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position to finance their development plans on their own will be allowed greater freedom for growth and diversification as a self- sustaining process. In the case of undertakings which are operating in core areas and are largely dependent on budgetary support, limited support will be provided in the initial years to enable them to stand on their own in the later years of the Plan.

5.3.4 As a result of the recent policy reforms, the industrial sector is expected to undergo considerable restructuring. First, in the past there has been considerable stress on import substitution at any cost. With the emphasis now being laid on competitiveness, future growth will be more in those sectors where the country has comparative advantage. Secondly, the size of individual companies, which is very low by international standards, not a single Indian company figures in the list of first 500 `Fortune' companies, is expected to grow through expansions, amalgamations, mergers, etc. Thirdly, there would be greater integration of indigenous production with outside. Those components/sub-assemblies whose production is uneconomic, will be imported. On the other hand, some other components/ sub-assemblies/ finished products will be increasingly exported. Finally, there will be joint ventures abroad to exploit the complementarities of resource endowments in this country and the concerned foreign country.

5.3.5 Among the metallurgical industries, the country possesses a good resource base in the case of iron and steel and aluminium. These two industries have the potential to record a very good growth rate in the long-run. However, in the medium-term, the prospects are not so good because of inefficient production and constraints of infrastructure in the case of former and lack of bauxite linkages and inadequate availability of power in the case of latter. In the case of aluminium, it will be worthwhile to explore possibilities of large scale manufacture of alumina in the country, partly for exports and partly for smelting abroad to meet the country's requirements of aluminium. Due to poor resource position, no major capacities are envisaged to be set up in the Eighth Plan in the case of copper, lead and zinc.

5.3.6 The capital goods industry has recorded impressive gains in the past in terms of quantitative increases in production. From a virtually non-existent base at the time of Independence, today the country is more or less self- sufficient in meeting the requirements of various user sectors. However, the qualitative performance of the industry leaves much to be desired. In most of the sectors, the performance of the indigenously manufactured capital goods is nowhere near the contemporary levels in terms of process technologies, quality of products, productivity and cost of production. This sector decides the, efficiency of operations of the various user sectors. With increasing emphasis on competitiveness, the user sectors will be anxious to switch over to state-of-the-art technologies and processes. This will, therefore, be one sector which will be adversely affected by the opening up of the economy and allowing freedom to the entrepreneurs to select and import capital equipment and technologies. In due course, the leading capital goods manufacturers can be expected to go in for collaborations, foreign equity and import of technologies to update their products and emerge as suppliers of world class capital goods but in the mediumterm, this sector will be adversely affected due to its inability to meet global competition.

5.3.7 In the areas of machine tools, transport equipment and accessories, electrical equipment and controls and instrumentation, the country has a good base. With upgradation of facilities through collaboration/foreign equity etc., it should be possible to build on this and achieve good growth in production as well as exports.

5.3.8 With low levels of capacity utilisation, poor productivity, inadequate ancillarisation, long delivery period and high cost of production, the ship building industry in the country is moribund. On the other hand, the ship repairing industry is reasonably competitive and has the potential to meet the growing demand and to save valuable foreign exchange. With greater attention to modernisation of ship repairing facilities, the industry is expected to achieve reasonable growth.

5.3.9 The growth of the electronics sector has been rather lopsided. The high growth rate recorded in the past has been largely due to the growth of the consumer electronics sector, especially the TV industry. The industry is characterised by a very weak components base and

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consequent high import intensity, grossly uneconomic scales of production and high cost of production. In the case of controls and instrumentation, there is considerable capacity in the country for manufacture of hardware but the capability to provide the requisite systems design and support is inadequate. The exports of computer software have recorded reasonable increases in the recent past but it has hardly been possible to touch the fringe of the potential. The opening of the economy is expected to lead to restructuring of the entire electronics industry, including closure of a number of sub- economic units engaged primarily in screw driver teehnology, consolidations and amalgamations of units and increased tie-ups with foreign firms to provide a sound base for sustained development of the industry. As this restructuring process will take some time, the outlook in the medium term does not look very promising.

5.3.10 The fertiliser industry will be virtually by-passed by the economic liberalisation in view of the controls on inputs and administered prices of inputs as well as outputs of the industry. In the case of nitrogenous fertiliser, a decision on the pricing policy is imperative. On the one hand, the existing system of retention prices and subsidy is leading to increasing burden of subsidy on account of increases in production and costs of inputs, which are not matched by corresponding increases in the retail prices of fertilisers and on the other, adequate private sector initiative is not forthcoming because of lack of a clear cut policy and freedom to decide the feed stock as well as uncertainty about the returns from the investments. From time to time, ad hoc adjustments have been made in the norms for fixation of retention prices, creating considerable apprehensions among the potential investors about the viability of the projects. It is primarily on this account that there has been very slow progress in the three fertiliser plants which were to come up in the private sector along HBJ pipeline in the Seventh Plan. It is imperative to finalise the feed stock and fertiliser pricing at the earliest. The country may be heading for increased shortages and dependence on import of nitrogenous fertilisers.

5.3.11 In the case of phosphatic fertiliser, the country's resource base is very poor and purely on economic considerations, setting up of phosphatic fertiliser capacity is undesirable. In order to minimise dependence on large-scale imports of fertilisers, joint ventures abroad would need to be explored. For production within the country, a judicious mix of import of rock phosphate and sulphur, phosphoric acid and finished fertiliser would need to be adopted.

5.3.12 The prices of most of the petrochemical products in the country are well above the international levels, partly because of high administered prices of inputs and partly because of high rates of taxes. World over, the petrochemical products are finding increasing applications as substitutes for metals, alloys, etc. Large number of new applications are being found almost everyday. Similarly, in the textile sector, cotton is considered a luxury item and synthetic fibres are used for the common man's clothing abroad because of ease of convenience, durability etc. But in India, the reverse is the case. While the petrochemical industry has been delicensed, its growth will be guided to a considerable extent by the reductions in taxes and duties on its products.

5.3.13 India is a large producer of cement and cement machinery. In the last few years, the production of cement has risen substantially. The cement production in the country is interna- tionally competitive. The cement industry is expected to record good growth in production as well as exports.

5.3.14 The sugar scenario has undergone a significant change during the past two years and the country has become a net exporter of the commodity from being a net importer for many years. The country is also a leading producer of sugar machinery and sugar production is quite competitive. With focus on increasing the per hectare yield of sugarcane, the sugar industry is likely to increase its production and exports substantially.

5.3.15 In spite of a phenomenal increase in exports of leather and leather goods in the recent past, India's share in world trade is minimal (0.7 per cent in the case of footwear, 9.5 per cent in footwear components and 4 per cent in leather garments). There is a growing market for leather products abroad and India can increase its exports substantially.

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5.3.16 The textile sector has been undergoing a major restructuring. The mills in the organised sector are not able to meet competition from the powerlooms, though spinning continues to be profitable. Increasingly, the mills are modernising their plants and machinery and devoting greater attention to exports. A number of 100 per cent EOUs have also come up. This is a healthy development. This trend is expected to get accelerated and the textile exports are poised for a quantum jump. With improved availability of quality fabrics at competitive prices, the garments industry is also expected to record a healthy growth. The powerloom sector is likely to further increase its contribution and become the prime supplier of cloth for domestic market. The outlook for the handloom sector does not look promising. It will need to switch over to production of high value items and cater to the sophisticated exports market for specialised products.

5.3.17 A number of composite mills have closed down. In the context of the need to find resources for modernisation and growth of mills as well as paying legitimate dues of workers etc., it will be worthwhile to examine the possibilities of sale of land and buildings, which in many cases are surplus to the requirements of the concerned mills. While there are, no doubt, legal difficulties, the long term interest of the industry demands that all parties i.e., Union Government, State Governments, managements and trade unions should sit together and evolve a workable strategy for realising the full com- mercial value of the property and utilising it for modernisation/diversification of the concerned mills as well as rehabilitation/re-deployment packages for surplus labour.

5.3.18 The jute industry is surviving virtually on oxygen being provided by the Government. Unless the industry takes up modernisation in a big way, concentrates on high value products and diversifies into new areas, it has a bleak future.

5.3.19 Of late, there has been considerable interest in the agro- food processing industry and a number of ventures are in the offing, some of them in collaboration with leading foreign companies and others as joint ventures with foreign companies. The marine export has also attracted a lot of attention. With the recent policy changes, these two sectors are poised for a rapid growth.

Public Enterprise Reform

5.4.1 Public Enterprises embody a major national capability in terms of physical, financial, institutional and human resources. Their effective utilisation can lead to significant economic growth. In the framework of the new Economic Policy, Public Sector industry has an important role as an autonomous, competitive and efficient sector, to provide essential infrastructure goods and services, development of natural resources and areas of strategic concern. A positive and productive future awaits public sector industry. To reach that goal, considerable restructuring is involved. The Eighth Plan recognises this and proposes a major public sector reform initiative. This initiative will consist of the following integrated strategies:

i. Restructuring involving modernisation, rationalisation of capacity, product-mix changes, selective exit and privatisation is needed on a massive scale, to make public enterprises viable, efficient and competitive.

ii. Increase in autonomy and performance accountability of public enterprises is critical to make them a dynamic force. The system of Memoranda of Understanding between administrative ministries and central public enterprises which has been launched in the Seventh Plan has these objectives in its design. However, its effectiveness needs to be improved.

iii. Changes in management practices at specific enterprise level to promote efficiency, dynamic leadership, resourcefulness and innovation are needed.

iv. State level public enterprises have serious problems. Interference, lack of professionalism and ad-hoc investment and employment decisions have resulted in chronic sickness of many of them. A major effort is called for, in collaboration with the State Governments, to promote reforms in them.

v. In the changing economic environment, technology will be a major tool to improve

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competitiveness and and efficiency of public enterprises. Their capability to develop import and use technology effectively or, to integrate technology in their corporate strategies (expansion, diversification, marketing etc.) is weak now. The new reform initiative needs to address this through building active linkages among R & D laboratories educational institutions and public enterprises. This is vital in the emerging inter-dependent and globalising economic environment.

vi. The organisation of Government (Ministries and agencies) for public sector has historically grown in a certain manner. Presently many regulations (price, distribution, investment and import controls) are being dismantled. This liberalisation not only calls for re-structuring of enterprises but also of the Government in the governance of industrial growth and management of inter-face with the enterprises. A new institutional capability is needed in Government that is responsive to environmental change, professional and can facilitate operation of market forces, through orchestrisation of the efforts of various (R&D, education, engineering, manufacturing, trade, etc.) organisations towards priority targets in select areas, by building a consensus and partnership among the different stakeholders.

5.4.2 The above call for a positive public sector reforms, by designed, selective and targetted interventions. The reform initiative needs to include: creating a knowledge base for reform, generating an institutional capability and developing a consensus among the stakeholders about policy goals and implementation strategies.

5.4.3 A network of institutions (academic, government, industry, consulting firms, financial institutions and international organisations) needs to be organised to design and implement the reforms. A coordinated strategy through a high powered task force is needed to mobilize the resources for achieving the objectives reforms in the Eighth Plan period.

Targets for the Eighth Plan

5.5.1 The capacity and production targets for selected industries for the Eighth Plan are contained in Statement 5.5. Brief highlights of industrial programmes and stratgies for major sectors are given in the subsequent paragraphs.

Metallurgical & Mineral Industries

5.6.1 The metallurgical and mineral industries constitute the bed-rock of industrial sector as they provide basic raw materials for most of the industries. Their easy availability is an essential pre- requisite for growth of most of the other sectors.

5.6.2 India continues to he a net importer of minerals and metals. The gap between the projected demand and supply of most of the miner- als is likely to increase in the coming years.

5.6.3 Considering the time lag between discovery and eventual production of minerals, a greater thrust on mineral exploration activities needs to be given during the Eighth Plan particularly towards exploration by adoption of improved technology, including remote sensing and geophysical techniques. The exploration strategy has to be reoriented and emphasis should be on those minerals in which the resources are poor e.g. gold, base metals, platinum group of metals, diamond, nickel, tungsten and rock phosphate, etc.

5.6.4 The State sector's contribution in mining of industrial/non- metallic minerals is quite significant. Reorganisation and strengthening of the concerned departments of the State Governments will be accorded priority in the Eighth Plan. Most of the non- metallic minerals are produced through small scale mining which will continue to co-exist with large scale mining.

Iron Ore

5.7.1 Iron ore constitutes one of the major exports of the country with foreign exchange earnings of about Rs. 1200-1300 crores in 1991-92. The major exporters are National Mineral Development Corporation (NMDC), Kudremukh Iron Ore Co. Ltd. (KIOCL) and private parties, particularly the Goan mine owners. The ore from Bailadilla mines of NMDC is by far the richest in the country. Until recently, the entire Bailadilla output was being exported, with the indigenous industry using inferior grades. It

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is imperative to reduce the level of exports of very high grade iron ore (+65% Fe) and utilise it increasingly in indigenous steel plants, particularly for direct reduction.

5.7.2 As a significant proportion of iron ore reserves is in the form of fines and blue dust, greater efforts will have to be made for their utilisation for which necessary R & D work will be taken up. In this context, the NMDC will undertake a project in collaboration with the Department of Electronics(DOE) on development of process technology for manufacture of various types of ferrite powders using indigenous raw materials/blue dust and their pilot plant production.

Iron and Steel

5.8.1 During the Seventh Plan and 1990-92, the expansions of Bokaro and Bhilai steel plants to four million tonnes each, the second phase modernisation/expansion of Tata Iron & Steel Company and the first phase facilities of Visakhapatnam Steel Plant (except light and medium merchant mill) were completed. In addition, there has been impressive growth of production capacity in mini steel plants and induction furnace units in the secondary sector. The second phase of Visakhapatnam Steel Plant is expected to be completed in August, 1992.

5.8.2 Indian steel industry has been suffering from a number of disabilities. Obsolescence of plant, machinery, and technology has been important factor for low capacity utilisation, low productivity, high energy consumption and high production cost. It is interesting to note that in the sixties, the Indian Steel Industry was inter- nationally competitive, but it is no longer so. The programme of development of steel industry in the Eighth Plan is aimed at improving the technological health of the existing integrated steel plants and modernisation and upgradation of technology so as to achieve international competitiveness in respect of both cost and quality. Modernisation of existing integrated steel plants at Durgapur and Rourkela in public sector and Tata Iron & Steel Co. in the private sector is expected to be completed in the Eighth Plan. Upgradation of steel making in the secondary sector has been taken up/being contemplated in the Eighth Plan. All these measures intiated in the Seventh Plan will bring the Indian steel industry at par with global standards. The modernisation and rebuilding of the IISCO plant at Burnpur is also expected to be taken up in the Eighth Plan.