded 17.8 per cent y-o-y decline during March 2020. This was the worst fall recorded since the beginning of the series in 2004. 9 out of 12 commodities which accounted for approximately two-third of total consumption, recorded a y-o-y decline in demand. These include commodities majorly used for transportation like high speed diesel, petrol and aviation turbine fuel (ATF). Consumption of ATF declined by 32.4 per cent, petrol by 16.4 per cent and high speed diesel by 24.2 per cent. The impact on production of refinery products is lagged. It fell by a much lower 0.4 per cent in March 2020. But, March was only a preview of the lockdown. The impact is expected to be severe in April.

Petroleum, oil and lubricants movement over the railways in April 2020 was 35.6 per cent down compared to the freight a year ago.

Data for March 2020 show the severe impact of the lockdown during a part of the month. Limited data for April 2020 show the impact of a more complete lockdown. The 90.6 per cent fall in cement freight traffic over railways, the 35.5 per cent fall in total railway freight traffic with most major industries seeing a fall of the order of 35 per cent indicates what may be expected in the data of April 2020.

ICI recorded 6.5 per cent y-o-y fall during March 2020. Despite only seven days of lockdown in March, this was the steepest recorded fall since 2012. The fall in April could be closer to 30 per cent. Coal offtake by Coal India Limited (CIL), which had fallen by 10.3 per cent in March, recorded a 25.5 per cent fall in April.

CMIE STATISTICS
Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.8 +0.4
Consumer Sentiments Index
Base September-December 2015
44.9 0.0
Consumer Expectations Index
Base September-December 2015
47.2 0.0
Current Economic Conditions Index
Base September-December 2015
41.2 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Sep 19 Dec 19 Mar 20 Jun 20
New projects 3.17 5.24 3.49 0.59
Completed projects 0.84 1.65 1.71 0.19
Stalled projects 0.41 0.61 0.77 0.11
Revived projects 0.43 0.83 0.42 0.55
Implementation stalled projects 0.90 0.15 9.54 0.07
Updated on: 03 Aug 2020 8:28PM
Quarterly Financials of Listed Companies
(% change) Sep 19 Dec 19 Mar 20 Jun 20
All listed Companies
 Income -2.3 -1.7 -4.8 -23.4
 Expenses -3.1 -2.2 -1.7 -25.3
 Net profit -1.3 -10.7 -44.3 -13.5
 PAT margin (%) 5.3 5.1 2.6 9.0
 Count of Cos. 4,447 4,419 3,915 480
Non-financial Companies
 Income -6.3 -5.5 -8.8 -34.4
 Expenses -6.7 -6.4 -4.9 -36.0
 Net profit -13.5 -13.6 -45.9 -32.6
 PAT margin (%) 5.8 5.7 3.6 8.9
 Net fixed assets 10.4 13.1
 Current assets 5.0 3.0
 Current liabilities 5.0 4.6
 Borrowings 8.4 14.6
 Reserves & surplus 5.9 2.3
 Count of Cos. 3,337 3,309 2,993 375
Numbers are net of P&E
Updated on: 03 Aug 2020 8:28PM
Annual Financials of All Companies
(% change) FY18 FY19 FY20
All Companies
 Income 8.4 13.2 5.2
 Expenses 9.8 13.4 2.7
 Net profit -39.9 21.0 38.6
 PAT margin (%) 2.0 2.4 7.6
 Assets 10.9 9.3 10.2
 Net worth 7.5 8.5 9.4
 RONW (%) 3.5 4.4 9.0
 Count of Cos. 26,524 25,174 1,087
Non-financial Companies
 Income 8.6 13.6 0.9
 Expenses 8.7 13.8 -0.4
 Net profit -8.5 23.7 6.4
 PAT margin (%) 2.8 3.2 10.2
 Net fixed assets 7.1 5.0 23.4
 Net worth 6.1 8.4 6.5
 RONW (%) 5.7 7.0 14.1
 Debt / Equity (times) 1.0 1.0 0.6
 Interest cover (times) 2.1 2.4 5.0
 Net working capital cycle (days) 77 70 26
 Count of Cos. 21,646 20,492 792
Numbers are net of P&E
Updated on: 28 Jul 2020 9:46PM