Unit-7
Indian economics
In the broader sense, an industrial policy is any government action which is aimed toward affecting the economic sector. As an instrument of industrialization, any country should formulate industrial policies. Further, during a country like India, where the private sector co-exists in business, it's important to regulate and regulate the world . During this article, we'll specialise in the economic policies of India.
Factors affecting productivity of Frames in India
Industrial Policies of India
India features a economy which suggests that the overall public and personal sector exist together.
Therefore, it's important that the govt declares industrial policies which clearly indicate the sphere of the State and therefore the private enterprises.
On April 30, 1948, the govt of India passed a policy resolution – the economic Policy Resolution, 1948 (IPR, 1948)
It divided the economic sector into four broad groups:
1. Group 1 – Basic and strategic industries like arms and ammunition, nuclear energy , railways, etc. Further, these were within the exclusive monopoly of the State.
2. Group 2 – Key industries like coal, iron and steel, shipbuilding, manufacture of telegraph, telephone, oil s, etc. The State took over the exclusive responsibility of al future developments in these industries. Also, the prevailing industries were allowed to function for 10 years. After the top of the tenure, the State would review and take adequate decisions.
3. Group 3 – a complete number of 18 industries including automobiles, tractors, machine tools, etc. The private sector was allowed to open these industries subject to government regulation and supervision.
4. Group 4 – All the remaining industries. However, the govt can participate or intervene if the necessity arises.
The IPR, 1948 also emphasized the importance of small-scale and cottage industries in India. To implement the IPR, 1948, the govt passed the Industries (Development and Regulation) Act in 1951.
The following are the most features of commercial Policy of 1948:
(i) Category of Industries:
Large scale industries were divided into four categories.
(a) Public sector:
It includes industries owned and managed by Govt. Viz. Arms and ammunitions nuclear energy and railways.
(b) Public-cum-Private sector:
It included six basic industries coal, iron and steel, aircraft manufacture, ship building, mineral oil, telephones, cable and wireless industry. The new ventures concerning these industries are going to be established by Govt. And already existing units will still be managed and developed for next 10 years by Private Sector.
(c) Controlled private sector
In includes 18 important industries viz. Automobiles , heavy machine tools, cotton textiles, cement, sugar, paper, shipping material and tractor. These industries will still remain under private sector but Central Govt. Will have overall control over them.
(d) Private and co-operative sector:
The rest of the industries are going to be run under private ownership or on co-operative basis Govt. Can keep check on these.
(ii) Cottage and little scale industries:
Rapid development of those industries was emphasized so as to use local resources generating employment avenues and production of commodity .
(iii) Employee-employer relation:
It was aimed that employee- employer relations should be congenial. The worker should get fair wages and Social Security .
(iv) Control over Foreign Capital:
The role of foreign capital for industrial development was recognised. But Govt. Took full control over foreign capital to observe the interests of nation.
(v) Development of infrastructure:
Special stress was laid on development of roads, railways, electricity and irrigation etc.
Revision 1 – 1956
On April 30, 1956, the govt revisited the IPR, 1948 and announced the economic Policy Resolution, 1956 (IPR, 1956). There have been three reasons behind the revision:
i. The introduction of the Constitution of India
Ii. The adoption of a planning system
Iii. The Parliament‘s declaration of adopting a socialist pattern of the society
According to the IPR, 1956, the industries were classified within the following categories:
1. Schedule A – an inventory of 17 industries because the exclusive responsibility of the State. Of these, four industries, namely arms and ammunition, nuclear energy , railways, and also air transportation become Central Government monopolies and therefore the rest under State Governments.
2. Schedule B – an inventory of 12 industries hospitable both the general public and personal sectors. However, these industries are progressively State-owned.
3. Schedule C – All the remaining industries. The private sector had the first initiative of development. However, they needed to suit within the economic and social priorities and policies of the govt . Further, they were subject to the provisions of the Industries (Development and Regulation) Act, 1951.
The IPR, 1956 also stressed the importance of small-scale and cottage industries for expanding employment opportunities.
Revision 2 – 1977
A Statement within the Parliament in December 1977 modified the economic Policy. The most thrust was in favor of the small-scale sector. Further, this was classified into three sub-sectors:
• Household and Cottage industries which provided large-scale self-employment.
• Tiny sector industries, if the investment amount was below a specified limit.
• Small-scale industries, which were larger than the primary two categories but had investment within certain limits.
Revision 3 – 1980
Apart from recognizing the necessity to enhance the management of the general public sector, the IPR, 1980 provided certain clarifications and extensions.
• Optimum utilization of installed capacity
• Higher productivity and more employment
• Preferential treatment for industrially backward units to get rid of regional disparities
• Promotion of export-oriented and also import-substitution industries
• Extending a preferential treatment to agro-related industries to extend the agriculture base of the economy.
Revision 4 – 1991
On July 24, 1991, the govt of India announced a replacement , liberalized industrial policy. This policy scrapped the asset limit for Monopolies and Restrictive Trade Practice (MRTP) companies.
Further, it abolished industrial licensing of all projects with a couple of exceptions. It also raised the limit for foreign participation within the country’s industrial sector. Here are the highlights:
• The policy abolished industrial licensing for all projects with the exception of a couple of selected sectors. Further, the exemption from licensing applied to all or any substantial expansions of existing and new units.
• It provided for the automated clearance for import of capital goods.
• With reference to the Monopolies and Restrictive Trade Practice (MRTP) Act, the policy stated that the pre-entry scrutiny of investment decisions by the MRTP companies was not needed.
• The policy also scrapped the asset limit of the Monopolies and Restrictive Trade Practice (MRTP) companies.
• It envisaged the divestment of state equity publicly sector to mutual funds, financial institutions, the general public, and also the workers. As of 2008, the reservation for the general public sector was very limited.
• There were only two sectors covering the manufacture of certain substances relevant to nuclear energy (along with the assembly of atomic energy) and also the supply of railway transport.
• The policy provided approval for direct foreign investment of up to 51 percent in certain high-priority industries. The govt made these changes so as to extend foreign investment in those sectors.
• There was an existing locational policy for industries. The IPR, 1991 as long as in locations aside from cities with a population of quite a million , the industries don't require any approval.
• Further, the sole exception is those industries which require compulsory licensing.
India’s Industrial Policy
Meaning
Government action to influence the ownership & structure of the industry and its performance. It takes the shape of paying subsidies or providing finance in other ways, or of regulation.
It includes procedures, principles (i.e., the philosophy of a given economy), policies, rules and regulations, incentives and punishments, the tariff policy, the labour policy, government’s attitude towards foreign capital, etc.
Objectives
The main objectives of the economic Policy of the govt in India are:
To maintain a sustained growth in productivity;
To enhance gainful employment;
To achieve optimal utilisation of human resources;
To attain international competitiveness; and
To transform India into a serious partner and player within the global arena.
Industrial Policies in India since Independence
Industrial Policy Resolution of 1948- It defined the broad contours of the policy delineating the role of the State in industrial development both as an entrepreneur and authority.
It made clear that India goes to possess a Mixed Economic Model.
It classified industries into four broad areas:
Strategic Industries (Public Sector): It included three industries during which Central Government had monopoly. These included Arms and ammunition, nuclear energy and Rail transport.
Basic/Key Industries (Public-cum-Private Sector): 6 industries viz. Coal, iron & steel, aircraft manufacturing, ship-building, manufacture of telephone, telegraph & wireless apparatus, and oil were designated as “Key Industries” or “Basic Industries”.
These industries were to be set-up by the Central Government.
However, the prevailing private sector enterprises were allowed to continue.
Important Industries (Controlled Private Sector): It included 18 industries including heavy chemicals, sugar, cotton textile & woollen industry, cement, paper, salt, machine tools, fertiliser, rubber, air and sea transport, motor, tractor, electricity etc.
These industries still remain under private sector however, the central government, in consultation with the government , had general control over them.
Other Industries (Private and Cooperative Sector): All other industries which weren't included within the above mentioned three categories were left open for the private sector.
The Industries (Development and Regulation) Act was passed in 1951 to implement the economic Policy Resolution, 1948.
Industrial Policy Statement of 1956 : Government revised its first Industrial Policy (i.e.the policy of 1948) through the economic Policy of 1956.
It was considered the “Economic Constitution of India” or “The Bible of State Capitalism”.
The 1956 Policy emphasised the necessity to expand the general public sector, to create up an outsized and growing cooperative sector and to encourage the separation of ownership and management privately industries and, above all, prevent the increase of private monopolies.
It provided the essential framework for the government’s policy in reference to industries till June 1991.
IPR, 1956 classified industries into three categories
Schedule A consisting of 17 industries was the exclusive responsibility of the State. Out of those 17 industries, four industries, namely arms and ammunition, atomic energy, railways and air transportation had Central Government monopolies; new units within the remaining industries were developed by the State Governments.
Schedule B, consisting of 12 industries, was hospitable both the private and public sectors; however, such industries were progressively State-owned.
Schedule C- All the opposite industries not included in these two Schedules constituted the third category which was left hospitable the private sector. However, the State reserved the proper to undertake any sort of industrial production.
The IPR 1956, stressed the importance of cottage and little scale industries for expanding employment opportunities and for wider decentralisation of economic power and activity
The Resolution also involved efforts to take care of industrial peace; a good share of the proceeds of production was to tend to the toiling mass keep with the avowed objectives of democratic socialism.
Criticism: The IPR 1956 came certain sharp criticism from the private sector since this Resolution reduced the scope for the expansion of the private sector significantly.
The sector was kept under state control through a system of licenses.
.The following points highlight the four major economic reforms under new policy of India since 1991.
Reform 1 De-Reservation of Industries of the general public Sector:
The new industrial policy 1991 has been adopted under which far-reaching structural reforms are initiated to lift excess direct controls and regulations on industries and to make sure a free-market oriented financial system .
The list of industries reserved for the general public sector has been pruned. Now, only 6 industries remain reserved for the general public sector.
Among the industries reserved earlier for the general public sector were many core industries like iron and steel, electricity, air transportation , ship building, heavy machinery industries like heavy chemical plants and telecommunication cables and instruments. The new industrial policy of 1991 threw open of these industries for the private sector for investment and growth.
Thus the new policy indicates the Government’s intention to ask a greater degree of participation by the private sector in important areas of the economy. The six industries which still be reserved for the general public sector are in areas where security and strategic considerations predominate. Consistent with the new policy, the resources within the public sector will now be used for the event of strategic, high-technology industries and essential infrastructure areas and for social sectors like education, public health and poverty alleviation programmes.
Reform 2 Liberalisation: Abolition of commercial Licensing System:
Until 1991 the Indian industrial sector had functioned under a system of tight controls and regulations represented by industrial licencing which meant to allocate the scarce resources towards building the economic base of the economy. By the year 1991 the Indian industrial economy had a quite wide and diversified base, the new policy abolished all industrial licencing regardless of the extent of investment apart from 15 industries that licence was still required.
These industries are those which are essential for security and safety purposes and for cover of environment. For granting of licence for even these 15 industries procedure has been greatly simplified. For getting licences only certain locational guidelines are to be fulfilled in order that polluting industries shouldn't cluster round the major urban centres. Besides, restrictions by Monopolistic and Restrictive Act (MRTPA) for expansion of massive firms were also relaxed.
Reform 3 Privatisation of Public Sector Enterprises
An important aspect of latest industrial policy of the govt is that it shouldn't operate commercial enterprises. Thereupon end in sight the govt decided to disinvest the general public enterprises. The govt can sell its enterprises completely to the private sector or disinvest a neighborhood of its equity capital held by it to the private sector companies or within the open market.
Therefore this policy of public sector disinvestment has also been called the policy of privatisation. Through disinvestment or privatisation, the govt can mop up an honest amount of resources which may be used for various purposes. The released resources are often wont to restructure and strengthen the general public sector enterprises which are potentially viable. These resources also can be wont to pay back a neighborhood of debt . These resources also can be wont to finance budget deficits.
What are the explanations for the policy of privatisation or public sector disinvestment. First, resources available with the govt are scarce. The govt needs resources to scale back its deficit . The govt urgently requires resources to form investment in infrastructure, education, public health and for poverty alleviation programmes. Resources released through disinvestment are often used for investment in these crucial sectors. Second, an honest number of existing public enterprises are working inefficiently and incurring huge losses.
Accordingly, a neighborhood of the economic reforms policy, the govt started reforms publicly sector enterprises.
The main elements of state policy towards Public Sector Enterprises (PSU) are:
(1) Disinvestment of state equity altogether non-strategic Public Sector Undertakings (PSU) to 26 per cent or lower if necessary.
(2) Those public sector enterprises which are potentially viable need to be restructured and revived.
(3) Those Public Sector Undertakings (PSU) which can't be revived would be closed down.
Disinvestment of Public Sector Undertaking in India Since 1991
The Government has now evolved a good , transparent and equitable procedure for disinvestment in selected public sector enterprises. The achievement made with reference to disinvestment of Public Sector Undertakings which started in 1991-92 with the sale of minority stakes in some public sector undertakings are given in Table 5.1. From 1999-2000 to March 2003 the disinvestment of public enterprises was mainly through sale of state equity to strategic private partners.
Under this policy of disinvestment through strategic sales, 100 per cent equity of recent Food was sold to Hindustan Lever. 51 per cent of state equity holding of BALCO was sold to non-public sector firm Sterlite Industries, 51 you look after Government equity holdings in CMC was sold to TATA, 25% of state equity in VSNL was sold to TATA. 25 per cent of state Equity in IPCL was sold to Reliance Industries at Rs. 1490 crores.
However, within the year 2003-04 policy of disinvestment through public sale of state shares in market of varied public enterprises was adopted. Thereunder in August 2003 Government raised Rs. 900 crores by selling its equity in Maruti Udyog Ltd. To the overall public within the open market. Similarly, in 2003-04 public sale of a neighborhood of state equity shares of public sector undertakings; IBP Ltd., DCIL, GAIL, ONGC was made and an honest amount of resources was raised.
As a end in 2003-04, Government’s disinvestment receipts of Rs.15, 545 exceeded the target. After 2003-04, under UPA in 2003-04 Government process of disinvestment bogged down thanks to the opposition by Left Parties which were then alies of the govt . In 2004- 05 only Rs.2765 crores and in 2005-06 t 1568 crores were raised through public sector disinvestment, 2006-07 public sector disinvestment was kept on hold thanks to stiff opposition by the left parties except that disinvestment in Maruti-Udyog Ltd was undertaken and Rs.2367 crores were raised.
Reform 4 Globalisation:
The following measures for globalisation of the Indian economy were taken:
(i) Welcoming Private Foreign Investment and Foreign Technology:
Till 1991, foreign investment and import of foreign technology was regulated tightly in India. Within the case of foreign technology agreements sought by Indian firms also as foreign investment, it had been necessary to get specific prior approval from the govt for every project. This involved delays and hampered business deciding within the import of technology by Indian firms.
Under the new policy for a specific list of technology and high investment priority industries, firms receive automatic approval to form foreign technology agreements within certain guidelines. This policy measure is predicted to get rid of the delay and uncertainty which earlier clouded the relationships between Indian and foreign firms.
Further, the govt has liberalised its policy regarding foreign investment. To draw in private foreign investment, it's been decided to grant automatic permission to non-public foreign investors to take a position up to 51 per cent of the entire equity shares in 34 high priority industries if certain norms are fulfilled. This facility are going to be available to those firms which are ready to finance their capital equipment imports through their foreign equity.
This is a serious departure from the previous policies which required case-by-case approval of foreign investment normally limited to 40 per cent equity participation. The priority sector includes power generation and petroleum refining. Further, the govt has given a guarantee of 16 per cent return on foreign investment in priority sectors. There's also proposal to permit automatic clearance for foreign financial and technical collaboration with Indian firms.
(ii) Trade Liberalisation:
In a bid to open up the economy, under the new policy quantitative restrictions, that is, import licencing for imports of products are removed. Further, to market competitiveness, efficiency and globalisation of the Indian economy import duties are reduced to the 20 per cent (excluding agricultural and dairy products) with effect from Jan. 9, 2004.
The new thinking is that with the cheapening of imported goods, the Indian firms will attempt to increase their efficiency and reduce costs in order that their products can compete with the foreign products. During this way they're going to be ready to expand their exports.
(iii) Currency Convertibility and Floating of Indian Rupee:
r step taken towards liberalisation of the Indian economy has been to form the Indian rupee fully convertible on accounting since March 1993. This suggests that for the aim of foreign trade and travel you'll convert the rupees into dollars and dollars into rupees within the exchange market at the market determined rate of exchange .
That is, the exchange rate of rupee is not fixed but susceptible to change as demand for and provide of exchange change. In July 1991, the Indian rupee was devalued by about 20 per cent. But now with market-determined rate of exchange , the Indian rupee can depreciate or appreciate depending upon demand and provide conditions.
Iron and industry
Introduction
At global level in 2018, the planet crude production reached 1789 million tonnes (mt) and showed a growth of 4.94% over 2017.
China remained world’s largest crude steel producer in 2018 (928 mt) followed by India (106 mt), Japan (104 mt) and therefore the USA (87 mt).
Per capita finished steel consumption in 2017 is placed at 212 kg for world and 523 kg for China and for India it had been 69 kg as published by World Steel Association.
India is that the largest producer of sponge iron within the world and therefore the 3rd largest finished steel consumer within the world after China & USA.
The Government has taken various steps to spice up the world including the introduction of National Steel Policy 2017 and allowing 100 per cent Foreign Direct Investment (FDI) within the steel sector under the automated route.
The growth within the Indian steel sector has been driven by domestic availability of raw materials like ore and cost-effective labour. Consequently, the steel sector has been a serious contributor to India’s manufacturing output.
Development of Steel Sector
The economic reforms initiated by the govt since 1991 added new dimensions to industrial growth generally and therefore the industry especially .
Licensing requirement for capacity creation was abolished, apart from certain locational restrictions and therefore the industry was faraway from the list of industries reserved for the general public sector.
Automatic approval of foreign equity investment up to 100% was granted. Price and distribution controls were removed with a view to form the industry efficient and competitive.
Restrictions on external trade, both in import and export, were removed with drastic reductions in duty .
General policy measures like reduction in duty on capital goods, convertibility of rupee on trade account, permission to mobilise resources from overseas financial markets among others, also benefited the Indian industry .
The Growth Profile
The liberalization of commercial policy and other initiatives taken by the govt have given a particular impetus for entry, participation and growth of the private sector within the industry .
While the prevailing units are being modernized/expanded, an outsized number of latest steel plants have also come up in several parts of the country supported modern, cost effective, state of-the-art technologies.
In the previous couple of years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to line up fresh green field projects in several states of the country.
Today, because the 2nd largest crude steel producer globally and with a capacity of over 100 million tonne, the Indian industry has come an extended way.
Pig Iron: India is additionally a crucial producer of iron . Post-liberalization, with fixing several units within the private sector, not only imports have drastically reduced but also India has clothed to be a net exporter of iron . The private sector accounted for 94% of total production of iron within the country. Pig iron, crude iron obtained directly from the furnace and cast in molds.
Sponge Iron: India, world’s largest producer of sponge iron (2018), features a host of coal based units located within the mineral-rich states of the country. Over the years, the coal based route has emerged as a key contributor and accounted for 79% of total sponge iron production within the country.
Sponge iron may be a metallic product produced through direct reduction of ore within the solid state. The method of sponge iron making aims to get rid of the oxygen from ore . The standard of sponge iron is primarily ascertained by the share of metallization (removal of oxygen), which is that the ratio of metallic iron to the entire iron present within the product.
Import and Export of Iron & Steel
Although India started exporting steel way back in 1964, exports weren't regulated and depended largely on domestic surpluses. However, within the years following economic liberalisation, export of steel recorded a quantum jump.
Subsequently, the rapid climb of domestic steel demand has led to a decline within the rate of growth of steel exports from India to make sure that domestic requirements are adequately met. India is currently a net importer of total finished steel.
Iron & steel are freely importable and freely exportable.
Additional Capacity Creation privately Sector
Since 1991 with further opening from the Indian economy, a focused reform process in situ and a rapid but stable growth of the Indian economy, investments have flown significantly into the industry of the country with major investment plans announced within the states of Odisha, Jharkhand, Karnataka, Chhattisgarh and West Bengal .
Crude steel capacity within the country stood at 138 million tonnes in 2017-18 as per data released by the JPC while the National Steel Policy 2017 envisions domestic crude steel capacity reaching 300 million tones once a year by 2030-31.
Demand – Availability
Demand and availability of iron and steel within the country are largely determined by economic process and gaps in demand-availability are met mostly through imports.
Interface with consumers exists by way of meeting of the Steel Consumers’ Council, which is conducted on regular basis.
Interface helps in redressing availability problems, complaints associated with quality.
Steel Prices
Price regulation of iron & steel was abolished on January 16, 1992. Since then steel prices are determined by the interplay of economic process .
Domestic steel prices are influenced by trends in staple prices, demand – supply, conditions within the market, and international price trends among others.
As a facilitator, the govt monitors the steel market conditions and adopts fiscal and other policy measures supported its assessment. Currently, GST of 18% is applicable on steel and there's no duty on steel items.
A Steel Price Monitoring Committee has been constituted by the govt with the aim to watch price rationalization, analyze price fluctuations and advise all concerned regarding any irrational price behavior of steel commodity.
To avoid any distortion in prices in sight of ad-hoc and rising imports, the govt had taken several steps including raising duty and imposed a gamut of measures including anti-dumping and safeguard duties on a number of applicable iron and steel items.
In a further move, to curb steel imports, the Indian government banned the assembly and sale of steel products that doesn't meet BIS approval.
To check the sale of defective and sub-standard chrome steel products used for creating utensils and various kitchen appliances, the chrome steel (Quality Control) Order, 2016, released for products utilized in making utensils and kitchen appliances which will help filter imports of the metal.
Government Initiatives
An duty of 30 per cent has been levied on ore to make sure supply to domestic industry .
Government’s specialise in infrastructure and restarting road projects is aiding the boost in demand for steel. Also, further likely acceleration in rural economy and infrastructure is predicted to steer to growth in demand for steel.
The Union Cabinet has approved the National Steel Policy (NSP) 2017, because it seeks to make a globally competitive industry in India.
.Background
A major player within the worldwide sugar trade, India produced 33 million metric tons in 2017/2018. The state is seeing record levels of sugar production and is about to overtake Brazil because the highest sugar producer.
India’s sugar production rose 11.5% during the 2014 to 2015 season on bumper cane production. This increase in production led to an in depth surplus in Indian sugar with mills struggling to pay fair wages to workers.
Sugar Industry’s Location in India
Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh , Bihar, Haryana and Punjab within the north and Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh within the south.
South India has tropical climate which is suitable for higher sucrose content giving higher yield per unit area as compared to north India.
Significance
Multiple linkages: Sugar may be a labour-intensive industry, up the whole value-chain from cane-growing to sugar and alcohol production. Across multiple districts of Uttar Pradesh , Maharashtra, Tamil Nadu, Karnataka, and a number of other other states, it's the most source of employment.
Source of employment: A sugar industry is source of livelihood for 50 million farmers and their families. It provides direct employment to over 5 lakh skilled laborers but also to semi-skilled laborers in sugar mills and allied industries across the state .
Byproducts: the varied byproducts of sugar industry also contribute to the economic process and promote variety of allied industries. Sugarcane has emerged as a multi-product crop used as a basic staple for the assembly of sugar, ethanol, paper, electricity and besides a cogeneration of ancillary product.
For livestock feeding: Molasses from sugar cane is employed for alcohol production and livestock feeding since it's highly nutritious.
Biofuel: In India, the overwhelming majority of ethanol is produced from sugarcane molasses, a by-product of sugar. Ethanol blended fuel can help in reducing petroleum imports.
Bagasse: Basic utilisation of baggase continues to be as a fuel. But it's also suitable staple for paper industry. 30% of cellulose requirement comes from agricultural residues. However, since the mills are scattered everywhere the country, collection of surplus baggase poses a drag and makes paper units uneconomical.
Problems of Sugar Industry
Uncertain Production Output
Sugarcane has got to compete with several other food and cash crops like cotton, oil seeds, rice, etc. This affects the availability of sugarcane to the mills and therefore the production of sugar also varies from year to year causing fluctuations in prices resulting in losses in times of excess production thanks to low prices.
Low Yield of Sugarcane
India yield per hectare is extremely low as compared to a number of the main sugarcane producing countries of the planet . For instance , India’s yield is merely 64.5 tonnes/hectare as compared to 90 tonnes in Java and 121 tonnes in Hawaii.
Short crushing season
Sugar production may be a seasonal industry with a brief crushing season varying normally from 4 to 7 months during a year.
It causes loss and seasonal employment for workers and lack of full utilization of sugar mills.
Low Sugar recovery rate
The average rate of recovery of sugar from sugarcane in India is a smaller amount than ten per cent which is sort of low as compared to other major sugar producing countries.
High cost
High cost of sugarcane, inefficient technology, uneconomic process of production and heavy excise duty end in high cost of producing .
Most of the sugar mills in India are of small size with a capacity of 1,000 to 1,500 tonnes per day thus fail to require advantage of economies of scale.
Government policy and control
Government has been controlling sugar prices through various policy interventions like duty , imposition of stock limit on sugar mills, change in meteorology rule etc., to balance supply demand mismatch.
But these controls have resulted in unremunerative sugar prices, increasing arrears for sugar mills and dues to be paid to sugarcane farmers.
Government Initiative
Rangarajan committee (2012) was found out to offer recommendations on regulation of sugar industry. Its major recommendations:
Abolition of the quantitative controls on export and import of sugar, these should get replaced by appropriate tariffs.
Committee recommended no more outright bans on sugar exports.
The central government has prescribed a minimum radial distance of 15 km between any two sugar mills, this criterion often causes virtual monopoly over an outsized area can give the mills power over farmers. The Committee recommended that the space norm be reviewed.
There should be no restrictions on sale of by-products and costs should be market determined. States should also undertake policy reform to permit mills to harness power generated from bagasse.
Remove the regulations on release of non-levy sugar. Removal of those controls will improve the financial health of the sugar mills. This, in turn, will cause timely payments to farmers and a discount in cane arrears.
Based on the report, Commission for Agricultural Costs and costs (CACP) recommended a hybrid approach of fixing sugarcane prices, which involved fair and remunerative price (FRP).
The year 2013-14 was a water-shed for the sugar industry. The Central Government considered the recommendations of the committee headed by Dr. C. Rangarajan on de-regulation of sugar sector and decided to discontinue the system of levy obligations on mills for sugar produced after September, 2012 and abolished the regulated release mechanism on open market sale of sugar.
The de-regulation of the sugar sector was undertaken to enhance the financial health of sugar mills, enhance cash flows, reduce inventory costs and also end in timely payments of cane price to sugarcane farmers.
The recommendations of the Committee concerning Minimum Distance Criteria and adoption of the Cane Price Formula are left to State Governments for adoption and implementation, as considered appropriate by them.
With the aim of benefitting Sugar farmers and so as to clear their arrears/cane dues, the Union Government has decided to extend the Minimum asking price (MSP) of Sugar from Rs. 29 to Rs. 31 for the year 2019-20.
Fair and Renumerative Price
FRP is that the minimum price that the sugar mills need to pay to farmers.
It is determined on basis of recommendations of Commission for Agricultural Costs and costs (CACP) and after consultation with State Governments and other stake-holders.
State Advised Price (SAP)
In other key growing states of Uttar Pradesh , Punjab, Haryana, Tamil Nadu and Uttarakhand, farmers get the State Advised Price (SAP) fixed by state governments which is typically above FRP.
Apart from this, the govt has also provided incentives on producing ethanol from B-heavy molasses and cane juice to divert the sugar surpluses towards biofuel, thus indirectly supporting sugar prices. The new Biofuel Policy 2018 has fixed a target of achieving 20 per cent ethanol blending with petrol by 2030.
Way Forward
The sector needs infusion of capital, but also policy measures and structural changes. Technological upgradation in age old mills especially in Uttar Pradesh and Bihar to enhance efficiency in production.
Major sugar producing States like Maharashtra and Karnataka have migrated to the progressive revenue-sharing formula other states should also introduce revenue-sharing formula to make sure farmers receive a share within the profits.
When domestic production is probably going to be in more than domestic consumption government should encourage exports through policy changes.
Mills should be allowed to supply more alcohol (a higher value product with massive industrial demand). Exports of sugar and alcohol should even be decontrolled. It'll improve financial situation of mills and will afford to pay farmers a price supported the market prices of sugar.
The production cost of sugar in India is one among the very best within the world. Intense research is required to extend the sugarcane production within the agricultural field and to introduce new technology of production efficiency within the sugar mills.
Production cost also can be reduced through proper utilisation of by- products of the industry.
Government should encourage ethanol production. It'll bring down the country’s oil import bill and help in diversion of sucrose to ethanol and to balance out the surplus production of sugar.
. COTTON TEXTILE INDUSTRY
Textile industry includes cotton, jute, wool, silk, and artificial fiber textiles. India is one among the leading producers of textile goods. It's one among most vital |the biggest"> the most important and most important sector within the economy in terms of output, exchange earning, and employment in India. Its contribution forms 20 per cent of the economic production, 10 per cent of the excise collection, 18 per cent of employment within the industrial sector, 20 per cent of the country's total export earning and 4 per cent of the GDP. At the present , India is that the third largest producer of silk, fifth largest producer of synthetic fibers, and has the most important loom age and spindles within the world.
India enjoyed monopoly within the production of textile goods from 1500 BC to 1500 AD. Indian cotton and silk textiles were in great demand everywhere the planet . It had been the arrival of British in India and therefore the technological revolution in Britain in 1779 which led to the downfall of the Indian manufacturing. British after the consolidation of their rule out India encouraged the export of staple from India to Britain and import of manufactured goods from Britain to India. The primary factory was established in 1854 in Mumbai by C.N. Dewar. The fast growth of cotton textile occurred in 1870 when there was much demand of Indian goods within the wake of yank war . Before the primary war the amount of Indian textile mills rose to 271. The demand for cloth during the Second war led to further progress of the textile industry.
The industry suffered a setback in 1947 nearly as good quality cotton growing area visited Pakistan. Consequently, India had to import cotton from the African countries.
Cotton being a pure staple provides an opportunity to determine factory either within the areas of staple or within the market. In India, most of the textile mills are within the cotton growing areas or within the neighboring cities and towns. The situation of cotton textile industry is additionally affected by: (i) staple , (ii) proximity to plug , (iii) moist weather, (iv) capital, (v) skilled and cheap labour, (vi) transport, (vii) sea-port, (viii) export facility and therefore the domestic and international markets.
State-wise Production of cotton in India(In sq metres)
Maharashtra 400,550
Gujarat 355,745
Tamil Nadu 65,850
Punjab 56,850
Madhya Pradesh 48,500
Uttar Pradesh 32,850
Rajasthan 28,880
Pondicherry 25,250
Karnataka 8,500
Kerala 6,850
Cotton Industry And Exports
Introduction
Cotton plays a crucial role within the Indian economy because the country's textile industry is predominantly cotton based. India is one among the most important producers also as exporters of cotton yarn. The textile industry is additionally expected to succeed in US$ 223 billion by the year 2021.
The states of Gujarat, Maharashtra, Telangana, Andhra Pradesh , Karnataka, Madhya Pradesh, Haryana, Rajasthan, and Punjab are the main cotton producers in India.
Key Markets and Export Destinations
• Cotton yarn and fabrics exports accounts for about 23 per cent of India’s total textiles and apparel exports.
• In 2017-18, India’s cotton production was 34.86 million bales of 170 Kgs. Each
• Between Apr-Oct 2018, total textile and clothing exports stood at Rs 1.52 trillion (US$ 21.95 billion).
• Between Apr-Oct 2018, exports of cotton raw including waste, cotton yarn, cotton fabrics and cotton made-ups grew by 26.01 per cent year-on-year to US$ 6,893.05 million from US$ 5,470.20 million during an equivalent period last year.
Various reputed foreign retailers and makes like Carrefour, Gap, H&M, JC Penney, Levi Strauss, Macy's, Marks & Spencer, Metro Group, Nike, Reebok, Tommy Hilfiger and WaI-Mart import Indian textile products.
Cotton Textile Export Promotion Council
The Cotton Textile Export Promotion Council (TEXPROCIL) takes part in national and international events to reinforce the visibility of Indian products, advertises and promotes Indian products in various media vehicles like fashion magazines, event-related pull-outs, India reports and leading trade magazines, and organizes buyer-seller meets (BSM) and trade delegation visits.
Introduction
India is that the second largest producer of cement within the world. No wonder, India's cement industry may be a vital a part of its economy, providing employment to quite 1,000,000 people, directly or indirectly. Ever since it had been deregulated in 1982, the Indian cement industry has attracted huge investments, both from Indian also as foreign investors.
India features a lot of potential for development within the infrastructure and construction sector and therefore the cement sector is predicted to largely enjoy it. a number of the recent major initiatives like development of 98 smart cities are expected to supply a serious boost to the world .
Expecting such developments within the country and aided by suitable government foreign policies, several foreign players like Lafarge-Holcim, Heidelberg Cement, and Vicat have invested within the country within the recent past. a big factor which aids the expansion of this sector is that the ready availability of the raw materials for creating cement, like limestone and coal.
Market Size
Cement production capacity stood at 502 million tones per annum (mtpy) in 2018. Capacity addition of 20 million tones once a year (MTPA) is predicted in FY19- FY 21.
The Indian cement industry is dominated by a couple of companies. The highest 20 cement companies account for nearly 70 per cent of the entire cement production of the country. a complete of 210 large cement plants account for a cumulative installed capacity of over 410 million tones, with 350 small plants accounting for the remainder . Of those 210 large cement plants, 77 are located within the states of Andhra Pradesh , Rajasthan and Tamil Nadu .
Investments
According to data released by the Department of commercial Policy and Promotion (DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 and March 2018.
Some of the main investments in Indian cement industry are as follows:
• As of December 2018, Raysut Cement Company is getting to invest US$ 700 million in India by 2022.
• During 2017-18, Ultratech commissioned a green field clinker plant with a capacity of two .5 MTPA and a cement grinding facility with 1.75 MTPA capacity in Dhar, Madhya Pradesh. The corporate is expecting to finish a 1.75 MTPA cement grinding facility and a 13 MW waste heat recovery system by September 2018 at an equivalent location.
• JK Cement is getting to invest Rs 1,500 crore (US$ 231.7 million) over subsequent 3 to 4 years to extend its production capacity at its Mangrol plant from 10.5 MTPA to 14 MTPA.
Government Initiatives
In order to assist the private sector companies thrive within the industry, the govt has been approving their investment schemes. Some such initiatives by the govt within the recent past are as follows:
In Budget 2018-19, Government of India announced fixing of a reasonable Housing Fund of Rs 25,000 crore (US$ 3.86 billion) under the National Housing Bank (NHB) which can be utilised for alleviating credit to homebuyers. The move is predicted to spice up the demand of cement from the housing segment.
Road Ahead
The eastern states of India are likely to be the newer and virgin markets for cement companies and will contribute to their bottom line in future. Within the next 10 years, India could become the most exporter of clinker and grey cement to the center East, Africa, and other developing nations of the planet . Cement plants near the ports, as an example the plants in Gujarat and Visakhapatnam, will have another advantage for exports and can logistically be armed to face stiff competition from cement plants within the interior of the country.Cement-June-2019
Due to the increasing demand in various sectors like housing, commercial construction and industrial construction, cement industry is predicted to succeed in 550-600 Million Tonnes once a year (MTPA) by the year 2025.
A large number of foreign players also are expected to enter the cement sector, due to the profit margins and steady demand.
. Role and Importance of Small Scale Industries
Small scale industries are important because it helps in increasing employment and economic development of India. It improves the expansion of the country by increasing urban and rural growth. Role of Small and medium scale enterprises are to assist the govt in increasing infrastructures and manufacturing industries, reducing issues like pollution, slums, poverty, and lots of development acts. Small scale manufacturing industries and cottage industries play a really important role within the economic development of India. If any amount of capital is invested in small scale industries it'll help in reducing unemployment in India and increasing self-employment. The industry may be a sector during which the assembly of products may be a segment of the economy. Allow us to learn more about the importance of Small scale industries and the way SSI helps in developing the country.
Classification of business
Basics of starting a business
Small Scale Industries Definition
Previously, the definition of small scale industries depended upon the business’s capital and labour. This definition remains wont to demarcate between small, medium and large-scale industries.
The Central Government has the authority to work out capital investment requirements for small-scale industries. These requirements are listed under the Industries (Development and Regulation) Act, 1951.
A small enterprise during which investment in plant & machinery ranges between Rs. 25 lakhs to Rs. 5 crores may be a small-scale industry.
Similarly, for industries that provide services, the investment requirement is between Rs. 10 lakhs and Rs. 2 crores.
Role and Importance of Small Scale Industries
• Increases production
• Increases total exports
• Improves the utilization rate
• Opens new opportunities
• Advances welfare
Every small-scale industry plays an enormous role within the Indian economy. Aside from providing employment to crores of individuals , it's the additional advantage of minimum capital requirements. The govt also offers several tax benefits to SSI for this purpose.
Furthermore, they will exist in urban also as rural areas. Small Scale Industries are ready to compete with large-scale industries and multinational corporations due to this. Thanks to reasons like these, they're of great importance.
Learn more about Characteristics samples of Small Scale Industries here.
The following are some specific roles that SSIs play within the Indian economy:
1. SSI Increases Production
India is one among the world’s fastest growing economies within the world. Consequently, its production output is very large . It's pertinent to notice that SSIs contribute almost 40% of India’s gross industrial value.
These industries produce goods and services worth over Rs. 40 lakhs for each investment of Rs. 10 lakhs. Furthermore, the worth addition during this output increases by over 10%.
Here is another interesting statistic about Small scale industries. The amount of Small Scale Industries in India increased from around 8 lakhs in 1980 to over 30 lakhs in 2000.
This figure has grown even more in recent years due to the government’s ‘Ease of Doing Business’ policies.
As a results of this, the entire industrial production output rose tremendously within the previous couple of years. SSIs are, therefore, strongly liable for the expansion of India’s economy.
2. SSI Increases Export
Apart from producing more goods and services, SSIs are ready to export them in large numbers also .
Almost half India’s total exports lately come from small-scale businesses.
35% of the entire exports account for direct exports by SSIs, while indirect exports amount to fifteen .
Even trading houses and merchants help SSIs export their goods and services to foreign countries.
3. SSI Improves Employment Rate
It is important to notice firstly that tiny Scale Industries employs more people than all industries after agriculture.
Almost four persons can get financial condition if Rs. 10 lakhs are invested in fixed assets of small-scale sectors.
Furthermore, SSIs employ people in urban also as rural areas.
Consequently, this distributes employment patterns altogether parts of the country and prevents unemployment crisis.
4. SSI Open New Opportunities
Small-scale industries offer several advantages and opportunities for investments.
For example, they receive many tax benefits and rebates from the govt . The chance to earn profits from SSIs are big thanks to many reasons.
Firstly, SSIs are less capital intensive. They even receive support and funding easily.
Secondly, procuring manpower and raw materials is additionally relatively easier for them. Even the government’s export policies favour them heavily.
5. SSI Advances Welfare
Apart from providing profitable opportunities, Small Scale Industries play an outsized role in advancing welfare measures within the Indian economy also .
A large number of poor and marginalized sections of the population depend upon them for his or her sustenance.
These industries not only reduce poverty and income inequality but they also raise standards of living of poor people. Furthermore, they allow people to form a living with dignity.
Role of Small-Scale Industries during a Developing Economy
The case for the event of small-scale industries is especially strong in under-developed but developing countries like India.
These small-scale industries satisfy many of the investment criteria that one often prescribes for the planned development of the country.
Labour-intensive:
Firstly, small-scale industries are labour-intensive, i.e., labour-investment ratio in their case is sort of high. A given amount of capital invested in small-scale industrial undertakings is probably going to supply more employment, a minimum of within the short run, than an equivalent amount of capital invested in large-scale undertakings.
This is a really important matter for our country where many people are either unemployed or under-employed. Further, the encouragement of small-scale industry would serve to counteract the seasonal unemployment in agriculture and thus to utilise labour which could otherwise attend waste.
Capital-light:
Secondly, small-scale industries are capital-light, i.e., they have relatively smaller amount of capital than that required by large-scale industries, since the capital-output ratio is far smaller within the case of the previous . Thus, one among the good advantages of small-scale industries is that they create possible economies within the use of capital. Capital is already scarce in an under-developed country like India.
Capital Formation:
Thirdly, besides making possible economies within the use of Ike existing stock of capital, small-scale industry may call into being capital that might not otherwise have inherit existence. The spreading of industries over the countryside would encourage the habits of thrift and investment within the rural areas. Moreover, the enterprising Small manufacturer has got to scrape together capital where he can find it. He often manages to urge it from relatives and friends. This capital probably would never have inherit existence as productive capital, had it not been for the tiny enterpriser.
Skill-light:
Fourthly, the peculiar attraction of small-scale industries lies in their being skill-light. A large-scale industry involves an excellent deal of management and supervising skill—foremen, engineers, accountants, and so on. Like capital, these skills also are in very short supply in our country, and it's important to economies the maximum amount as possible in their use. Small-scale industry provides how of doing this and, at an equivalent time, provides industrial experience and is a training ground for an outsized number of small-scale managers.
In India, with an extended tradition of highly artistic products of industry , there exists a substantial ‘fund’ of local and traditional skill. Small industry could also be better able than large industry to require advantage of those existing traditional skills with minor adaptations.
Import-light:
Fifthly, small-scale industries are import-light, i.e., they use a comparatively low proportion of imported equipment and materials as compared with the entire amount utilized in them. A low-import intensity within the capital structure of the small-scale industries reduces the necessity for foreign capital or exchange , and thus obviates the balance of payments difficulties later, and currently retains within the country an outsized a part of whatever induced effects may materialize.
Quick Investment:
Sixthly, small-scale industries are of the “quick- Investment type”, i.e., those during which the time-lag between the execution of the investment project and therefore the start of flow of consumable goods is comparatively short. During a developing economy, with a high inflationary potential and wish for a rapid rise within the living standards, the importance of such quick-investment type industries can hardly be exaggerated. The small-scale industries have a high fruition co-efficient (i.e., a high ratio between planned output and investment) and also a brief fruition lag.
Decentralisation:
Seventhly, the event of small-scale industries will cause dispersion or decentralisation of industries, and can thus promote the thing of balanced regional development. a serious drawback within the industrial structure of an under-developed country is that regional distribution of industries is exceedingly uneven.
On the one hand, there's a disproportionate growth of large-scale industries during a few areas, and on the opposite , a virtual absence of such industries within the greater a part of the country. The event of small-scale industries will tend to correct this uneven distribution of industries within the country.
Equal Distribution of Income and Wealth:
Eighthly, small-scale and cottage industries have the extra advantage that, with decentralized industries, they secure a more even distribution of income and wealth. The event of large-scale industries tends to concentrate large incomes and wealth during a few hands. This is often undesirable from the social point view, because it leads to the exploitation of man by man. If also creates vested interests which put obstacles within the way of the economy marching towards its got’ of socialistic pattern of society.
Overcoming Territorial Immobility:
Lastly, by carrying the work to the worker, small-scale industries can overcome the difficulties of territorial immobility. Moreover, unlike large industries, small-scale industries don't create problems of slum housing, health and sanitation, etc., and therefore the attendant disease, misery and squalor. Thus, there's a robust case for encouraging small-scale industries in under-developed countries like India.
References
1. Indian Economy - Rudra Dutt & Sundarram
2. Bhartiya Arthashastra – L. M. Roy
3. Indian Economy – Uma & Kapila
