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27 || 28 || Appendix

Chapter 16:
INDUSTRY AND MINERALS

Industrial development plays a crucial role in our development strategy particularly with regard to the objectives of structural diversification, modernisation and self-reliance. The overall pace and the pattern of industrial investment and growth in the Sixth Plan have to reflect this orientation of development policy and take into account the lessons from past experience.

REVIEW

16.2 The progress of industrialisation over the last thirty years has been a striking feature of Indian economic development. The process of industrialisation was launched as a conscious and deliberate policy in the early fifties. In pursuance of this policy, large investments have been made in building up capacity over a wide spectrum of industries. Industrial production has gone up by about five times during this period. Apart from the quantitative increase in output, the industrial structure has been widely diversified covering broadly the entire range of consumer, intermediate and capital goods. In most of' the manufactured products, the country has achieved a large measure of self-sufficiency, providing the capability to sustain the future growth of vital sectors of the economy primarily through domestic effort. This is reflected in the commodity composition of our international trade in which the share of imports of manufactured products has steadily declined; on the other hand, industrial products, particularly engineering goods, have become a growing component of our exports. The rapid stride in industrialisation has been accompanied by a corresponding growth in technological and managerial skills, not only for efficient operation of highly complex and sophisticated industrial enterprises but also for their planning, design and construc'ion. Considerable advance lias also been made in industrial research and in absorbing, adapting and developing industrial technology.

16.3 Impressive ns these achievements are, the rate of industrial growth has not been uniform during this period. After a steady growth of about 8 per cent d'lring the initial period of 14 years, there was a fluctuating trend in the industrial growth rate, approaching near stagnancy in 1966-68 climbing to a level of-9.5 per cent in 1976-77 and dipping (0—1.4 cent in 1979-80. There are many reasons for these fluctuations in the rate of industrial growth. Tn the initial years of planning, industrial development was largely based on import subs'itution and had the advantage of a captive market. A steady growth could thus be maintained. Thereafter, the growth in industrial production was conditioned by the general pace of economic development in the country. With the changing international and national environment, it has been difficult to match the sustained growth of earlier years. During the last decade (1970-71 to 1979-80) the average growth rate has been about 4 per cent per annum. While no single factor c,a'n be identified as having a significant bearing on "file rate of industrial growth, a close relationship could be identified between the trends in total investment (particularly public investment) and industrial production. Other factors which iwve affected the growth rate from time to time are the shortage of infrastructural and other vital inputs (such as power, transport, coal, cement), unremunerative administered prices, disturbed industrial relations and to an extent inefficient management.

16.4 A significant aspect of industrial development during this period has been the predominant role assigned to the public sector in the establishment of basic in-dustires. The public sector has taken the initiative for the development of such industries as steel, non-ferrous metals, petroleum, coal, fertilisers and heavy engineering. It has also made investments in con sumer industries like textiles, drugs and pharmaceuti-cals, cement and sugar, partly as a result of the need for it to assume the responsibility for nursing back sick units which were taken over by the Government. While the investments in the public sector in the States are largely confined to mediun'. scale industries appro-pri.qte from the point of view of accelerated exploitation of local resources, the major thrust for the development of capital intensive industries has been provided by the Central Government. The total investment in the Central public sector undertakings as on March 1979. amounted to Rs. 15,600 crpres of which approximately Rs. 12,800 crores were invested in industrial and mining undertakings. Arising from these large investments in the public sector, the share of public sector in the net domestic product in organised industry and mining has also moved up from 8 per cent in 1960-61 to 28.9 per cent in 1977-78.

16.5 The performance of the public sector canno' be judged on the basis of the yard-stick normally aptiied to the private sector. The justification of the public sector lies in its contribution to fulfilling cerhim broader socio-economjc objectives. Viewer in this light, the public sector as a whole has acquitted itself reasonably well. But for the entry of the public [sector in a major way in the development of these basic industries, the structural changes witnessed in the Indian economy could not have been achieved. It has also provided the necessary counter-poise to the priva'.e sector for supply management as needed from time to time in periods of crisis in vital sectors of the economy. The public sector has also devoted comparatively greater attention to research and development, so essential for achieving the goals of technological self-reliance.

16.6 In aggregate financial terms the internal resources generated by the public sector undertakings for financing the Plan have been comparatively meagre. The major factors responsible for these are—

1. low return on investment on account of price constraints imposed on some public sector undertakings;
2. considerable number of private sector sick units (particularly in the textile and engineering industries) which the Central Government had to take over in the interest of maintaining employment and production;and
3. the technological complexity of the industries which had to be promoted in the public seclor where a longer gestation period and slower learning curve are inevitable.

16.7 Notwithstanding these considerations, there is need for substantial improvement in the working of the public sector undertakings. The continued growth prospects of the public sector, and indeed of the economy, are critically dependent on its ability to generate resources for its future growth. A substantial improvement i'fl the efficiency of these undertakings, so as to provide a reasonable rate of return on large investments made on them is, therefore, of crucial importance. To the extent pricing policy has inhibited the resource raising capacity of certain undertakings, it would be necessary to review it to bring it in line with prudent commercial norms. There is also the need to Improve management practices within the undertakings so as to impart a greater concern for optimal utilisation of capacity and higher levels of technical efficiency. Inordinate delays have been a common feature in the implementation of public sector undertakings: these not only lead to loss of production but also significantly contribute to higher investment costs. Modern techniques of project monitoring and construction management will need to be introduced to avoid the excessive costs inherent in the serious slippages in thf construction of projects. At the same time it is necessary that there should be adequate delegation of authority to the public sector undertakings and also within the public sector undertakings at various levels. As far as posisble, the authority and discretion of the public sector management, within the delegated functions, should not be brought into question; the performance of the management should be judged on the basis of overall results achieved as distinct from the soundness of individual decisions taken by it. The induction of professional management and industrial culture in the public sector enterprises should be steadily promoted. An intensive institutionalised programme of induction and short term training for senior public sector managers should be introduced to ensure continuous availability of a body of properly trained and motivated personnel for top level positions in the public sector.

16.8 Certain other deficiencies in the nature and pattern of industrial development have also emerged. Regional imbalances in industrial development have noi been corrected to the extent required. The expectation that massive, investments in Central sector projects' would have a wide ranging 'trickle down effect' in stimulating small and ancillary industries has not been realised in many States. Even within States, industries have tended to gravitate towards existing centres, the backward areas remaining substantially untouched. The incentive schemes for attracting industries to backward areas have not been able to prevent this tendency to an adequate extent. Schemes for giving ca.pi.al subsidies to the backward districts appear, in retrospect, to have been used to a large extent, in fact, by the developed States.

16.9 The pattern of industrial development has not been sufficiently guided by cost considerations. In a regime of protection from international competition, industries have tended to get estaMlshed at sub-optimal capacities, leading to a high cost industrial structure. Adequate attention has also not been given to improvements in technology and quality of products. Some of these factors have led to the emergence of sickness in certain industries particularly when market conditions tend to generate a measure of competition within the economy.

STRATEGY FOR THE SIXTH PLAN

16.10 In the above context, the perspectives for the coming years have been identified. Such projections must take as their starting point the economic situation in the base year of the Plan i.e. 1979-80. During this year, the weakness of the infrastructure particularly coal, power and transport, has been yn overriding constraint to industrial production, and virtually for the first time since the beginning of planned development, a fall in industrial output (of—1.4 per cent) was recorded. The capacity in a number of industries remained substantially unutilised, leading to shortages of various industrial products. A further consequence of this has been a sharp worsening in our balance of trade, since large imports of cement, Sugar, steel fertilisers etc. had to be resorted to so as to augment domestic supplies, accentuating an already difficult situation that arose from the increase in the prices of crude oil in the international market.

16.11 In addition to the conventional strategies of aiming at optimum utilisation of existing capacities and improvement of productivity, certain other elements of policy would be necesasry in the medium term perspective. These would encompass the following:—

(a) Substantial enhancement of manufacturing capacities in public/private sector covering a wide range of industries for providing not only consumer goods and consumer durables but also for supporting agricultural and industrial growth through supply of intermediate and capital goods. The pace of industrial investment will need to be speeded up so that manufacturing capacities are in position well ahead of demand to permit competitive market forces to operate and to avoid possibilities of shortages with attendant adverse effects on the economy.

(b) The capital goods industry in general and the electronics industry in particular will need special attention as these support the growth of ;i wide range of economic activity. The proper development of these industries in terms of competitive costs and high quality would be essential to ensure that the projects based on domestic capital goods du not become very costly. Similarly other selected industries would need to be identified (such as machine tools and commercial vehicles) for accelerated development for supporting not only the domestic requirements but also for exploiting the export potential in a larger measure than hitherto.

(c) In the context of the substantial foreign exchange resources required to support the Plan, export of engineering goods and industrial products, as also project exports will need to be stepped up. Manufacturing capacities would have to be substantially augmented on a selective basis, to generate adequate domestic supplies to support the export effort. Suitable strategies will need lo be identified.

(d) Industrial progress will necessarily depend upon continued technological excellence; this would call for a judicious blend of permitting import of contemporary technology, and promoting the development of indigenous know-how through domestic research and development. A re-orientation and review of the existing procedures and parameters for transfer of technology for this purpose appears necessary. Further, instead of responding to initiatives from foreign pirtics, suitable perspectives and strategies will have to be developed for seeking out and arranging for appropriate and advanced technologies of relevance to the specific areas of our interest. This may require the strengthening of appropriate institutional arrangements.

(e) Although industrial development would increase the demand for energy, measures will need to be taken in the context of the emerging energy situation to improve energy efficiency, not only of manufacturing industry, but also of their end-products. Further, efforts will need to be made to adjust the energy consumption pattern in the industrial sector to domestic energy endowments. This will have particular relevance in sectors such as road transport for which alternative solutions (for example in terms of alternative fuels for commercial vehicles) will need to be developed on aa urgent basis.

(f) New strategies for development of backward regions will need to be devised. The thrust would be to implement a new model of development which would prevent concentration of industry in existing metropolitan areas. The recommendations of the National Committee on Development of Backward Areas will be examined so as to evolve a viable strategy in this direction.

INDUSTRIAL POLICY INITIATIVES FOR THE SIXTH PLAN

16.12 Industrial policy cannot be static and will have to respond to the changes in the economic scene as set out in the preceding paragraphs. The framework of rules and regulations relevant to the nascent stage of development are not necessarily appropriate to the complex industrial structure which has since been built up. Without sacrificing the basic principles of a planned economy, sufficient flexibility would need to be built into the system to impart a sense of dynamism to take advantage of the considerable technological and managerial capabilities that have been developed over the years. In order to make efficient use of scarce capital, much greater attention will have to be paid to securing greater efficiency and competitiveness in ihe functioning of our industry. In order to protect employment, all encouragement will have to be given to the growth of cottage, village and small industries. Sectors where efficient production can be secured on a small scale would continue to be reserved for future expansion only by tha small scale units. However, if social costs of protection of the decentralised sec'ior are to be coniained within reasonable limits, there must be a greater play of competition in the remaining sectors which are not reserved exclusively for small scale industry. In industries where the economies of scales are not important dispersal of industries to secure grea er regional balance is both economically efficient as well as socially desirable. However, where economies of scale exercise an important influence on the cost of production, expansion of existing enterprises ;s to be preferred to setting up new plants of uneconomic size. This applies particularly lo the expansion of capacities which depend on export markets. Moreover, consistent with the emphasis on technological self-reliance, adequate stress must also be laid on keeping the technology in use upto-date. To that end, import of technology particularly for export oriented and key industries may need to be libaralised.

16.13 The directional changes in the Industrial Policy are reflected in the Industrial Policy Statement of July, 1980. This accords particular emphasis on improving efficiency and productivity in the industrial sector through optimum utilisation of existing capacity. To this end, it is proposed to grant recognition to increased capacities arising from technological improvements and labour productivity by endorsing industrial licences selectively on the basis of such capacities and to permit automatic growth in industries in the core sectors or those which have a direct linkage with the core sectors or with long term exports. The Industrial Policy Statement of 1980 aiso provides for the. induction of advanced technology, introduction of processes which would aim at optimum utilisation of energy as also for the establishment of appropriate capacities to achieve economies of scale. A special thrust is to be given to the establishment of export-oriented units. The operational elements of the industrial policy will have to be kept constantly under review in order to meet the challenges arising from the shifts in the international and national economic situation.

INVESTMENT PROGRAMMES AND TARGETS

16.14 The Plan envisages an average annual rate of growth of 8 per cent of industrial production during the five year period. Against the background of the actual rate of growth in the last decade, this may appear to be a formidable task and determined efforts will be required in order to achieve the sub-stanially higher industrial growth postulated in the Plan. A significant improvement in the functioniig of the infrastructure, particularly coal, power and railway's is an essential pre-condition for the realisation of the Indus rial growth target. It is expected that with the concentrated attention being given to improving the operational efficiency of the infrastructural system, the trend of improvement seen in the second half of 1980-81 and the large investments provided in the Plan for these sectors, these constraints would be eliminated to a considerable extent In Ihe near future. Assuming such an improvement, a detailed analysis suggests that capacity is not likely to he a constraint in achieving the production targets envisaged in the Plan, Based on levels of capacity utilisation actually achieved in the past, the existing canacity and the capacity currently under implementation are adequate to achieve the production targets envisaged. With the substantial step up in pomic sector investment and the more hopefui prospects for agricultural growth, demand is also unlikely to be a constraint in achieving the postulated growth in industrial production. The suggested order of increase is in any case necessary to secure an increase of 9 per cent per annum in exports.

16.15 The capacity and production targets for selected industries for 1984-85 are indicated in Annexure 16.1.

16.16 The objectives of self-reliance would require that the pattern of investment in the industrial sector should con'i'nue to give high priority to the creation of adequate capacity in basic industries such as steel, noB-fcrrous metals, capital goods, fertilizers and petrochemicals. The public sector will have to assume a major role in the expansion of these industries. There will, however, be a su'bstanilal scope for the expansion of the private, joint and cooperative sectors within the framework of the broad policy. The fields in which these sectors are expected to contribute significantly are fertilizers, cement, paper, textiles, chemicals, pesticides, drugs and pharmaceuticals.

16.17 Arising from the investment envisaged in the Plan, structural shifts in the pattern of industrial production are expected lo emerge in the eighties. Production of natural gas, petroleum and coal, and industries based on these resources, and more particularly fertilizers, plastics, synthetic fibres, synthetic rubber and other petro-chemicals are expected to grow rapidly during this period. A major expansion in the electronic industry in which the country has a competitive advantage due to the availability of a large pool of technically qualified personnel is also visualised. While the expansion in metalid engineering industries would continue, chemical and electronic industries are expected to assume the leading role in industrial investment and production.

16.18 The salient features of the industrial programmes envisaged for the Plan are briefly indicated in the following paragraphs.

Iron and Steel

16.19. Demand and supply: The capacity utilisation of the integrated steel plants was 90 per cent in 1977-78 but due to a setback in production, the capacity utilisation dropped lo 81.5 per cent in .1978-79 and to 69 per cent during 1979-80. The shortfall in the production of saleable steel particularly in integrated steel plants has been primarily on account of infrastructural constraints in terms of availability of coal, power and rail transport. However, the loss of production of saleable steel from the integrated steel iplants during 1979-80 was more than off-set by the increased contribution from the mini steel plants and a substantial increase in imports (and curtailing of exports) so that the total availaility of steel to the economy was about 5 per cent higher than in the previous year. The shortages of power proved !o be a major constraint, such that even tha molten steel that was produced with the restricted supplies of coal. etc. could not be converted inta saleable steel and resulted in accumulation of 0.75 million tonnes of ingot steel. Tn the preceding years also the production of saleable steel from the integrated steel plants has shown a declining trend:

The outlook for 1980-81 is not better than the previous year. Already from being a net exporter of steel during 1976-77 and 1977-78. we have become of sted, despite the slow growth in industrial ostput. Since demand would grow in the region o< and and per cent per year, this declining trend in production. with seed to be reversed sharply if major cons!ra»ts to the growth ot the- economy due to shortages of steel are to be averted.

16.20 Strategy: In the above context, the short-term and long-term strategy in the Iron and Steel sector encompasses the following:

1. Removal of inlrastructural constraints, including import of coking coat. Coking coal needs to be imported partly on account of supply constraints, and partly to off-set the high ash content of Inftigenous coal. Approximately, 1 to 2 million tonnes of coal may need to be imported per year for some time;
2. Provision of captive power plants to cater to the essential operating need's of steel plants particuterly at Bok,aro, Durgapur and Rourkela;
3. Acceleration of R and D activities relatable to utilisation Inferior grades of coal in blast furnaces; improving steel making practices to get higher productivity and yields, etc.;
4. Speedy implementation of modernisation and replacement programmes to quickly enhance productive capacities and productivity;
5. Speedy implementation of expansion schemes;
6. Implementation of the Vizag steel project so as to make it operational by the first year of the next Plan and, if possible, to take up a second project.

Targets: The above strategies would be aimed at meeting the demand projections of 12.9 million tonines by 1984-85 and of 18.4 million tonnes by 1989-90, starting from a consumption level of 8 million tonnes in 1979-80. The production of steel including the output of mini steel planis has been planned to be increased from 7.4 million tonnes in 1979-80 to 11.5 million tonnes in 1984-85, and'17.4 million tonnes in 1989-90 provided the infrastruc-tural constraints are adequately eradicated. Even under this condition, there will be need for marginal import of steel, as there will be imbalances between various categories of steel i.e., shortage of shaped products and a surplus in flat products in 1984-85.

16.21 Capacity expansion: The programme calls for a major step up in capacities although much of it would fructify only towards the later part of the Plan period and mostly in the Seventh Plan. This Situation is inherent in a long gestation investment sector such as steel.

The additional capacities envisaged are:

In arriving at the relative investment priorities greatest stress has been laid on completion of con tinumg schemes as also for modernisation and rationalisation piograiiimas. Some of the new schemes which have been included in tlie Plan and which may require investment to ellectively take place during the later pan ot tlie Plan period, will be funded only after a mid-term appraibal of tlie Plan, and if availability of resources so permits. The contruction of a second steel plan; in Urissa is also contemplated, if funding arrangements can be satisfactorily settled.

in the past, the construeiiun of steel plants has been seriously atlected due to delay in the supply ot equipment, both indigenous and imported, slippages in tlie schedule of civil work, erection of equipment etc. Besides other adverse impacts, these delays have resulted hi considerable cost over-runs. Steps tor speedier impiemeniaiion of projects and for closei monitoring of tile progress ol supplies of critical in puts, of construction and erection will need to be taken.

16.22 Minieplant', sponge iron: Taking note of the 1'aet that ihe inini steel planis are capital intensive and power intensive, and also have to depend largely on availability of steel scrap, additions to capacity of mini steel plants are not envisaged during the plan period. However, tlierc is acope for existing licensed units to increase their output during the plan period. Further, it is recognised that for meeting the special requircinenis of small volume off-take of various users, the mini steel plants have a greater flexibility than the integrated steel plants. The availability ot sponge iron could help in reducing the dependence on melting scrap. Necessary research and trial production programmes in this direction have been initiated in a pilot plant of 30000 tonnes p.a. capacity based on solid reduction at Koih,agudem in Andhra Pradesh. Some more plants based on solid reduction with a capacity of about 100,000 tonnes per annum each are likely to be set up by 1984-85. Depending on the availabiLty of natural gas and the economics of production, the possibility of setting up sponge iron plants based on gaseous reduction will be examined. If these new technologies find large scale practical application there could be substantial savings in die form of reduced requirements of scarce coking coal.

Iron ore

16.23 The investment programme for production of iron ore takes into account the possibilities of increased exports as well as the growing needs for domestic consumption for production of steel. On this basis, a production target of 60 million tonnes is envisaged for 1984-85, consisting of 25 million tonnes for domestic consumption and 35 million tonues for exports. In order to maintain the export of iron ore through Vizag port at the level of about b million tonnes and at the same time to meet the requirements of the Vizag steel project, it is proposed to take up the development of new mines in tae Bailadillu zone. Further, in view of the reduced demand for Kudremukh iron ore from Iran, the establishment of pelletisation facilities for the conversion of a part of the iron ore from Kudremukh is also envisaged. The possibility of setting up a pellet plant at Bailadilla will also be explored.

Now-terous metals

16.24 While India is well endowed with ferrous minerals, the resources of non-ferrous minerals are limited. The development strategy has, therefore, to provide for a judicious balance between imports and local production, coupled with emphasis on prospecting and increasing the known inventory of resources. Further, it should aim to accelerate the pace or assimilation of imported process technology and development of new technologies appropriate to local conditions with specific regard to the constraint of power and of capital resources. In the recent past, it has been possible to discover 1,arge reserves of bauxite and also small amounts of additional reserves of copper, lead and zinc ores. The Plan envisages expansion of capacity to utilise optimally these potential resources, consistent with the principles of conservation.

16.25 The production of aluminium, copper and zinc has been considerably affected in the recent past on account of shortage of power. With the contemplated addition to power capacity, it is expected that this constraint would be substantially eliminated during the course of the Plan period. At the same time, in planning for major increase in the production of non-ferrous metals, the possibility of providing captive power generation would have to be kept in view. This has been taken into account in planning additional capacity in a new project for production of aluminium.

16.26 The programmes envisaged in the Plan provide for:—

1. completion of existing schemes;
2. investment in mining and smelter capacity to correct imbalances and to substantially Increase outputs with minimum outlay;
3. establishment of a large alumina/aluminium complex at Orissa, geared to meeting domestic and export needs; and
4. exploitation of the zinc lead deposits recently discoveied at Agucha in Kajasthan. Additionally, the possibility ot taking up anotner amm.na-amminimn complex based on bauxite deposits in Andhra Pradesh will also be explored.

16.27. As a result of the investments proposed, a substantial increase in the output of non-ferrous metals is envisaged by l984-85. Even so impons would have to continue.

Engineering industries

16.28 Over the years engineering industries in the country have registered a pnenomenal growth to gene-idle a strong base in a wide range ot neavy and light engineering industries covering a broad spectrum of capital goods ana consumer durable products, the buiK ot ilie capiiai goods required for power projecta, lenilizer plauis, cement planis, steel plants, mining equipment, pctro-chemical plants are being mei irom indigenous production. Construction macomery aud equipment tor irrigation projects, diesel eugmcd, pumps and tractors tor agncunure, transport vemcles, etc. are also being met irom witnin tne country, fcx-ports oi engineering goods are a major element in non-traditional exports and it is envisaged that a suostanual sicy ud in the eneineerine exports during the Plan period would help to buttress the foreign excnangc reserves, as also provide a means (througn uie impact ot international competitiveness) to fur-tner improve the quality of such goods.

16.29 Rural development will require essential in-irastructural and other inputs like transport, power, cement and fertilizers whicn in turn will make suostan-tial demands on the output of the engineering sector. Tne strategy for aevelopnieOt in this sector will call for creating auequate capacities slightly in advance ot emerging requirements. Also, the approach for maximisation ot output and export earnings will call for a selective thrust in the development of engineering industries in which the country has comparative advantage in the international context. In addition, to support the growth of many other user sectors, substantial additions to capacity may be required in many engineering industries. This is notwithstanding the fact that there are areas in which capacities which have been created, have been inadequately utilised during the recent past on account of various constraints. Some examples of these are metallurgical machinery, mining machinery, cranes, cement and sugar machinery and diesel engines. Taking into account the need for better utilisation of such past investments made in the economy, a more selective approach for import of equipments is to be adopted. At the same time, with a view to improving the international competitiveness and technology of indigenous engineering industries, it will be selectively exposed to international competition. A more liberal policy for the import, of technology in selected areas would be allowed in order to meet the above objectives. Again, recognising the problems arising from possible stagnation, the scope and content of the present scheme for automatic growth/diversification would be suitably enlarged/ modified. This would have the advantage of creating increased production at minimum cost and in the shortest possible time, apart from providing an incentive to the efficient units to grow.

16.30 The investment programmes in the public sector are mainly related to expansion of capacities for power equipment and allied products, diversification and modernisation of existing units to improve their economic viability, as also for improving the performance of sick units which were taken over in the Eastern region.

16.31 Provision has been made for completion of all on-going schemes in the ship building sector such as in Cochin and Hindustan Shipyards. Further, work on expansion of ship repair facilities is to be initiated. The Cochin Shipyard which is nearing completion is expected to reach 60 per cent utilisation of its capacity by the end of the Plan, and expansion of Hindustan Shipyard is expected to be taken up. The need and possibility of financing the expansion of the Cochin Shipyard would be examined after a mid-term appraisal of the plan. Similarly, the need for setting up new shipyards would also be examined at that stage. However, construction of additional shipyards would need to be viewed in the context of the general outlook for the shipping industry, the proportion of the total Indian ships to be acquired from indigenous shipyards and the relevant economics of domestic production versus imports of ships from abroad.

Electronics

16.32 The electronic industry is particularly well suited to rapid growth in India because it is relatively labour intensive, requires high levels of engineering and scientific back-up and has a large and growing domestic as well as export market. A High Level Committee on the Electronics Industries submitted its report some time ago and its recommendations for accelerating the growth of this industry are being examined.

16.33 The programmes in the electronics industry are being coordinated by the Department of Electronics but implemented also by the concerned Departments which are responsible for the manufacture and end use of a wide range of specialised electronic products. The main thrust of the investment programmes is to complete existing schemes and to selectively expand capacities to meet emerging specialised requirements within the country. It is proposed to develop capacities both in the private sector and the public sector, for manufacture of electronic components and materials, which require capital intensive and technology intensive inputs. This is nn area in which the nvailability in the past has laeeed behind demand. Another area of emphasis is technological upgradation and standardisation of components and et'r.ipmcnr. The cost of electronic "oods will be reduced through appropriate rationalisation of production process and revisions in the excise and duty structures.

16.34 In addition to the completion of a major facility for the manufacture of large scale integrated circuits, which would provide the vital "chips" for use in a wide range o'f electronic products a number of new programmes have been identified for implementation. Some of these relate specifically to generation of appropriate manpower experties, others are related to export promotion programmes and to manufacture of specialised and strategic products such as high power micro wave equipment and radar systems. Emphasis has also been placed on technology development and research.

Fertilizers

16.35 The strategy for supporting the rapidly expanding agriculture programmes requires that much greater attention be devoted to creation of indigenous production capacities for both nitrogenous and phos-phatic fertlizers, maximising to the extent possible, the utilisation of indigenous raw material resources like gas, pyrites, rock phosphate, etc.

16.36 The amount of chemical fertilizers being applied per hectare is currently so small that in many places diminishing returns are not expected to start for a long time to come. The agronomic practices in many parts of the country are such that over 50 per cent of the nutrients applied tend to get lost during the south-west monsoon season. This aspect will be critically reviewed and necessary follow up measures taken to minimise leaching and other kinds of losses.

16.37 Over the years, the development of the fertilizer industry has taken place in the public, private and cooperative sectors. The growth of the chemical fertilizer industry has been impressive, particularly during the last decade. In the case of nitrogenous fertilizers starting with a capacity* of 85 thousand tonnes in 1955-56, the industry grew to a capacity of 5.48 lakh tonnes in 1965-66 and 38.9 lakh tonnes in 1979-80. The capacity for phosphatic fertilizers grew from 64 thousand tonnes in 1955-56 to 2.28 lakh tonnes in 1965-66 and 12.30 lakh tonnes in 1979-80.

16.38 The demand for nitrogenous and phosphatic fertilizers is estimated at 60 lakh tonnes and 23 lakh tonnes respectively in 1984-85 and at 86.0 lakh tonnes and 33 lakh tonnes in 1989-90. Considering the time-lag inherent in the establisment of new capacity, the attainable levels of production in 1984-85 are estimated at 42 lakh tonnes of nitrogen and 14.0 lakh tonnes of P205. Substantial imports would, therefore, be necessary even at the end of the Plan period.

16.39 The nitrogenous fertilizer plants in the country, are based on a variety of feed stocks such as natural eas. naphtha, fuel oil, coal. electricity and coke oven gas. In the light of the discovery of natural gas in the Bombay High and Bassein off-shore areas ths feed stock policy has been reviewed. It has been decided that gas would be the preferred feed stock for fertilizer production and consideration should be given to the further use of coed as fertilizer feed stock as soon as coal gasification technology in Tal-cher and Ramagundam plants is established as viable. These two coal based plants have now achieved commercial production and it is hoped that sufficient plant operating experience would be gained during the initial years of the Plan period to enable a decision to be taken, on use of coal as feed stock for future nitrogenous fertilizer plants, based on techno-econo-mic considerations. The use of naphtha is to be limited to the extent that there is a long-term disposal problem at an inland location. For the present, other feed stocks are not being encouraged.

16.40 Advance action will need to be taken for setting up additional nitrogenous and phosphatic fertilizer capacity during the Plan period to meet the anticipated requirements during the period beyond under implementation including Thal and Hazira, ac-under implementation including Thal and Hazira, action will have to be initiated in a phased manner to take up the construction of 8 new nitrogenous fertilizer projects, 6 of them based on the gas from the Bombay High/South Bassein Region. These plants are expected to be each of 1350 tonnes per day ammonia capacity with matching urea capacities. Four of the new nitrogenous fertilizer projects are to be set up in the public sector; out of the remaining four plants, two are to be taken up in the cooperative sector.

16.41 Considering the substantial deficits in phosphatic fertilizers during the Sixth and Seventh Plan period, action would be initiated on several new Phosphatic Fertilizer Projects in addition to the expansion of some of the existing facilities. The New Phosphatic Fertilizer Projects would be based on a judicious combination of indigenous rock phosphate and pyrites from Rajasthan and also imported rock, sulphur and phosphoric acid. It is envisaged that action will be initiated in a phased manner on seven new fertilizer projects in the public sector including the marginal expansion of one of the public sector units nt Cochin, and 4 new projects in the private sector, in addition to several single super phosphate schemes which are expected to be taken up in the private sector.

16.42 In order to maximise the output from existing units, there is a constant need to improve efficiency of operations; this is receiving: attention. Cantive Tower facilities are being created to meet the critical nower requirements in units where the power supply is erratic. Steps have also been initiated to modernise ancTrennvate the old plants and to remove the tech-nolonical shortcomings in other units through suitable modifications.

Pesticides

16.43 Pesticides have assumed a vital role both for crop protection and health programme's. The installed capacity in 1979-80 for technical grade pesticides was 70,425 tonnes with a production level of 50,041 tonnes. In the Central public sector, Hindustan Insecticides Limited (HIL) is engaged in the manufacture of a number of pesticides. Another public sector company, Hindustan Organic Chemicals (HOC) also manufactures BHC. Suitable 'provisions have been made for the setting up of new pesticides project's based both on indigenous and imported technologies. It is proposed to set up joint 'sector ventures for pesticides formulations and/or basic materials, with participation by the Central and the State Sectors. After taking these public sector capacities into account the overall demand for pesticides leaves a gap which is expected to be filled by the private sector.

Petrochemicals

16.44 The major development in the petrochemical industry during the Fifth Plan ha's been the setting up of the petrochemicals complex of the Indian Petrochemicals Corporation Limited (IPCL) a public sec-for undertaking, at Baroda. The naphtha cracker and most of the down stream units were commissioned during 1978-79. A beginning has also been made for setting up a petro-chemicais complex in Bongai-gaon, Assam through another public sector company, the Boneaigaon Refinery and Petrochemicals Limited (BRPL).

16.45 The discovery of crude oil and natural gas in the off-shore region on the Western Coast provides a new dimension to the possibility of petro-chemicais expansion during the Sixth Plan period. Considering the capital-intensive nature of petro-chemical projects, the pattern of production is being carefully chosen to meet priority uses. Based on cost benefit analysis, a detailed study was carried out, identifying the advantages to the economy in the use of petrochemical products in place of conventional materials, without adversely affecting the established industries. Many such areas have been identified such as the use of plastic products in agriculture, irrigation, health, communication and other priority areas. Synthetic fibres can supplement cotton to meet the growing textile requirements of the population. The conversion of plastics into consumer and some industrial products can be done economically in the small scale sector, an activity which has a significant employment potential.

16.46 Taking into account the gestation period for setting up new units in the petro-chemical industry, production from new starts is not likely to contribute to availability in any significant manner during the Plan period. Production targets envisaged for petrochemicals are, therefore, primarily on the basis of schemes already under implementation. New starts have been viewed essentially in the context of meet-ing the requirements in the subsequent plan period.

16.47 An important consideration taken into account in postulating further expansion of the industry is the adoption of technologies and unit size's that are economic and will, therefore, produce products at costs which compare favourably with international prices. Consequently, the time phasing for the setting up of new capacities will take into account the possibilities of imports till there is sufficient gap between domestic demand and supply to ensure that economically viable units are established. The possibility of exports will be taken into account whenever the internal market is not able to absorb the total indigenous production.

16.48 Integrated operations can minimise investment costs and effectively utilise existing facilities. The possibilities in existing refineries and petrochemical units in the public/private sector, have been taken into account in formulating the programme.

16.49 It is tentatively proposed to initiate steps to establish in the Central public sector (a) one olefius complex using natural gas as feed-stock, (b) aroma-tics recovery facilities for the recovery of benzene and xylenes, (c) a caprolactam plant; and (d) a DMT/PTA Plant. Furthermore, expansion of some of the activities in IPCL and Petrofils is contemplated.

16.50 The overall programme for petrochemicals leaves substantial scope for the expansion of activities in the private/joint sector also. Some of the important areas in which necessary action is being initiated are synthetic fibres, polystyrene and detergent alkylates.

Drugs and Pharmaceuticals

16.51 The drugs and pharmaceuticals industry has made considerable progress in the last two decades. The production of basic drugs and pharmaceutical formulations was estimated to be Rs. 226 crores and Rs. 1150 crores respectively in 1979-80. The contribution 01 the public sector amounted to 26 per cent in the case of bulk drugs and 6.3 per cent in the case of formulations, the organised private sector accounting for 63.4 per cent and 67 per cent respectively with the balance being the output of the small industry sector. To meet the supply gap, bulk drugs worth Rs. 150 crores (landed cost) were imported.

16.52 Requirements of bulk drugs and formulations by 1984-85 have been estimated at Rs. 815 crores and Rs. 2450 crores respectively. The production of basic drugs is expected to increase to Rs. 665 crores and the balance of Rs. 150 crores would continue to be met by imports. The production of basic drugs in public sector is expected to increase from Rs. 59 crores to Rs. 215 crores and formulations from Rs. 72 crores to Rs. 330 crores.

16.53 The policy on drugs aims at:

1. development of self-reliance in drug technology;
2. providing a leadership role to the public sector;
3. making drugs available at reasonable prices and in abundance to meet the health needs of the people; and
4. fostering and encouraging the growth of the Indian sector.

16.54 Keeping in view the important role assigned to the public sector, a provision of Rs. 145 crores has been made for Hindustan Antibiotics Ltd., Indian Drugs and Pharmaceuticals Ltd. and the three drug units in the Eastern region: Smith Stanstreet Pharmaceuticals Ltd., Bengal Chemical and Pharmaceutical Works Ltd., and Bengal Immunity Co. Ltd.

16.55 The major on-going schemes which would be completed are: the second phase expansion of the synthetic drugs plant; the nicotinamide project and expansion of the antibiotics plant of IDPL and thp expansion of the streptomycin and penicillin plant of HAL. A number of joint sector units are proposed to be established with the participation of State Governments to serve local needs. Provision has also been made for new starts in the Plan on a selective basis.

Other Organic and Inorganic Chemicals

16.56 The only public sector undertaking that is involved in the manufacture of basic chemicals, which are important intermediates in the manufacture of drugs and pharmaceuticals, dyes, rubber chemicals, pesticides and laminates is Hindustan Organic Chemicals (HOC). One of the major projects currently under implementation by HOC at Cochin is a 40,000 TPA phenol plant alongwith 24,000 TPA of acetone. HOC is also expected to initiate action on a polyte-trafleroethylene project and a caustic soda/chlorine project during the Sixth Plan.

16.57 The overall programme for organic and inorganic chemicals will leave substantial scope for the expansion of activities in the private/joint sector also. Several new caustic soda and soda ash projects are expected to be implemented during the Sixth Plan mainly to cater to the projected demands in the Seventh Plan period.

Textiles

16.58 The overall requirements of textiles covering cotton, blends and man-made fabrics are estimated at 13,300 million metres including exports of 1,400 million metres in 1984-85. The basic objective of the textile programme is to make available textiles in adequate measure and at reasonable prices for the population and at the same time to encourage and support the production of cloth in the handloom sector to the maximum extent possible. It is envisaged that an addition to capacity should be permitted in the powerloom sector and a series of measures by way of disincentives will be devised to prevent powerloom from competing with the handlooms.

16.59 The level of production in the decentralised sector in 1979-80 was 6350 million metres (hand-looms 2900, and powerlooms 3450 million metres) which is expected to go up-to 8400 million metres in 1984-85. The share of the handloom will be 4100 million metres and the powerlooms 4300 million metres. While targeting the production tor handlooni the maximum level of production that could be achieved in the handloom sector has been taken into account in the context of the organisational and technological problems involved in reaching the millions of handloom weavers spread in different parts of Ihe country. It is envisaged that the production in the mill sector would reach 4900 million metres. The pattern of production in the three sectors projected for 1984-85 is as follows:-—

(in million metres)

To achieve the envisaged production target, considerable addition to capacity in terms of spindles (2.1 million) is needed. While creating additional spind-lage, preference would be given to the existing units to bring them to an economic size. Arrangements will also be made to meet the requirements of hank yarn for the handloom sector.

16.60 A provision of Rs. 90 crores has been made in the Plan for rehabilitation and modernisation, as well as for installation of additional spindles under the National Textile Corporation (NTC). NTC will increasingly utilise institutional funds for its programme and the total investment envisaged is Rs. 220 crores.

Jute Textiles

16.61. A production target of 1.5 million tonnes of jute manufacture is projected for 1984-85 including requirements for export estimated at 0.55 million tonnes. For achieving the export target, efforts will need to be made for improving the quality of secondary backing, production of specialised sacking constructions and the greater use of lighter hesslan. The present capacity of the jute industry is estimated at around 1.32 million tonnes per annum. In order to achieve the production target additional capacity of 0.2 million tonnes would need to be created. It is envisaged that the two new jute mills m Tripura and Orlssa would result in creating additional capacity of 0.25 lakh tonnes. With the implementation of scheme of modernisation/renovation of the existing units, and marginal expansion of spinning capacity, the addition to capacity by existing units is envisaged at 1.25 lakh tonnes. There would be need, therefore, for creation of additional new capacity of 50 thousand tonnes per annum. It is proposed to give preference to units coming up in cooperative/public sector and the units to be located in North-Eastern region.

16.62 The Government has set up a National Jute Manufacturers Corporation which has under its control six jute mills. A scheme for modernisation and rehabilitation of these mills is under way. A Plan provision of Rs. 5.60 crores is envisaged for this purpose.

Paper and newsprint

16.63 Demand for paper and paper board is estimated to increase from 1.1 million tonnes in 1979-80 to 1.54 million tonnes by 1984-85. The capacity and production targets envisaged for 1984-85 are 2.05 million tonnes and 1.5 million tonnes respectively. The additional capacity is expected to come up largely through establishment of small sized paper mills based on secondary raw materials and three large units being set up in the public sector.

16.64 The present consumption of newsprint which is of the order of 0.35 million tonnes is largely met through imports. Taking into account the present trend in consumption of newsprint, it is estimated that the demand for newsprint would increase to 0.5 million tonnes by 1984-85. Capacity for newsprint is expected to increase to 0.23 million tonnes and production to 0.18 million tonnes in 1984-85; imports of newsprint will have to continue during the plan period.

16.65 It is expected that the Nagaland paper project and Nowgong and Cachar paper projects in Assam, in the public sector, with a total capacity of 0.233 million tonnes of paper and paper board would be commissioned by 1984-85. Similarly, the Kerala Newsprint project with an annual installed capacity of 80 thousand tonnes per annum of newsprint and the newsprint project of Mysore Paper Mills with a capacity of 75 thousand tonnes per annum are expected to go into production during the Plan period.

16.66 The raw materials for the paper and newsprint industry require to be planned on a more systematic and long term basis in view of the limited forest resources of the country and the long gestation period for their regeneration. Maximum use of non-conventional raw materials has assumed importance in the context of emerging shortage of conventional raw materials to support the expanding paper industry. Steps for encouraging their use have already been initiated and policy measures of greater use of bagasse for the manufacture of paper and newsprint have been announced.

16.67 The Outlay provided in the Plan fully takes care of the ongoing programmes for the paper and newsprint industry in the public sector. Additionally, consideration will be given to the possibility of initiating new paper|pulp projects based on the forest resources in the North East region.

Cement

16.68 The main bottlenecks which had resulted in lower production of cement and under-utilisation of capacity during recent years have been the lack of adequate infrastructural facilities like coal, power and transport. Efforts are being m,ade to improve infrastructure facilities as a result of which it is expected that capacity utilisation would be substantially improved during the Plan period. The cement capacity is expected 10 increase to 43 million lonnss in 1984-85 from 24.3 million tonnes in 1979-80. A production target of 34.5 million tonnes for 1984-85 is envisaged. A higher production than what has been targeted could be achieved if there is significant improvement in the infrastructural facilities. This could result in narrowing the gap between supply and demand.

16.69 In planning additional capacity, advantage is being taken of economies of scale through the installation of large size one million ton'ne capacity plants. This has been possible because of the induction of pre-calcinatlon technology. More than 8 plants of one million tonne capacity are expected to go on stream during the Plan period. In addition, a large number of mini cement plants are expected to be established which may contribute around one million tonnes of cement.

16.70 The public sector units have major programmes for utilisation of slag from tlie steel plants. A capacity of 1.68 million tonnes of slag cement is being set up by U.P. Cement Corporation at Chunar, using slag from Bokaro. Besides, Steel Authority of India are also setting up a two million tonne slag cement capacity at Chilhati using Rourkela and Bhilai slag.

16.71 The Cement Corporation of India have an ambitious programme of setting up three one-million tonne capacity cement plants at Tandur, Neemuch and Yerraguntala. An investment of Rs. 300 crores is envisaged for the Cement Corporation of India.

16.72. The capacity in public sector units will Increase from 3.60 million to 9.30 million tonnes and their share in capacity wiil rise from around 15 per cent to 22 per cent during the Plan period.

Sugar

16.73 As the world's largest producer of sugar-cane, the country has considerable potential for the development of the sugar industry to meet domestic demand as well as exports. The rapid growth of the cooperative sugar factories, which account for over 50 per cent of sugar production, illustrates the potential for the development of this industry, as well as the harmonisation of the interest of the farmers and those of the manufacturers of sugar.

16.74 The wide fluctuations in the sugarcane production result in periodic scarcity and surplus in sugar causing distress to the farmers, sugar industry and the consumer. This calls for a rational policy for pricing of .sugarcane and sugar, as also the other sweetening agents like gur and khandsari,

16.75 Taking into account the trend in the consumption of sugar the domestic requirements are estimated at 6.o4 million tonnes in 1984-85. An export level oi one million tonnes is tentatively projected. The level of exports, however, would be influenced by the international demand-supply position and prices. Capacity and production targets of 8 million and 7.64 million tonnes respectively aie envisaged for 1984-85.

16.76 The policy for licensing of new sugar factories announced by the Government in July, 1980 gives priority to the cooperatives and public sector units. Applications from private sector would also be considered, 11 adequate response is not forthcoming from the preferred sectors.

16.77 Incentives to sugar factories established at high cost have been revived in November, 1980, to help in the establishment of adequate capacity to meet the projected demand. A differential price policy of giving an .additional levy price for smaller and older units has been adopted for the first time. The proposed development cess and assistance to sick units for modernisation and rehabilitation are other important features of this new policy. The present policy of constructing storage tanks for conservation of molasses would need to be continued for maximising the production of alcohol.

Vegetable oils and Vanaspati

16.78 There is currently a large gap between the demand and domestic production of edible oils requiring considerable imports. With a view to attaining self-sufficiency the production of oilseeds is envisaged to be stepped up from 10.20 million tonnes in 1979-80 to 13.10 million tonnes by 1984-85. An integrated programme for augmenting the total supply of oils botli for edible and industrial purposes is under formulation. The maximisation of production of edible oils from newer sources like soyabean, rice-bran, etc. will be a major element in the Sixth Plan strategy for this sector. Facilities for extraction of these oils will be augmented. The demand for vanas-pati by 1984-85 is estimated at 0.9 million tonnes. The industry is being supplied with imported oils at pre-determined prices in order to relieve the pressure on indigenous oils which are commonly used for direct consumption. A review of the existing capacity for vanaspati is being carried out taking into account such factors as the prolonged hydrogena-tion that is required because of the use of a different mix of oils, correction of regional demand-supply imbalance etc.

16.79 The outlay of Rs. 38.65 crores provided in the Plan for development of vegetable oils relates to such programmes as setting up of processing facilities for soyabean oil, modern oil complexes, establishment of a national level organisation for integrated management of vegetable oilseeds and oils and a coordinated research and development programmes. In addition there is a large project in the cooperative sector for the modernisation of the vegetable oil industry ineluding production of oilseeds organised through the National Dairy Development Board.

Leather

16.80 India has the world's largest source of leather-its livestock population. With the present availability of 33.2 million raw hides and 69.9 million raw skins per annum, India is well placed to satisfy a significant part of the world's requirement of leather fooiwear and leather goods. The pattern of leather exports has undergone a significant change since 19/3-74. The share of finished leather in the total exports has gone up from about 19 per cent during 1974-75 to about 57 per cent during 1979-80. This is a significant achievement in the first stage of switch over, i.e. from semi-finished leather exports to finished leather exports.

16.81 During the eighties, the most crucial task before the industry is to attain the second phase of conversion from finished leather exports to exports of leather goods. An appropriate policy would be evolved and expeditiously implemented to increase on a sustained basis the export of leather footwear and leather goods, along with the generation of increased employment. In this effort, the various State leather Development Corporations and the Bharat Leather Corporation would play a significant role.

Atomic Energy (Industry and Mineral sector)

16.82 The main objectives underlying the programmes of Atomic Energy under the industry and minerals sector are the development of indigenous capability for achieving self-sufficiency in the production of special materials and equipment needed for all the activities in the nuclear fuel cycle from uranium exploration to waste disposals, development of viable technology and facilities for the application of radiation and radio-isotopes in the field of industry, medicine and agriculture and promoting the commercial exploitation of technology, materials and equipment developed primarily for meeting the needs of the nuclear programme. The bulk of the 'provision in the Plan is intended for completion of various schemes under implementation in the B'habha Atomic Research Centre, Electronics Corporation of India, Uranium Corporation, and Indian Rare Earths Ltd. Substantial provision has also been made for expanding the capacity for the production of heavy water.

OUTLAYS

16.83 The overall outlay envisaged in the plan is Rs. 20,407 crores including coal and petroleum. A major part of the outlay amounting to Rs. 19,018 crores is in the Central sector and the balance of Rs. 1,389 crores in the States sector. Some two-third of the outlay in the Central sector is on continuing schemes, the balance one-third representing new Starts during the Sixth Plan period. These new starts arc intended primarily by way of advance action in order to create the necessary capacity to meet the anticipated demand in the early years of the Seventh Plan period. The outlays of the Central sector programmes are indicated in Annexures 16.2 and 16.3. The provision in the Central Plan for major section is given below:

(Rs. crores)

A significant portion of the outlay has been allocated to petroleum, coal, metals and fertilizers in line with the priorities of the Plan. A rough analysis indicates that approximately 26 per cent of the overall outlay in the 'public sector would go to support the programmes in the rural and agricultural sector. In the case of metals, the new steel plant at Vizagapatnam, the alumina complex at Orissa and the continuing programmes of expansion of sieel plants at Bhilai and Bokaro account for the large investment proposed. In the case of fertilizers, several new starts tor nitrogenous fertilizers based on natural gas and also for phosphatic fertilizers arc envisaged.

16.84 The Plan provision for the public sector undertakings also includes support for R and D activities many of which will, besides supporting the needs of the concerned public sector units, also cater to the overall technological needs of the industries concerned. Provision has also been made for replacement, rehabilitation and technological improvements in existing undertakings.

16.85 However, the resource constraint for the industrial sector of the Plan has limited the flexibility for inclusion of many essential new schemes. The fact that these schemes are desirable and necessary for maintaining the pace of growth, ha.s been noted but funds would be provided for starting these schemes on the basis of a mid-term appraisal of the Plan and an assessment of the emerging resource position at A t time. Schemes which have been so treated are those where investment expenditure would normally be required in the later part of the Plan period.

16.86 The outlay in the States and Union Territories is generally meant for augmenting the share capital of State Financial Corporations and State Industrial Development and Investment Corporations to enable them to extend financial assistance to small and medium entrepreneurs and to undertake other promotional activities in their respective States. Particular emphasis has been laid on the provision of infrastructural facilities under the programme of developrrent of industrial areas. The State Plans also contain 'provisions for projects under industries such as cotton spinning, cement, electronics, ceramics, tannery, light engineering and consumer products based on the processing of local raw materials or to cater to the local market. Under mineral development, prevision has been made for carrying out detailed exploration of mineral resources. Special attention has been paid to exploiting the industrial potential of the North East Region and arrangements would be made to ensure a continued and integrated support for quick implementation of the programmes so identified for this region.

16.87 A statement containing the provisions made in the Plan's of States and Union Territories for large and medium industries, including mineral development, is at Annexure 16.4.