New Industrial Policy of India
- After independence, the first Industrial Policy was declared on April 6, 1948 by the Union Industry Minister Mr. Shyama Prasad Mukherjee.
This policy established a base for Mixed and Controlled Economy in India and clearly divided the industrial sectors in to private and public sectors.
Later on, 1948 Industrial Policy was replaced by a new Industrial Policy Resolution declared on April 30, 1956 with the basic objective of establishing ‘Socialistic Pattern of Society’ in the country.
- Industrial Policy Resolution of 1956 categorized industries which would be the exclusive responsibility of the state or would progressively come under state control. Earmarking the pre – eminent position of the public sector, it envisaged private sector coexisting with the state and thus attempted to give flexibility to the policy framework.
- Though the Government had declared a number of new industrial policies after 1956, but every new policy accepted the 1956 Industrial Policy Resolution as its base. In June 1991, Narsimha Rao Government took over charge and a wave of reforms and liberalization was observed in the economy. In this new atmosphere of economic reforms, the Government declared broad changes in Industrial Policy on July 24, 1991.
- The Industrial Policy initiatives undertaken by the Government since July 1991 have been designed to build on the past industrial achievements and to accelerate the process of making Indian industry internationally competitive. It recognizes the strength and maturity of the industry and attempts to provide the competitive stimulus for higher growth.
- A significant number of industries had earlier been reserved for public sector. Recently, a decision has been taken to open defence industry sector to private sector with foreign direct investment permissible up to 26 percent.
- Now, the areas reserved for the public sector are Atomic energy, the substances specified in the schedule to the notification of the Government of India in the Department of Atomic Energy dated the 15 March, 1995 and railway transport.
Distinction between Cottage, Small and Village Industries
- In a broad sense, cottage, small and village industries are treated similar but they fundamentally differ from each other.
- Cottage industry is run by family members on full or part time basis. It possesses negligible capital investment. There is hand made production and no wage earning person is employed in cottage industry.
- Small industrial units employ wage earning labor and production is done by the use of modern techniques. Capital investment is also there. A few cottage industries which are export – oriented have been included in the category of small sector so that facilities provided to small units may also be given to export – oriented cottage industries.
- The industries established in rural areas having population below 10,000 and having less than Rs 15,000 as fixed capital investment per worker will be termed as village industries. KVIC and state village Industries Board provide economic and technical assistance in establishing and operating these industrial units.
India’s Share in Global Trade Up
India has been able to grab a significant portion of the world trade pie with its booming economy and a billion – plus markets, says a report by the World Trade Organization (WTO).
According to the World Trade Statistics report, India’s share in the global trade, including trade in merchandise and services sector has increased from 1.1 percent in 2004 to 1.5 percent in 2006.
Special Economic Zones
A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws. "Nationwide" laws may be suspended inside a special economic zone. SEZs have been established in many countries as testing grounds for implementation of liberal market economy principles. They are viewed as instruments to enhance the acceptability and credibility of transformation policies, to attract domestic and foreign investment, and generally, for Special Economic Zone (SEZ) the opening up of the economy. With its genesis in the Export Processing Zones (EPZ), the SEZs in India seek to promote value addition component in exports. Generate employment and mobilize foreign exchange. EPZs and SEZs were employed with considerable success by China and other ASEAN countries in the 1970s and 1980s to create regional islands, where export-oriented manufacturing could be undertaken. In India, the EPZ experiment was much less of an unequivocal success; and since 1965, when the first EPZ in Kandla was set up. A total of only 11 such zones have come into existence. The Exim Policy of 1997-2002 then introduced the more comprehensive and liberal SEZ concept, after which a bill was drafted and passsed by Parliament in the form of the SEZ Act, 2005.
Special Economic Zones Act 2005
Objectives
- to provide for a stable and long-term fiscal policy framework with minimum regulatory intervention for such zones
- to attract investment, both domestic and foreign
- to ensure employment generation through encouraging export activities
- There would be no violation of labour laws in the SEZs.
- It also provides for a single-window clearance mechanism for the establishment of SEZs.
- The objective of SEZs includes making available goods and services free of taxes and duties, bolstered by integrated infrastructure for export production and a package of incentives to attract foreign and domestic investments for promoting export- led growth.
Provisions
- It empowers the Union Government to specify an officer or agency for carrying out surveys or inspections to verify or ensure compliance with the provisions of the Central Act by a developer or an entrepreneur.
- The Act provides that SEZs could also take the form of port, airport, inland container depot, land station and land customs stations, as the case may be, under Section 7 of the Customs Act.
- The Act approves the setting up of an International Financial Services Centre in a SEZ.
- The Act provides for tax concession for 15 years in respect of newly established SEZ units that begin to manufacture or produce articles or provide services during the previous year relevant to any assessment year commencing on or after April 1, 2006.
- under this dispensation, units would be eligible for 100 per cent tax exemption for 5 years, 50 per cent for the next five years and 50 per cent of the ploughed back export profits for the next five years (in all 15 years).
- Indian SEZs to be based on ‘India- specific’ model instead of adopting the model followed by any other country.
Apprehensions against SEZ
Some of the apprehensions against the SEZs are
- Generation of little new activities as there may be relocation of industries to take Advantage of tax concessions
- Revenue loss
- Large-scale land acquisition by the developers which may lead to displacement of SEZ Act 2005 farmers with eager compensation
- acquisition of prime agricultural land having serious implications for food security
- Misuse of land by the developers for real estate and f) Uneven growth aggravating regional inequalities.
Strategic Sale
It involves selling 51 % or more of the equity to a strategic partner—domestic or global, so as to restructure the management towards private management control, In some cases, the government stake holding is completely liquidated, While in most others it is reduced to 26%.
The Disinvestment Commission
The Disinvestment Commission Believed that 26% stake of the Government is the minimum for the protection of national interest and to stall shareholders’ resolution, according to the Companies Act.
Advantages:
- the sale of equity is independent of the state of the capital market, as the strengths of the unit along with its potential matter more
- FDI does not bring finances for the Government while strategic sale will
- it will vastly improve the market sentiment by attracting FIIs
- Strong signals will be sent to the foreign investor that India is serious about PSU reforms and consequently, FDI will flow to a greater extent. Another modality to divest the Government stake to 49% is being mooted
Micro, Small and Meidum Enterprises Development Act, 2009
It provides the first-ever legal framework for recognition of the concept of "enterprise" (comprising both manufacturing and services) and integrating the three tiers of these Salient Features of the Micro, Small and Meidum Enterprises Development Act, 2009. enterprises, viz, micro, small and medium. Under the Act, enterprises have been categorized broadly into those engaged in (i) manufacturing and (ii) providing/ rendering of services. Both categories have been further classified into micro, small and medium enterprises, based on their investment in plant and machinery (for manufacturing enterprises) or in equipment (in case of enterprises providing or rendering services) as under:
Manufacturing Enterprises
Micro Enterprises investment up to Rs. 25 lakh.Small Enterprises-investment above Rs. 25 lakh and up to Rs. 5 crore.Medium Enterprises – investment above Rs. 5 crore and up to Rs. 10 crore.
Service Enterprises
Micro Enterprises - investment up to Rs. 10 lakh
Small Enterprises - investment above Rs. 10lakh and up to Rs. 2 crore.
Medium Enterprises - investment above Rs. 2 crore and up to Rs. 5 crore.
The Act provides for a statutory consultative mechanism at the national level with wide representation of all sections of stakeholders, particularly the three classes of enterprises, and with a wide range of advisory functions, and an Advisory Committee to assist the Board and the Centre/State Governments.
Other Features
- Establishment of specific Funds for the promotion, development and enhancement of competitiveness of these enterprises
- Notification of schemes/programmes for this purpose
- Progressive credit policies and practices
- Preference in Government procurements to products and sevices of the micro and small enterprises
- More effective mechanisms for mitigating the problems of delayed payments to micro and small enterprises
- Simplification of the process of closure of business by all three categories of enterprises.
- First Steel industry at Kulti, near Jharia, West Bengal 'Bengal Iron Works Company' in 1870.
- First large scale steel plant TISCO at Jamshedpur in 1907 followed by IISCO at Burnpur in 1919. Both belonged to private sector.
- The first public sector unit was 'Vishveshvarayya Iron and Steel Works' at Bhadrawati.
Public Sector Steel Plants
Location |
Assistance |
|
Rourkela (Orissa) |
Germany |
|
Bhilai (M.P) |
Russian Government |
|
Durgapur (W.B) |
Britain Government |
|
Bokaro (Jharkhand) |
Russian Government |
|
Burnpur (W.B) |
Acquired by Private Sector in 1976 |
|
Vishakhapatnam (A.P) |
Russian Government |
|
Salem (Tamil Nadu) |
- |
|
Vijai Nagar (Karnataka) |
- |
|
Bhadrawati (Karnataka) |
Nationalization of Vishveshvarayya Iron and Steel Limited. (Owned by Central and State Government) |
- All these are managed by SAIL. (At present all important steel plants except TISCO, are under Public Sector).
- Steel Authority of India Limited (SAIL) was established in 1974 and was made responsible for the development of the Steel Industry.
- Bhilai, Durgapur and Rourkela were established during the Second Five Year Plan. Bokaro was established during the Third while the steel plants at Salem, Vijai Nagar and Vishakhapatnam were established in the Fourth Five Year Plan.
- Presently India is the fifth largest steel producing country in the world.
Top - 10 Steel Producing Countries
|
Top - 10 Steel Producing Countries |
||
|
Rank |
Country / Region |
Steel Production (Million Tonnes) |
|
1 |
China |
489.0 |
|
2 |
Japan |
120.2 |
|
3 |
United States |
97.2 |
|
4 |
Russia |
72.2 |
|
5 |
India |
53.1 |
|
6 |
South Korea |
51.4 |
|
7 |
Germany |
48.5 |
|
8 |
Ukraine |
42.8 |
|
9 |
Brazil |
33.8 |
|
10 |
Italy |
32.0 |
|
- |
World |
1 ,343.5 |
Top - 10 Steel Producing Companies
|
Top - 10 Steel Producing Companies |
|
|
Company |
Country / Region |
|
Arcelor Mittal |
Global |
|
Nippon Steel |
Japan |
|
JFE |
Japan |
|
POSCO |
South Korea |
|
Shanghai Baosteel Group Corporation |
China |
|
Tata Steel |
India / Global |
|
Liaoning An-Ben Iron and Steel Group |
China |
|
Shagang Group |
China |
|
Hebei Tangshan Iron & Steel Group |
China |
|
United States Steel Corporation |
United States |
Cotton and Textile Industry in India
- Oldest Industry of India, and employs largest number of workers.
- It is the largest organized and broad - based industry which accounts for about 4 per cent of GDP 20 percent of manufacturing value added and one - third of total export earnings.
The first Indian modernized cotton cloth mill was established in 1818 at Fort Gloaster near Kolkata but this mill was not successful. The second mill named Bombay Spinning and Weaving Co. was established in 1854 at Bombay by KGN Daber.
Cement Industry
- Production of cement was started in 1904 at Madras but the foundation of stable Indian cement industry was laid in 1914 when the Indian Cement Company Limited started production at Porbander in Gujarat.
During planning period, the cement industry has recorded continuous growth. India became not only self - reliant at the end of Seventh Plan but also started export of cement. At present, cement is the most advanced industries in the country.
- India is the fourth largest cement producing country is the world, the first three being China, Japan and USA.
After the complete decontrol of price and distribution on March 1, 1989, and introduction of other policy reforms, the cement industry has made rapid strides both in Capacity / Production and in production and process technology
- At present, there were 130 large cement plants with an installed capacity of 163.45 million tonnes per annum.
Besides, there are more than 332 mini cement plants with an estimated capacity of 11.10 million tonnes per annum.
Jute Industry
- Jute industry is an important industry for a country like India, because not only does it earn foreign exchange but also provides substantial employment opportunities in agriculture and industrial sectors.
- Its first modernized industrial unit was established at Reshra in West Bengal in 1855. There are at present 73 jute mills in India, out of which West Bengal has 59 mills, Bihar 3 mills, U.P 3 mills, Andhra Pradesh 4 mills and Assam, Tripura, Orissa and M.P one each.
- The jute industry in the country is traditionally export oriented. India ranks No. 1 in raw jute and jute goods production and No. 2 in export of jute goods in the world.
Sugar Industry
- Sugar industry is the second largest industry after cotton textile industry among agriculture based industries of the country.
As on September 30, 2006 there were 582 installed sugar factories in the country as against 138 during 1950 - 51.
At present, 203 sugar factories in private sector, 62 in public sector and remaining 317 factories in co - operative sector are working in the country.
This industry provides not only employment to a substantial number of persons but also holds the potentialities of developing other industries related to its by - products.
- India is the largest consumer of sugar and the second largest producer of sugar with a share of over 15 percent of world sugar production.
Sugar industry is the second largest agro - based industry in India after textiles. The importance of sugar industry in India can be judged from the fact that about 45 million sugarcane growers and a large number of rural laborers depend on sugarcane and sugar industry for their livelihood.
Sugar cultivation accounts for 3 percent of total cultivated area and contributes 7.5 percent of the gross value of agricultural production.
- India is the largest consumer of sugar and the second largest producer of sugar with a share of over 15 percent of world sugar production.
- Maharashtra contributes over one - third of the total sugar output, followed closely by U.P, Tamil Nadu and Karnataka.
Fertilizer Industry
- India is the third largest producer of nitrogenous fertilizers in the world.
- There are, at present, 57 fertilizer units manufacturing a wide range of nitrogenous and complex fertilizers, including 29 units producing urea and 9 units producing ammonium sulphate as a by - product.
Paper Industry
- The first mechanized paper mill was set - up in 1812 at Serampur in West Bengal.
- The paper industry in India is ranked among the top 15 global paper industries. The per capita paper consumption in India is still at 5.5 kg, which is far below the global average (nearly 50 kg).
- The Government had completely de - licensed the paper industry from July 17, 1997.
- At present, there are more than 600 pulp and paper mills producing nearly 5.8 million tonnes of paper and paper board and about 0.77 million tonnes of newsprint. A significant aspect of the paper industry is strong presence of smaller paper mills which account for nearly 50% of the total installed capacity and contribute about 50% to the production of paper and paper board in the country.
Coal Industry
- The credit for introducing coal in India goes to the two English men Sambhar and Hatley. They took permission from East India Company's Chief Warren Hastings in 1774 for excavating coal from Raniganj and Veerbhum areas.
Their efforts started survey of coal regions. The extraction of coal was started in 1814 in Raniganj area. A number of new coal mines were located in Raniganj area in 1830.
- Coal occupies the most important place among available power resources in India. Indian coal industry is a basic industry on which many other industries depend.
Coal accounts for about 67% of the country's commercial requirements. It is also an essential input in steel and carbo - chemical industries. The share of non - coking coal in total coal production comes to be about 85.3%.
- Coal is India's largest mineral resource and presently India is the fifth largest producer of coal in the world.
As on Jan 1, 2006, the coal resources of India (down to a depth of 1,200 m) have been estimated by the Geographical Survey of India at 2,53,301 million tonnes.
Silk Industry
- India is the second largest (first being China) country in the world in producing natural silk. At present, India produces about 18% silk of the world.
- Silk was first introduced in China but India too produced silk in ancient period. In earlier days, India exported silk cloth and other silk items in a large quantity to many countries. But at present silk industry in India is not as healthy as it was in the past.
- India enjoys the distinction of being the only country producing all the five known commercial varieties of silk, viz., Mulberry, Tropical Tasar, Oak Tasar, Eri and Muga (of which the golden yellow muga silk being unique to India). India's total silk production is about 16,500 tonnes (against a demand of around 26000 MT).
Gems and Jewellery Industry
- The Gems and Jewellery Sector contributed about 15 percent in India's total merchandise exports during 2005 - 2006.
India is the largest cutting and polishing centre of diamonds in the world, both in terms of quantity and value.
In terms of carat, India's share in this sector is about 80 percent of the world market. Gold jewellery and coloured gem segments accounts for about 15 per cent and 5 percent respectively of India's gem and jewellery export in value terms.
- Destination - wise, the major market for Indian gems and jewellery in terms of importance are USA, UAE, Hong Kong, Belgium, Israel, Japan, Thailand, UK, Singapore and Korea. USA itself accounts for 29 per cent of the total exports from India in this sector.
Chemical Industry
- Chemical industry is one of the oldest industries in India. It not only plays a crucial role in meeting the daily needs of the common man, but also contributes significantly towards industrial and economic growth of the nation.
It is on important constituent of the Indian economy. Its turnover is estimated at around US$ 30 billion approx, which is equivalent to about 3 percent of India's GDP In terms of volume, it is 12th largest in the world, and 3rd largest in Asia.
Within India, it contributes 20 percent of the Excise revenue to the Government. A substantial proportion of exports from this sector go to the USA, Europe and other developed nations.
The industry has a weightage of about 14 percent in the Index of Industrial Production and 17.6 per cent within the manufacturing sector.
Since the beginning of the planned process of economic development after Independence, public sector played a pre-eminent role in India. Commanding heights of the economy were to be in the hands of the public sector—basically infrastructure areas like transport, communications, energy, steel and fertilizers.
Objectives of the PSUs
- establish sound economic infrastructure
- set up industries in the backward regions and thus help bring about balanced regional development
- assist in ancillarization and thus the spread of the benefits of industrialization
- create sufficient levels of employment and set standards in labour welfare
- build a self-reliant economy
- earn ingestible resources for development
- prevent/reduce concentration of private economic power
- selling goods and services at reasonable prices so as to serve consumer, keep low inflation and help non-inflationary growth process
- Invest in areas where the private sector would not and could not like in roads, transport and so on.
Performance
- In the last 50 years of economic development, the public sector indeed lived upto the expectations as can be seen below:
- around 240 Central PSUs today (excluding some insurance, finance and other companies) provide the country with infrastructure in steel, cement, transport, communications, power and so on
- the record of the PSUs in supplying many goods and services like coal, drugs, transport, power, irrigation and so on is commendable though an element of subsidy is involved in the effort
- The PSUs are a model employer providing various facilities like education, housing and etc.
- By establishing industries in the poor states like MP, Rajasthan, Bihar and others, the efforts of the PSUs to reduce regional economic imbalances are not insignificant.
Problem Areas
The problems with the PSUs in general are:
- lack of sufficient autonomy due to the fact of excessive government control which is unavoidable because the resources spent are public resources
- The technology is obsolete due to meager or no expenditure on modernization, which is explained by the loss making nature of the units. For example, the State Electricity Boards(SEBs)
- the managerial efficiency is low as there is no incentive for higher efficiency partly because it is not rewarded and also because the financial package is unattractive
- the tenure of the chief executive is uncertain and leaves little scope for commitment and dynamism
- the locational disadvantages are such that some plants need to work at 125% capacity to break even, for example, some of the cement plants in central India belonging to the CCI
- the labour strength is in excess and the wage bill is very high
- In some cases the project appraisal is incomplete, for instance, in the case of Surgical Instruments Ltd (Chennai) where the technological tie-up with Russia made instruments suitable for an average Russian, with physical proportions much larger than an Indian.
