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The Monsoon season hit India late. America was not alone in feeling the drought, India also got hit. When the needed Monsoon came, it was a bit late. Now weather forecasters expect the Monsoon to end. What was the economic impact of the late Monsoon?

Impact on Cement prices

With pickup in monsoon, cement prices weakened in most of the regions. Prices fell sharply in Bhubaneswar (~INR50/bag), Hyderabad (~INR44/bag), Lucknow (~INR30/bag) and Jaipur (~INR25/bag). Prices were relatively more stable (down by INR1-5/ bag) in Chennai, Mumbai, Ahmedabad, Kolkata and Chandigarh.

Grain

Kharif food grain output may be lower than last year’s 130 mn tonnes, as scanty rain in the early part of the monsoon hit plantings

Impact on politics

If the President does not call a special Parliament session, the Government can very well decide to do away with the winter session. Constitutionally, Parliament has to meet at least once in six months. The last session ended on 7 September, 2012. So, the government can choose to avoid a Parliament vote until the Budget session. While this would surely result in howls of protest from the opposition, washout of almost the entire monsoon session would lessen public outcry against this move.

Electricity

The Economic Times reports that electricity rates in short-term markets dropped to a record low of INR1.20/unit on Sunday from INR3 a year ago, as the late revival of monsoon rains has reduced agricultural demand and improved hydropower generation, luring more market participants to power exchanges and providing an opportunity to industries such as cement, textiles and steel that had suffered in the summer because of power scarcity.

The Consumer Education Research Society has complained that Gujarat State Electricity Corporation’s PLF dropped to 39.15% in August as against 71.26 % in April. The newspaper said that CERS is of the opinion that GSECL must have a shutdown of many units for planned maintenance due to the monsoon season, while this year’s poor rain resulted in increased demand of power.

GDP

The Indian Economy relies largely on the agriculture sector (over 15% of GDP, employs 52% of population), and this sector depends largely on the production and quality of monsoon which is highly unpredictable.

Urea

Urea volume declines 5% y-y in August, affected by a weak Monsoon: Urea saw a volume decline of 5% y-y, leading to a 3.8% y-y decline in FY13 YTD. Given the improved sowing patterns aided by a Monsoon recovery, the MSP increase for the current season expected to boost farm income and the government delaying the increase in urea MRP (increased urea-complex differential), we expect ~ 4% volume growth in FY13E, with a strong demand pickup in 2H FY13.

Fertilizer

Complex fertilizer volume down 19% y-y but sees a 8.8% m-m improvement: Complex fertilizers reported a 19% y-y decline in August, leading to a 19.6% y-y decline in FY13 YTD. Although Monsoon recovery has stabilized the inventory levels, the sharp price hikes implemented in June are exerting pressure on volume in addition to the lower production levels, given a lack of raw materials.

High retail prices of complex fertilizers to change consumption patterns in favor of urea: Although the impact of a weak Monsoon will not be felt on agriculture with sowing recovering with a decline of just 5% y-y YTD, demand recovery expected currently would be in favor of urea players, where the price differential with complex is at an all-time high and a weaker rupee is beneficial.

Finally and most importantly, Water