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 continue to give high priority to the creation of adequate capacity in basic industries such as steel, non-ferrous 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 substanital 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 to 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 petrochemicals 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 metal and 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 to 81.5 per cent in 1978-79 and to 69 per cent during 1979-80. The shortafall 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 plants 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 to be a major constraint, such that even the molten steel that was produced with the restricted supplies of coal. etc. could not be converted into saleable steel and resulted in accumulation of 0.75 million tonnes of ingot steel. In the preceding years also the production of saleable steel from the integrated steel plants has shown a declining trend:
(Million tonnes)
1976-77 6.92
1977-78 6.89
1978-79 6.59
1979-80 6.04
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 not
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importers of steel, despite the slow growth in industrial output. Since demand would grow in the region of 8.8 per cent per year, this declining trend in production will need to be reversed sharply if major constraints to the growth of 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:
(a) Removal of infrastructural constraints, including import of coking coal. Coking coal needs to be imported partly on account of supply constraints, and partly to off-set the high ash content of indigenous coal. Approximately, 1 to 2 million tonnes of coal may need to be imported per year for some time;
(b) Provision of captive power plants to cater to the essential operating needs of steel plants particularly at Bokaro, Durgapur and Rourkela;
(c) Acceleration of R&D activities relatable to utilisation of Inferior grades of coal in blast furnaces, improving steel making practices to get higher productivity and yields, etc.,
(d) Speedy implementation of modernisation and replacement programmes to quickly enhance productive capacities and productivity;
(e) Speedy implementation of expansion schemes;
(f) 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 tonnes 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 plants 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 infrastructural constraints are adequately eradicated. Even under this conditions 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:
Years
Plant Scheme
Comple- Start of
tion production
Bhilai Steel Plant 4.0 MT expansion 1982-83 1983-84
Bokaro Steel Plant (a) 4.0 MT expansion 1982,83 1982.83
(b) 4.75 MT stage 1986-87 1987-88
Vizag Steel Plant (a) Ph. I (1.15 AT) 1984-85 1985-86
(b) Ph. II (2.25 Mr) 1987-88 1937-88
In arriving at the relative investment priorities, greatest stress has been laid on completion of continuing schemes as also for modernisation and rationalisation programmes. Some of the new schemes which have been included in the Plan and which may require investment to effectively take place during the later part of the Plan period, will be funded only after a mid-term appraisal of the Plan, and if availability of resources so permits. The contruction of a second steel plant in Orissa is also contemplated, it funding arrangements can be satisfactorily settled.
In the past, the construction of steel plants has been seriously affected due to delay in the supply of equipment, both indigenous and imported, slippages in the schedule of civil work, erection of equipment etc. Besides other adverse impacts, these delays have resulted in considerable cost over-runs. Steps for speedier implementation of projects and for closer monitoring of the progress of supplies of critical in puts, of construction and erection will need to be taken.
16.22 Mini steel plants and sponge iron: Taking note of the fact that the mini steel plants 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, there is scope for existing licensed units to increase their output during the plan period. Further, it is recognised that for meeting the special requirements of small volume off-take of various users, the mini steel plants have a greater flexibility than the integrated steel plants. The availability of 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 Kothagudem 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 availability 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 the form of reduced requirements of scarce coking coal.
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IronOre 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 tonnes for exports. In order to maintain the export of iron ore through Vizag port at the level of about 6 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 the Bailadilla. zone. Further, in view of the reduced demand for Kudremukh iron ore from Iran, the establishment of pelletisation facilities for the con- version 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.
Non-ferrous 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 of 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 large 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:-
(a) completion of existing schemes;
(b) investment in mining and smelter capacity to correct imbalances and to substantially increase outputs with minimum outlay;
(c) establishment of a large alumina/aluminium complex at Orissa, geared to meeting domestic and export needs; and
(d) exploitation of the zinc lead deposits recently discovered at Agucha in Rajasthan. Additionally, the possibility of taking up another alumina-aluminium 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 1984-85. Even so imports would have to continue.
Engineering industries 16.28 Over the years engineering industries in the country have registered a phenomenal growth to generate a strong base in a wide range of heavy and light engineering industries covering a broad spectrum of capital goods and consumer durable products. The bulk of the capital goods required for power projects, fertilizer plants, cement plants, steel plants, mining equipment, petrochemical plants are being met from indigenous production. Construction machinery and equipment for irrigation projects, diesel engines, pumps and tractors for agriculture, transport vehicles, etc. are also being met from within the country. Exports of engineering goods are a major element in non-traditional exports and it is envisaged that a substantial step up in the engineering exports during the Plan period would help to butteress the foreign exchange reserves, as also provide a means (through the impact of international competitiveness) to further improve the quality of such goods.
16.29 Rural development will require essential infrastructural and other inputs like transport, power, cement and fertilizers which in turn will make substantial demands on the output of the engineering sector. The strategy for development in this sector will call for creating adequate capacities slightly in advance of emerging requirements. Also, the approach for maximisation of 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
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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 perform- ance 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 require- ments 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 an area in which the availability in the past has lagged behind demand. Another area of emphasis is technological upgradation and standardisation of components and equipment. The cost of electronic goods 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 of 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 phosphatic 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 P2O5. 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 gas, 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
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areas the 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 coal 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-economic 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, acunder implemention including Thal and Hazira, action will have to be initiated in a phased manner to take up the construction of 8 new nitrogenous ferti- lizer 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 periods, 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 at 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. Captive power facilities are being created to meet the critical power requirements in units where the power supply is erratic. Steps have also been initiated to modernise and renovate the old plants and to remove the technological shortcomings in other units through suitable modifications.
Pesticides 16.43 Pesticides have assumed a vital role both for crop protection and health programmes. 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 A pesticides. Another public sector company, Hindustan Organic Chemicals (HOC) also manufactures BHC. Suitable provisions have been made for the setting up of new pesticides projects 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 has been the setting tip of the petrochemicals complex of the Indian PetroChemicals Corporation Limited (IPCL) a public secfor 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 petrochemicals complex in Bongaigaon, Assam through another public sector company, the Bongaigaon Refinery and Petrochemical's 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-chemicals expansion during the Sixth Plan period. Considering the capital-intensive nature of petrochemical 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 petro- chemical 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 petrochemical 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 meeting 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 sizes that are eco-
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nomic 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 indi- genous 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 olefins complex using natural gas as feed-stock, (b) aromatics 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 of 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 im- ported.
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.
6.53 The policy on drugs aims at:
(a) development of self-reliance in drug technology;
(b) providing a leadership role to the public Sector;
(c) making drugs available at reasonable prices and in abundance to meet the health needs of the people; and
(d) 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 I Pharmaceuticals Ltd. and the three drug units in the Eastern region: Smith Stanstreet Phar- maceuticals Ltd., Bengal Chemical & 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 the 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 pant alongwith 24,000 TPA of acetone. HOC is also expected to inidate action on a polytetrafleroethylene 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 handloom.
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16.59 The level of production in the decentralised sector in 1979-80 was 6350 million metres (handlooms 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 for handloom 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 the 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)
Sector Cotton Non-cotton Blends Total
Mill 3500 400 1000 4900
Powerloom 2600 1200 500 4300
Handloom 3150 200 750 4100
TOTAL 9250 1800 2250 13300