Capacity utilisation up in select sectors

New Delhi: There are early signs of an uptick in capacity utilisation in select sectors, which could be a precursor to an investment revival.

Utilisation rates are on the rise in cement, automobile ancillaries, engineering, casting and sheet metals, industry players told Business Standard.

A gauge of capacity utilisation is also provided by the RBI data on working capital loans. In line with the trend of rising capacity utilisation rates, working capital loans grew 6.4 per cent in the July-September quarter of 2017-18, up from 4.8 per cent in the preceding quarter. It had plummeted to a low of 1 per cent in the fourth quarter of 2016-17.

“Our order intake has risen 20 to 25 per cent in 2017-18, signalling 80 per cent capacity utilisation in certain sectors like cement. Some of the sectors with high orders included food processing, alcohol and the carbon black industry,” said M S Unnikrishnan, managing director and chief executive officer, Thermax.

An executive at one of India’s largest heavy machinery supplier to original equipment manufacturers said his firm's capacity utilisation had improved to 80 per cent in the later part of the current financial year, up from 60 per cent two years ago.  

"The ban on overloading boosted demand for trucks and raised the demand for machinery from original equipment manufacturers. There is also a rise in demand from commercial vehicles manufacturers in North America,” he said.

Estimates of working capital loans have been derived from data on credit extended by banks through instruments, including cash credit, overdraft, packing credit, and inland and foreign bills purchased/discounted. The RBI is yet to come up with data on capacity utilisation rates for the third quarter of 2017-18. The last survey had shown the capacity utilisation rate at 71.8 in the second quarter of 2017-18, marginally up from 71.2 in the first quarter.

In other sectors, too, a similar rise in utilisation rates was observed.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.