ii) It has been decided to give 60% weight to financial performance in the 1995-96 MOUs in order to lay greater thrust or financial efficiency and fiscal discipline.
iii) It is proposed to hold workshops to decen- tralise the concept of accountability and instil the concept of' collective decision- making and belongingness among all sec- tions of the employees of the MOU signing PSEs.
Need for new outlook 7.16 Under the present liberal regime, It has become more essential that the public sector Is allowed to function with complete autonomy to be competitive with the private sector. This can only be possible if the Board of Directors are given greater responsibility with corre- sponding accountability to make investment and other major decisions. For example, in- vestment decisions of Rs.50 crore and above require appropriate government clearance. This limit can be raised and Board given the final authority in such cases, especially where the PSU is not seeking any budgetary support.
7.17 Under the existing policy of the Govt. of India, a new project proposed to be set up in any of the 29 notified industries or any pro- posal for expansion or modernisation of any activity (Where the pollution load exceeds the existing level) requires prior environmental
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clearance from the Govt. of India. Vide notifi- cation of January, 1994 as amended in May, 1994, the procedure for such environmental clearance has been considerably streamlined. However, implementation of the instructions require to be monitored closely. Some of the PSUs have indicated that, although expansion and modernisation requires environmental clearance from the Govt. of India only if the pollution load exceeds the existing level, many cases where the pollution load does not exceed the existing level are also required to be re- ferred to the Govt. of India for clearance. Moreover, decision for environmental clear- ance exceeds the stipulated time period of 120 days thereby delaying the implementation of the project causing considerable cost overrun.
7.18 Similarly, for projects in mining sectors requiring lease or renewal of existing lease and involving conversion of forest land into non- forest land require clearance from Forestry Department. This is rather lengthy and time consuming and requires streamlining.
7.19 As a measure of reform in Public Sector Enterprises, partial disinvestment of Govern- ment holdings in the share capital of a selected member of Public Sector Enterprises has been undertaken. An aggregate amount of Rs. 4,950 crore has been raised through sale of shares to public sector financial institutions, mutual funds and the general public upto March, 1994. The procedure adopted for such disinvestment has been subjected to some criticism due to lower realisation in price and lack of transpar- ency. It has been argued that major financial restructuring is required in most of the PSUs to improve their viability and make the Earn- ing Per Share (EPS) more attractive, before attempting such disinvestment. In this connec- tion, the recommendations of the Rangarajan Committee for imparting greater transparency by issue of prospectus and public issue of shares needs consideration. Disinvestment of Government holdings in the public sector serves two main purposes. On the one hand, it reduces Government liability while increasing public accountability, and on the other it is an instrument of raising resources in the hands of Government. In view of the fact that disinvest- ment adds to Government resources, there is a strong case for ploughing back a portion of the amount realised through disinvestment to the PSUs for their diversification and upgradation programmes. The profit making public sector enterprises may also be, advised to adopt po- tentiall viable sick public enterprises and re- vive them through investment of resources raised through dis-investment. A part of the resources raised by the public enterprises may also be utilised to repay the public debt to reduce the burden on the Government. In the context of the need for restructuring of some of the PSUs, it may be necessary to set up a Public Sector Restructuring Fund to be fi- nanced partly through budgetary support and partly through contribution by the PSUs, to serve as a rolling funds for utilisation by the PSUs for their diversification and upgradation programme.
Industrialisation of Backward Areas 7.20 Industrialisation plays an important role in correcting regional imbalances and accler- ating industrial growth. The pace of industrial development, however, has not been uniform. There are pockets of backwardness even in an industrially prosperous State. With liberalisa- tion the problem has become more acute as the new industrial units are gravitating towards existing developed States. For instance, 9 States (Maharashtra, Gujarat, U.P., Tamil Nadu, Haryana, Andhra Pradesh, M.P., Rajast- han and Punjab) have accounted for 82.3 8% of industrial investment proposals (Industrial En- trepreneus Memoranda and Letter of Intents) during the post-liberalisation period, i.e., August' 1991 to December' 1994.
7.21 For promoting industrialisation of the backward areas in an effective manner, it was decided to develop 70 growth centres in all the States/Union Territories, during the 8th Plan, to serve as magnets for attracting industries in backward areas. These growth centres are to be endowed with adequate infrastructural fa- cilities in respect of power, water, communi- cations and banking, etc. Each growth centre would create infrastructural facilities of a high order. These growth centres would lead to employment generation and prevent concen- tration of population in large towns and met- ropolitan cities. Till 1993-94, 39 growth centres have been approved and work for set- ting up these centres is in progress. The project reports of 22 more growth centres are in the process of appraisal. A sum of Rs.73.24 crore has so far (till March '1994) been released as central assistance towards the approved Cen- tres.
7.22 To promote industrialisation in specific hilly, remote and inaccessible areas such as Jammu & Kashmir, Himachal Pradesh, Sik- kim, North-Eastern States, Andaman & Nico-
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bar Islands, Lakshadweep, eight hill districts of Uttar Pradesh and Darjeeling district of West Bengal, the Transport Subsidy Sche- me' 1971 was in operation upto 31.3.1995. Un- der the scheme, subsidy at rates ranging from 50% to 90% on the cost of movement of raw- materials and finished goods from/to selected rail heads/ports was provided to all industrial units except plantations, refineries and power generation units. The scheme worked on reim- bursement basis, i.e., the subsidy to eligible units was first disbursed by the State/UTs con- cerned and disbursement claimed from Centre. From the inception of the scheme up 15.10.1994, an amount of Rs. 163.32 crore has been disbursed.
7.23 Besides, while deciding the location of Central Public Enterprises, due consideration is given to the backwardness of various regions subject to the over-riding consideration of techno-economic feasibility. Income tax holi- day for five years was provided in the budget of 1993-94 for establishing new units in the North-Eastern and other hilly areas. The budget of 1995-96 proposes to establish a new North Eastern Development Bank to finance industrial enterprises in that region.
Reforms in Industrial Sector: Initiatives by
State Governments 7.24 Several State Governments have taken significant initiatives in industrial sector re- forms to accelerate the pace of the implemen- tation of new industrial policy measures. States have announced their own industrial policies setting out the objectives and priori- ties in industrial development. The State level initiatives in the industrial reforms include:
i) Appointment of Committees to review laws relating to various aspects of liberalisa- tion with a view to simplifying and streamlining them;
ii) Constitution of State level and districts level committees and single window agencies to expedite industrial clearance within a stipulated time limit;
iii) Privatisation/disinvestment in State public sector units;
iv) Simplification of Inspection System of industrial units;
v) Greater role for private sector in accelerat- ing industrial growth;
vi) Emphasis on development of infrastruc- ture with private sector participation;
vii) Simplification and streamlining of proce- dures adopted by industrial promotion agencies;
viii)Announcement of package of incentives to attract investment; and
ix) Rationalisation of State tax structure.
It is expected that these measures may help accelerate the pace of industrial development in the country.
Industrial Growth 7.25 The 8th Plan started against the backdrop of impressive industrial growth during the Eighties. The average annual growth rate of the industrial sector including mining, manu- facturing and electricity generation during the 7th Plan period was 8.5% which though mar- ginally lower than the targeted 8.7% was much higher than 5.9% achieved during the 6th Plan. The significant growth in industrial production during the 7th Plan provided a base for a higher targeted growth for industrial sector in the 8th Plan. The 8th Plan envisaged a growth of 8% in mining, 7.3% in manufacturing and 7.8% for electicity. This targeted rate of growth for industrial production could not be achieved during the first two years of the 8th Plan. The industrial production remained sluggish com- pared to the growth rate achieved in the 7th Plan period. Only 2.3% rate of growth was achieved in the first year of the 8th Plan (1992- 93). In the second year (1993 -94), the growth rate achieved was only 4.1%. Industrial pro- duction, however, showed an upward move- ment in 1994 and during April- December' 1994, the growth rate achieved was 8.3%. Table 7.1 gives the growth rates of in- dustrial production by broad categories and use-based classification for the period 1991-92 to 1994-95.
7.26 The slow growth in industrial production can be attributed to the demand constraints faced by industry on account of the decline in government and public sector spending and the contractionary credit policy of 1991-92 to help contain fiscal deficit and inflation and the poor performance of domestic capital goods sector. The recession in capital goods sector occurred as the private investment did not show any substantial increase partly because of the inveritable time-lag between intentions and actual placement of orders and partly be-
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Table 7.1
Annual Growth Rates of Industrial Production
Per Cent
Sectors Weights 1991-92 1992-93 1993-94 1994-95
April-Dec)
General 100.00 0.6 2.3 4.1 8.3
Broad Categories
Manufacturing 77.11 0.8 2.2 3.6 8.5
mining & quarrying 11.46 0.6 0.6 2.5 7.0
Electricity 11.43 8.5 5.0 7.4 8.5
Use Based Classification
Basic Goods 39.4 6.5 2.6 5.9 4.3
Capital Goods 16.4 -8.6 -0.1 -5.3 22.2
Intermediate Goods 20.5 -2.2 5.4 11.4 4.5
Consumer Goods 23.6 1.5 1.8 3.1 8.1
Consumer Durables 2.6 -10.7 -0.7 15.2 10.2
Consumer
Non-durables 21.0 4.7 2.4 0.5 7.6
Source : Economic Survey 1993-94 and C.S.O.
cause of postponement of investment deci- sions by the corporate sector in the face of uncertainty, competition and rapidly changing policy environment. The reduction in customs duty led to liberal imports which affected ad- versely the capacity utilisation in the domestic sector in some industries like copper, lead, zinc initially. Besides, the Government had in- creased the administered prices of some infra- structural items like coal and petroleum which increased the cost of production and thereby adversely affected the profitability position as well as the incentive to produce. At the same time, the import compression measures due to paucity of foreign exchange during the initial phase of liberalisation also affected the avail- ability of the imported raw materials, spares and components and capital goods to import- dependent industries such as electrical and electronics, metals and chemical and pharma- ceuticals, engineering, paper, rubber, plastic, automobiles and ancillaries. The downward adjustment of the exchange value of rupee in July 1991 made imports costlier and pushed up the production cost of import-dependent industries.
7.27 With the revival measures taken in 1994- 95 Budget with rationalisation of tax and duty structures and the reform measures gradually developing stronger roots, the above-stated uncertainties have been resolved to a large extent and the industrial activity has started showing the sign of recovery. The turn-around is most impressive in the capital goods sector which witnessed a growth rate of 22.2% during the period April-December'1994. Besides, during 1994-95, the index of six infrastructure industries (electricity, coal, saleable steel, crude petroleum, petroleum refinery products and cement), carrying a combined weight of 28.77, recorded a rise of 8.0% as against 5.3% during 1993-94. The over-all industrial recov- ery in the industrial sector has been aided by the smooth progress in this infrastructure sub- sector.
Industrial Production 7.28 The sectoral targets of industrial produc- tion and achievement thereof during the 8th Plan period are given in the Annex-7.3. It can be seen from the Annex that overall targets of industrial production are achievable in most of the cases. Production targets are also achiev- able for most of the minerals and metals. There may be shortfall in the case of fertilisers and some of the basic chemicals. The reasons for the shortfalls in the respective industrial sub- sectors are elaborated in the subsectoral issues.
Sectoral Issues
Iron & Steel 7.29 With the enunciation of Industrial Policy of July 1991, the iron and steel industry has been removed from the list of compulsory licensing. It is expected that this would result in surge in private investment. Sponge iron, pig iron ferro alloys and steel industry are
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now included in the list high priority industries for private investment.
7.30 The programme of development of the steel industry in the Eighth Plan is aimed at improving the health of the existing integrated steel plants and modernisation and upgrada- tion of technology so as to achieve interna- tional competitiveness in respect of both cost and quality. Modernisation of existing inte- grated steel plants of Steel Authority of India Ltd. (SAIL) at Durgapur and Rourkela in the 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 steel sector has been taken up.
7.31 The 8th Plan envisages a production tar- get of 20.09 million tonnes in 1996-97 for hot metal from integrated steel plants, out of in- stalled capacity target of 20.46 million tonnes. In respect of saleable steel production from integrated steel plants the targets have been set at 15.94 million tonnes out of installed capac- ity target of 16.33 million tonnes.
7.32 The actual production of hot metal from integrated steel plant during 1992-93, 1993- 94, and 1994-95 was 15.197, 15.936 and 17.762 million tonnes respectively. A produc- tion target of 18.780 million tonnes has been set for 1995-96. In the year 1995-96 the in- stalled capacity of integrated steel plants for production of hot metal is expected to be 19.387 million tonnes. It is expected that there may be some shortfall in realization of the Eighth Plan production target of 20.090 mil- lion tonnes of hot metal.
7.33 The actual production of saleable steel from integrated steel plants during 1992-93, 1993-94 and 1994-95 was 11.388,11.983, and 13.142 million tonnes respectively. A produc- tion target of 14.221 million tonnes for salable steel from integrated steel plants has been set for 1995-96. The installed capacity of inte- grated steel plants in 1995-96 for saleable steel production is 14.698 million tonnes that may go upto 15.866 million tonnes in 1996-97 due to completion of modernisation of steel plants at Durgapur and Rourkela. It is expected that the production of 15.940 million tonnes may be achieved in 1996-97.
7.34 The mason for shortfall in achieving pro- duction targets for saleable steel from inte- grated steel plants is that there have been time overrun in, modernization of Rourkela and Durgapur steel plants, and also in stabilization of steel production at Vishakhapatnam Steel Plant of Rashtriya Ispat Nigam Limited (RINL) as also due to indecision for moderni- sation of IISCO.
7.35 Based on the Feasibility Report submitted by the Japan International Cooperation Agency (JICA) in July 1987, the stage-I clear- ance was given for the modernisation of IISCO. The Detailed Project Report (DPR) and Basic Engineering Reports (BER) were prepared by Japanese Consulting Companies (JCC). The cost of modernisation of IISCO was estimated at Rs. 6,520 crore. The PIB in its meeting held on 26.12.1991 approved the modernistion of IISCO and authorised the Ministry of Steel to approach CCEA with the condition that it explore the possibilities of private participation. Accordingly the offers from private sector were invited. The Commit- tee of Experts was constituted to evaluate the offers received from the private sector and recommended the offer of one of the partici- pants 'for undertaking the modernisation of IISCO. However, later SAIL has submitted an alternative proposal for modernisation of IISCO in two phases. The issue of modernisa- tion of IISCO, needs to be resolved quickly.
7.36 The targets of export of finished steel in 1996-97 was set at 2.800 million tonnes. About 2.200 million tonnes of finished steel has been exported in 1993-94. It is expected that the target of export of 2.800 million tonnes may be realised as envisaged in the Eighth Five Year Plan.
7.37 Although pricing and distribution of iron and steel was decontrolled in January, 1992, the integrated steel plants were directed to fix ex-stockyard prices on the basis of actual freight or the freight element as was then ex- isting, whichever was less. Thus, these steel plants were required to subsidise a part of the transport cost for the more distant states. The burden on the public sector steel plants on this account is around Rs. 107 crore per annum. It is time that this freight subsidy is completely withdrawn, so that the steel plants may charge the actual cost and utilise the funds for their development projects.
Minerals 7.38 The priority area identified for the Eighth Five Year Plan period was minerals explora- tion keeping in view the time lag between discovery of new deposits and eventual pro- duction of minerals. Thrust areas included were acquisition of modem exploration tech-
nologies such as remote sensing, geophysical & geochemical techniques and re-orientation of exploration strategy, etc., in the context of minerals which have poor resource base such as gold, diamond, nickel, tungsten, rock phos- phate, sulphur, etc. The tempo of exploration including modernisation of Geological Survey of India (GSI) has been rather slow due to paucity of resources and reduction in the ex- ploration budget for promotional projects pro- vided to Mineral Exploration Corporation of India Ltd. (MECL) - a public sector enterprise.
7.39 In line with the liberalisation of the econ- omy, the Government have announced a new National Mineral Policy wherein 13 minerals, which were hitherto reserved for the public sector, have been thrown open to private sector form Mining. The Mines & Minerals (Regulation & Development) Act, 1957 was amended in line with the new National Mineral Policy and new Industrial Policy. As a result of these policy changes, many private entrepreneurs including foreign nationals have shown inter- est to invest in the mining sector particularly for base metals, gold and diamond.
Iron Ore 7.40 The demand for iron ore during the termi- nal year of the Eighth Plan (1996-97) had been projected at 72 million tonnes comprising 40 million tonnes for domestic consumption and 3 2 MT for exports. As against this, the produc- tion of iron ore during the first three years has been varying between 54-57 million tonnes per annum; the exports have been between 26-27 million tonnes. The National Mineral Development Corporation (NMDC) - a Cen- tral Government public enterprise - consider- ing the growing domestic demand from sponge iron industry and anticipating better prospects for exports had planned 22 million tonnes of production of iron ore in 1996-97 (terminal year of the Eighth Plan) with com- pletion of the on-going schemes and opening up of two new mines, namely, 10/11-A and 11-B (of 5 million tonnes each) at Bailadila in Madhya Pradesh during the Plan period. There has been delay in implementing these mining projects due to paucity of resources. Due to this, production target set for the Eighth Plan is likely to fall short by about 10 million tonnes. This is likely to lead to a serious situ- ation since the demand for iron ore is steadily increasing. The Rowghat project of Bhilai Steel Plant is also getting delayed due to non- availability of environment clearance. Be- sides, the demand for calibrated lumpy ore is increasing from the sponge iron industry which necessitates speedy development of the 11-B mine at Bailadila in M.P. It is, therefore, imperative that 10/11-A and 11-B mining pro- jects are taken up for implementation without further delay.
Aluminium 7.41 The demand for aluminium was antici- pated to grow at an annual rate of 8.4% during the Eighth Plan period. In the first three years of the Eighth Plan, the average annual growth rate has only been around 1.5% due to a gen- eral slow down in the economy and low off- take of the metal by the State Electricity Boards which were facing resource crunch. Therefore, the demand target set for the termi- nal year of the Eighth Plan (1996-97) is not likely to be realised.
7.42 A major investment plan for the Eighth Plan in the public sector was for modernisation of the Korba Smelter of Bharat Aluminium Company and installation of anew cold rolling mill at an anticipated cost of Rs. 123 crore apart from developing a new mine at an estimated cost of Rs.75 crore at Mainput in Madhya Pradesh. However, due to inability of BALCO to mobilise internal and extra-budgetary re- sources, all these investments have been slowed down.
7.43 National Aluminium Company had planned to instal sixth unit of its captive power plant at an estimated cost of Rs.226.41 crore and expand its smelter. While the sixth unit of its captive power project has been completed, the expansion of its Smelter has not yet been taken up. Hindustan Aluminium Corporation has dropped its project of 1,50,000 tonnes per annum capacity in Andhra Pradesh on com- mercial considerations. Indian Aluminium Company - a private sector enterprise - which had to close its 65,000 tonnes per annum ca- pacity Belgaum smelter in Karnataka in 1992 due to high power tariff and general power shortage there, has now energised a capacity of 24,000 tonnes per annum. The Madras Alu- minium Company's Mettur smelter in Tamil Nadu of 25,000 tonnes per annum capacity which remained closed since 1991 has been energised recently. Based on these develop- ments, the aluminium production in 1996-97 is now anticipated at 5,50,000 tonnes as against the Eighth Plan projection of 6,56,000 tonnes.
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Copper 7.44 The liberalisation of the economy af- fected copper industry rather severely. The problem was compounded with recession in the international copper industry during 1992- 93, which continued upto October 1993 result- ing in sharp fall in the London Metal Encharge (LME) price of the metal. With reductions in import duty announced in the Budgets of 1992-93, 1994-95 and 1995-96, the indige- nously produced copper became highly un- competitive as compared to imported metal. The consumer became free to buy either from international market or indigenous market consequent to decontrol of non- ferrous metals industry and liberalisation of the economy. This resulted in huge losses to HCL, particu- larly in 1993-94. However, the situation im- proved with the spurt in LME prices w.e.f. October 1993. The HCL recorded a modest profit in 1994-95 and is likely to continue with this trend during the remaining period of the Eighth Plan.
7.45 The demand for copper was anticipated to grow at 5.9% during the Eighth Plan period. Due to a slow growth in the economy, the consumption of copper remained practically stagnant during the three years from 1991-92 to 1993-94. However, of late, there has been a good pick up in demand and it appears that the demand in 1996-97 may be only marginally lower than the Eighth Plan target of 200,000 tonnes.
7.46 The only indigenous copper producer, Hindustan Copper Ltd. (HCL) had planned to expand its Khetri Copper Smelter from 3 1,000 tpa. to 45,000 tpa. However, with a view to becoming competitive in the liberalised envi- ronment, HCL has changed the scope of its Khetri Smelter expansion programme and is now contemplating to expand the smelter to a capacity of 100,000 tonnes per annum at an estimated cost of Rs.360 crore. As a result, production from the proposed smelter expan- sion will not materialise during the Eighth Plan period and HCL's total production in 1996-97 may be only 45,000 tonnes as against the Eighth Plan target of 55,000 tonnes.
7.47 With liberalisation of the Indian econ- omy, the private sector is planning to venture into this sector in a big way. Three new private sector smelters based on imported concen- trates - Sterlite's 60,000 tonnes per annum capacity smelter, Indo-Gulf Fertilizers & Chemicals' 100,000 tonnes per annum copper smelter and Metdist Limited's 100,000 tonnes per annum copper smelter are expected to come up by the end of this century. Besides, SWIL has planned to set up a 50,000 tonnes per annum secondary copper smelter.
Zinc 7.48 The liberalisation of the economy af- fected zinc industry also. The problem was compounded with recession in the interna- tional zinc industry during 1992-93 which continued till October 1993 resulting in sharp fall in the LME price of the metal. With the reduction of import duty, the indigenously produced zinc became highly uncompetitive as against imported metal. Consequently, the Hindustan Zinc Limited's (HZL)'s a public sector enterprise - profit fell sharply to Rs.4.55 crore in 1993-94 compared to Rs.62.86 crore in 1992-93. However, after October 1993, when LME prices started rising again, the per- formance of HZL improved in 1994-95 com- pared to 1993-94 with the company recording a profit of Rs. 15 crore. The position is further expected to improve in 1995-96 with the com- pany having projected a profit of Rs.20 crore. Because of the inability of the company, to generate adequate internal resources, it has had to slow down its investment programmes.
7.49 Zinc is expected to maintain its trend growth rate of 4.5% during the Eighth Plan period. The demand target of 180,000 tonnes set for the terminal year of the Eighth Plan (1996-97) is expected to be realised.
7.50 The production target of 154,000 tonnes set for the terminal year of the Eighth Plan- 1996-97 is also expected to be realised. Except for 10,000 tonnes of additional capacity planned by private sector Cominco Zinc Ltd. to be added to its existing capacity of 20,000 during the Eighth Plan period, no major capac- ity addition for zinc metal was planned, The Cominco Zinc Ltd. has completed its expan- sion programme as scheduled. An additional capacity of around 30,000 tonnes of zinc has come up in the secondary sector.
Lead 7.51 The demand for lead was anticipated to grow at an average rate of 7% during the Eighth Plan period which is not likely to be realised due to slower then projected growth rate in some of the consuming sectors like commercial vehicles. Besides, exports of lead acid batteries and cables to the earstwhile So-
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viet Union were affected due to break down of the Soviet Union.
7.52 The production target of lead was fixed at 96,000 tonnes for the terminal year of the Eighth Plan -1996-97. As against this, a pro- duction of 85,000 tonnes is now anticipated. The shortfall is due to only a part realisation of the anticipated expansion of lead capacity in the private sector.
Gold 7.53 Among the mining companies, Bharat Gold Mines Ltd. (BGML) continues to be sick and its rehabilitation programme prepared by the Operating Agency appointed by the BIFR, namely, ICICI is under consideration of the Government.
Mineral Exploration Corporation 7.54 The Mineral Exploration Corporation of India Ltd. is not in a position to raise resources from the market for its exploration pro- gramme, nor is it in a position to obtain more work on contract for utilising its capacity fully. Besides, the budgetary support to the company for promotional projects has been reduced. Unless immediate remedial measures are taken, the company could become sick.
7.55 There is an urgent need to continue with the exploration of minerals particularly where the country is deficient. Exploration being a risky investment will take time for the private sector companies to come in the market for exploration. It is, therefore, imperative for the Government to continue to invest in explora- tion as a matter of policy for some more time. A mechanism would, however, need to be worked out to recover the costs from the inves- tors in mining projects based on exploration carried out with Government investment at the time of granting mining leases.
Fertilizer Sector 7.56 There are at present, 57 fertiliser units manufacturing a wide range of nitrogenous and phosphatic/complex fertilisers. Besides, there are about 80 small and medium scale units producing single superphosphate (SSP). At the time of commencement of the Eighth Plan, the installed capacity of nitrogen was 81.48 lakh tonnes and of phosphate 27.52 lakh tonnes. The total installed capacity as on March, 1995 stands at 89.72 lakh tonnes of nitrogen and 28.22 lakh tonnes of phosphate.
7.57 During the Eighth Plan, addition of capac- ity of 27 lakh tonnes of Nitrogenous fertiliser and 4.5 lakh tonnes of phosphatic fertiliser was envisaged, thus reaching a level of capacity of 109.40 lakh tonnes of nitrogen and 3 1.00 lakh tonnes in case of phosphate in the terminal year of Eighth Plan. The actual production target of Nitrogenous fertiliser was targetted at 98.00 lakh tonnes and of phosphatic fertiliser 30 lakh tonnes. The addition of capacities were to be achieved through the doubling of the capaci- ties of existing fertiliser plants at Vijaipur, Aonla and Jagdishpur and also commissioning of the other projects (Gadepan, Babrala, Kak- inada, Shahajahanpur).
7.58 In the first three years, the achievement in capacity addition had been 9.54 lakh tonnes of nitrogen and 0.72 lakh tonnes of phosphatic fertilisers. The capacity is likely to reach a level of 102.62 lakh tonnes of nitrogen and 28.75 lakh tonnes of phosphate by the end of Eighth Plan period. There is likely to be a shortfall in capacity addition by 7.0 lakh tonnes in case of nitrogen and 2.0 lakh tonnes in case of phosphate in the Eighth Plan target due to slow progress made on projects under implementation. Actual production of nitroge- nous fertilisers has fallen short of targets mainly due to lower contribution of 'N' nutri- ents from the complex fertilisers whose pro- duction has gone down due to market constraints and shortage of gas for the gas based plants en-route Hazira-Bijaipur-Jag- dishpur (HBJ).
7.59 A gradual phasing out of fertiliser subsidy has been envisaged in the Eighth Plan. Follow- ing the recommendations of the Joint Parlia- mentary Committee (JPC) on fertiliser pricing, all phosphatic and potassic fertilisers were de- controlled on 26.08.1992. As a consequence, the price of these fertilisers had increased con- siderably. However, at the same time, the price of urea was scaled down by 10%, thus signifi- cantly altering the price differential between 'Nitrogenous (N) ' 'Phosphatic (P)' / & potas- sic (K)' fertilisers. In spite of 20% rise in the price of urea in July, 1994 the difference in the phosphatic and nitrogenous fertilisers still re- mained sizeable. This price differential in the prices of NPK had caused more imbalance in their consumption ratio.
7.60 After the decontrol of phosphatic fertilis- ers and a free trade fertiliser policy since Sep- tember, 1992, the domestic production suffered due to stiff competition from low priced imported fertiliser. To case this situ-
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ation, a subsidy of Rs. 1000 per tonne on Di-Ammonium phosphate (DAP) was reintro- duced, This, however, had not helped the do- mestic manufacturers as their relative position with respect to imported stock remains un- changed. Only when exclusive subsidy to do- mestic product was made applicable from May, 1993 were the domestic manufacturers able to increase their production level.
7.61 The fertiliser sector is facing an uncertain future with increasing production costs, feed stock shortages and uncertain prices. No pri- vate initiatives to set up fertiliser plants have been forthcoming due to rigid pricing policies. To make fertiliser sector more attractive for investment, an attractive price policy and an assured supply of feed stock on long term basis has to be devised. Fertiliser sector needs pref- erential treatment in the allocation of gas. A long term perspective plan is essential at this moment for fertiliser sector as the gestation period of fertiliser plants is long.
Shipbuilding and Ship Repair Industry 7.62 In the Eighth Five Year Plan, keeping in view the problems being faced by the Ship- building Industry, it was felt that while efforts would be made to improve productivity and viability of the existing yards, more emphasis would be given to the repair activity, which is far more profitable / foreign exchange saving activity than shipbuilding.
7.63 At present there are about 41 shipyards in India. Out of these, seven are in the public sector, two in the State sector and the remain- ing in the private sector. The private sector shipyards are allowed to construct vessels of any size. However, at present the private sector shipyards are not capable of building large sized ships. The capacity utilisation of the public sector shipyards under the Ministry of Surface Transport i.e. Hindustan Shipyard Ltd (HSL), Cochin Shipyard Ltd.(CSL), Hoogly Dock And Port Engineers Ltd. (HDPE) has been less than 20% in the first three years of the Eighth Five Year Plan. The major reasons for the poor capacity utilisation are lack of regular flow of adequate number of orders in time, reluctance on the part of Indian ship owners to place order due to higher price of indigenous ships vis-a-vis the lower interna- tional price and long construction period and more time taken for indigenous procurement of steel.
7.64 The Government has taken a series of measures including delicencing, changes in the import / export policy etc. to improve the viability of the shipbuilding industry. Some of the measures which have already been taken in this regard are:
i) The price of an ocean going vessel to be built at Indian Yard would be fixed on the basis that the public sector yard would partici- pate in open tender and permitted to match the lowest bid and thereafter be entitled to 30% extra price over the above price, 20 % being payable by the Govern- ment and 10 % by the Shipowners.
ii) Loans at concessional rate of 9% to the extent of 80% of the cost of a ship would be given to shipping companies placing orders with Indian Shipyards.
iii) Fixation of price in terms of US $/Japanese Yen and the shipowners to pay each stage in instalment to the shipyard at market determined parity rate of foreign ex- change prevailing on the date of actual payment.
iv) Ship repair industry has been recognised as deemed export industry and a number of concessions given to 100 % export oriented units are available to this indus- try.
It is expected that the performance of this sector will improve with these measures.
Engineering Industry 7.65 Engineering Industry, which grew at an annual compound growth rate of 11.7% in the Seventh Five Year Plan, started having setback from 1991-92, when it had a negative growth rate of 5%. The Industrial Policy statement of July, 1991 and subsequent developments in the Indian Economy made it possible to reverse this trend. While the growth rate was - 1.5% in 1992-93 and 0.4% in 1993-94, has gone up to 11.8% in 1994-95 (April-December).
7.66 The shortfall in growth in the engineering industry during 1992-93 and 1993-94 was due to negative growth in metal products, non elec- trical and electrical machinery and very poor growth in transport equipment. The new policy regime has had some positive impact on ma- jority of these products and they have started contributing towards growth. The areas which still lack growth are non-electrical machinery and basic metals.
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7.67 In the public sector, the major contribu- tion for production comes from the 49 operat- ing units under Department of Heavy Industry. However, these units would not be able to achieve the Eighth Five Year Plan production target of around Rs. 60,000 crore and profit target of Rs. 1,151 crore. It is now anticipated that the production from all the units during Eighth Five Year Plan would be about Rs. retired during Eighth Five Year Plan upto January, 1995 under this Scheme.
7.69 In the wake of liberalisation and conse- quent changes in the industrial scenario in the country, the need for restructuring some of the PSUs has been recognised. Several studies have been undertaken for identifying optimal product mix, investment and organisational
Table 7.2
Production in Electronics Sector
Sl. Particulars Terminal Year of Eighth Plan (1996-97)
No. Target Anticipated
Production Growth Prod. Growth
(Rs.cr) Rate(%) (Rs.cr) Rate(%)
1. Consumer 8500 22.35 6250 15.05
Electronics
2. Industrial 4500 24.57 3300 17.08
Electronics
25.57
3. Communication & 6000 23.01 6650
Broadcasting
4. computer systems 3300 30.56 2300 21.46
5. Components 7600 31.95 4200 17.19
6. Export oriented 2000 48.70 4000 70.82
Hardware prodn
7. Software 2600 46.50 2400 44.19
8. Strategic 1500 28.39 550 5.05
Electronics
Total 36000 27.73 29700 22.91