Project Cost Index declines in December 2013

The ERIL Index of Cost of Project Inputs, the composite project cost index, declined in December 2013, after it inched up in the preceding five months (on provisional-over-provisional basis). Taking a slightly longer period, the project cost index worked out to just 0.6 per cent higher during the first nine months of the ongoing fiscal 2013-14, or only a little higher at 1 per cent on a calendar year basis, both the measures falling significantly below 2.2 per cent and 2.6 per cent, respectively, in manufactured product prices that should technically set the pace for project investment.

Capital goods production showed 1 per cent decline during April-November, whereas cement and alloy and non-alloy steel production was up 4-4.4 per cent during the period. By the way, final project cost index numbers have tended to be slightly higher than those provisionally assessed earlier in recent months.

Among the major investment goods categories, industrial machinery, air-conditioners and refrigerators, electrical wires and cables, automotives and auto parts, and structural clay products like bricks and tiles and marbles were in positive WPI zone during April-December; even as WPI for cement was running 5 per cent lower and iron and semis 1 per cent lower during this period.

Computed by Economic Research India Pvt. Ltd, the ERIL Index measures the overall project cost escalation in terms of WPI of material inputs relevant in project construction.

Trends during December
The aggregate wholesale price index for non-metallic mineral products rose by 0.5 per cent during the month due to higher price of marbles (6 per cent) and slag cement (1 per cent).

The combined WPI for basic metals, alloys and metal products declined by 0.2 per cent due to lower price of sheets (14 per cent), silver (6 per cent), gold and gold ornaments (2 per cent), and aluminium, ferrosilicon, steel rods and plates (1 per cent each). However, the price of furniture increased by 19 per cent, melting scrap by 3 per cent, sponge iron, CRC and ferromanganese by 2 per cent each, and pencil ingots, steel structures, GP/GC sheets, wire rods, ferrochrome, lead, rounds and angles by 1 per cent each.

The collective WPI for machinery and machine tools declined by 0.1 per cent due to lower price of electric switches (9 per cent), thresher (6 per cent), electrical wires (3 per cent), batteries, control equipment and material handling equipment (2 per cent each), and UPS/stabiliser, fans and PVC insulated cables (1 per cent each). However, the WPI of sprinklers escalated 11 per cent, communication equipment, TV sets and electrical pumps 2 per cent each, and battery dry cells, electric generators, insulators and machine tools 1 per cent each.

The consolidated WPI for transport, equipment and parts rose by 0.1 per cent due to 1 per cent hike in auto parts WPI.