The Hindu Business Line : Capacity utilisation stagnates in 2003-04

The Finance Minister has increased tax incentives for industrial investments. Still, we may have to wait a while for a substantial improvement in industrial investment activity.

This is because the capacity utilisation of a substantial proportion of products is still below 70 per cent. This is according to the published figures in the 2003-04 annual report of the companies under consideration. In 2002-03, capacity utilisation of these product categories also averaged about 70 per cent.

The data, which pertains to 500 product categories manufactured by 150 companies, reveals that in the case of half of the product categories, the capacity utilisation is below 70 per cent. These product categories account for a third of the total sales of all the product categories. Capacity utilisation is 90 per cent or higher only in the case of 151 product categories; these products accounted for just close to half of total sales.

Prominent product categories in which capacity utilisation has been languishing include the printing inks division of Micro Inks, cold rolled coils division of Uttam Galva, tablets division of Nicholas Piramal, steel pipes arm of Saw Pipes and the diesel - tractor division of Mahindra & Mahindra. The capacity utilisation in the case of these divisions ranges between 27 and 42 per cent.

Capacity utilisation has, however, been higher than 90 per cent in a number of cement plants including that of Century Textiles, Gujarat Ambuja and Shree Cement. Product categories such as viscose filament rayon yarn (Indian Rayon), bulk drugs (Novartis), ball & roller bearings (SKF India) and tyres (MRF) also can boast of such capacity utilisation.

The positive aspect for companies in 2003-04 has, however, been the improvement in sales realisation, which rose by an average of about 2.7 per cent across product categories. In contrast, average increase in sales realisation in 2002-03 was practically negligible. Sharp increase in sales realisation in 2003-04 was seen in product categories such as sponge iron, caustic soda, switchgears and tablets & capsules. Sharp decline in sales realisation was evident in product categories such as refractories, storage batteries, viscose filament rayon yarn and picture tubes.

Investment initiatives, which rose in 2002-03, have, however, not slackened. In 2002-03, in about 60 products installed capacity rose by about 25 per cent. In 2003-04, installed capacity rose by more than 25 per cent in 62 products. The capacity utilisation of these 62 products in the immediately preceding year averaged about 89 per cent. These include the refractories division of Vesuvius, the carbon black division of Indian Rayon and the automobile tyres division of Apollo Tyres.