2nd Five Year Plan
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Chapter 19:

Progress During The First Plan

THE progress of industry during the first five year plan appears satisfactory if judged solely by the rise in the index of industrial production. But it will be seen to be not quite uniformly satisfactory if viewed against the background of the objectives, priorities and levels of capacity and production which had been envisaged for different industries when the plan was drawn up. The picture as it is expected to emerge at the end of the year 1955-56 is briefly presented in the paragraphs which follow.

Progress In The Public Sector

2. The progress of production and expansion of capacity can be considered to have been satisfactory in the case of the Sindri Fertilizer Factory, Chittaranjan Locomotive Factory, Indian Telephone Industries, the Integral Coach Factory, the Cable Factory and the Penicillin Factory. On the other hand, progress has been somewhat behind schedule in the case of some Central and State Projects which have taken longer to complete and to begin production than had been anticipated. This is true, for instance, of the Machine Tool Factory, U.P. Cement Factory, Nepa Factory and the Bihar Superphosphate Factory. In regard to iron and steel, a new plant to be set up by the Central Government was expected to rum out 350,000 tons of pig iron by 1955-56 and the expansion scheme of the Mysore Iron and Steel Works was expected to yield an additional 60,000 tons of finished steel by the same year. These targets have not been achieved by the end of the First Plan. Preparatory work was, however, completed by the end of the Plan period for three steel factories of 1 million ton ingot capacity each and the foundations have been laid for a rapid advance in the iron and steel industry in the coming years. As regards the heavy electrical plant, which was suggested to be taken up for implementation in the last years of the period of the plan, a good deal of time was taken in reassessing the requirements and demarcating spheres of production for the public and private sectors and so no investment of any magnitude was made on this project during the Plan period. However, much preparatory work was completed and an agreement signed with Associated Electrical Industries Ltd., for the implementation of this project.

3. As against Rs. 94 crores proposed to be spent in the public sector on industrial projects, the outlay now anticipated is Rs. 57 crores. The production targets originally envisaged and the latest estimates of production'anticipated for 1955-56 ar given below:—

Target under first plan Expected production as now assessed
l 2 3 4
(a) Pig Iron (capacity) tons 350,000 Nil
(b) Finished steel (capcity) tons 100,000 35,000
(c) Locomotives No. 92 125
(d) Integral Coaches No. 50 20
( GRT 20,000 13,000
(/) D.D.T. tons 700 284
(g) Penicilin million mega units 4.8 6.6
(h) Fertilisers:      
(i) Ammonium sulphate tons 315,000 326,000*

The coke-oven plant constructed recently at Sindri as an integral part of the fertiliser works will produce 200,000 tons of coke for ammonia synthesis and the by-products of coal carbonisation.


1 2 3 4
(ii) Super phosphate (Bihar Govt. Factory) tons 16,500 Nil
(i) Newsprint tons 30,000 4,200
j) Cables miles 470 525
(k) Telephones No. 25,000 50,000
(f) Exchange lines No. (50.000)+ 20,000 35,000
(i) Cement (U.P. Govt. Cement Factory) tons 35.000 200.000 180.000
(m) Machine tools Lathes 1,600 12
(n) (200)+

+ Revised targets.

Delays in the execution of the iron and steel projects were perhaps unavoidable, having regard to their complexity, the large investments involved and the necessity of carrying on negotiations with foreign par ties in regard to both technical and financial assistance.crores on iron and steel programmes, Rs. 11 crores for Trombay and other power schemes, Rs. 7 crores on the cotton textile industry, Rs. 5.5 crores on cement and refractories and Rs. 5 crores on sugar projects.

Investment In The Private Sector

4. It was envisaged that an investment of Rs. 233 crores would be necessary to meet the expansion programmes of industries in the private sector during the period of the first plan. The expenditure on replacement and modernisation of plant and machinery in the various industires, which had a large backlog of depreciation to be made up, was estimated at Rs. 230 crores of which about Rs. 80 crores were attributable to the higher cost of plant and machinery ruling during the plan period as compared to earlier years. Thus, an aggregate expenditure ofRs. 463 crores on new projects, replacements and modernisation was envisaged in the plan. As against this, it is now estimated" that the total gross investment in fixed capital in the private sector during the plan period has been about Rs. 340 crores. The largest investments have been in cotton textiles (Rs. 80 crores), petroleum refining (Rs. 45 crores), iron and steel (Rs. 49 crores) followed by heavy and light engineering industries (Rs. 25 crores), chemicals, fertilizers, pharmaceuticals, dyestuffs and plastics (Rs. 15 crores), cement and refractories (Rs. 18 crores), paper and paper board (Rs. 11 cores), sugar (Rs. 15 crores), electric power generation (Rs. 32 crores), jute textiles (Rs. 15 crores), rayon and staple Fibre (Rs. 8 crores) and others (Rs. 27 crores). On the basis of data so far available, the annual investment on new units and expansions during this period is estimated to have been Rs. 53 crores in 1951-53, Rs. 44 crores in 1953-54, Rs. 50 crores in 1954-55 and Rs. 85 crores in 1955-56. The estimate of investment in 1955-56 includes anticipated expenditure of about Rs. 22

5. Shortfalls in investment in certain industries have occurred principally through (a) the unfavourable conditions which obtained generally during the first two years of the plan, (b) change in the si^e of the plant and the construction schedule of the Caltex Refinery at Visakhapatnam, (c) delay in respect of schemes relating to FACT, aluminium, gypsum-sulphur and chemical pulp which had been envisaged under the plan. Broadly speaking, the lag in private investment occurred in industries which required heavy capital investment and offered a relatively small profit margin. The National Industrial Development Corporation (NIDC) and the Industrial Credit and Investment Corporation of India (ICIC) only came into existence during 1954-55. Until, 1954 when the relevent legislation was amended, the Industrial Finance Corporation of India was precluded from extending loans to industries in excess o!_Rs._ 50 lakhs. The overall investment in new units and expansions has, however, come very nearly to the figure of Rs. 233 crores since in fields like cotton textiles and power generation the investment exceeded the amounts which had been originally anticipated.

6. As regards investment on replacement and modernisation programmes, on the whole, except in the case of the sugar industry, progress was satisfactory but by no means commensurate with requirements. Considerable arrears have to be overcome if the older established industries are to maintain their competitive position during the next few years. In engineering establishments a recent survey of the state of machine tools, which the Ministry of Commerce and Industry have carried out has disclosed the extent to which replacement arrears exist. Large arrears have also been revealed by recent studies into the condition of technical equipment in the sugar, cotton textile and jute industries.

Production Levels In Different Industries

7. The plan hacf emphasised as the first priority the achievement of higher levels of production through the intensive utilisation of existing capacity. This object has been broadly fulfilled, and production targets have been achieved in cotton textiles (mill sector), sugar and vegetable oils. Increase in production from unutilised capacity as well as from significant additions to production capacity have been secured more or less in accordance with the targets which were set in cement, paper, soda ash, caustic soda and other chemicals, rayon, bicycles and certain other industries. On the other hand, due to the non-fulfilment in the investment programmes mentioned ealier, shortfalls in production have occurred in aluminium and nitrogenous fertilisers in the private sector. In one group of industries shortfalls in production were* on account of lack of adequate domestic demand. These include some of the light engineering industries such as diesel engines and pumps, radios, batteries, electric lamps and hurricane lanterns. In some industries, production remained below target levels on account of reduced export demand (jute manufactures) or low demand from indigenous industries which cater for exports (plywood for tea chest). Production of superphosphate scarcely exceeded 50 per cent of the planned output On a broad view it may be said that on the whole the results achieved during the first five year plan have been satisfactory. This is due in no small measure to the success of agricultural programmes, improvements in the availability of raw materials and to the assistance given by the State through appropriate fiscal and other adjustments in accordance with requirements at different periods such as protection to nascent industries, revision of import and export duties, etc.

8. Compared to the consumption levels estimated earlier for different mineral and agricultural raw materials, it is expected that in the case of petroleum crude, the actual requirements will be considerably larger in the last year of the plan as a result of production being commenced by petroleum refineries earlier than had been anticipated. In the case of rock phosphate, jute, iron ore and glass sands, on account of lower production levels in the consumer industries consumption will be less than had been estimated.

Industrial Plant And Machinery And Capital


9. Valuable experience and skill have been gained during the first plan in the construction of industrial plant and machinery and in the production of capital goods. A new blast furnace and a contact sulphuric acid plant were almost completely designed and fabricated by Indian industry. As regards progress in the manufacture of industrial machinery, it is estimated that the value of output of different items of textile machinery produced in the country increased from about Rs. 4 crores during 1946-50 to about Rs. 11 crores during 1951-56. In the manufacture of cement machinery, beginnings have been made with the production of some of the component items needed by the industry. As regards jute mill machinery, production of spinning machinery has been developed recently by one of the engineering works. In the field of electrical equipment, the output of two important items, namely electric motors and transformers, is estimated to have risen from a value ofRs. 150 lakhs in 1950-51 to about Rs. 450 lakhs in 1955-56. The output of locomotives in the private sector is expected to reach 50 units in 1955-56 valued at about Rs. 3 crores from practically negligible numbers at the commencement of the first plan. The value of output of indigenous machine tool industries is expected to rise to Rs. 1 crore as compared to Rs. 40 lakhs in 1950-51; new types of machine tools have also been developed. The capital goods sector may now be described as having emerged from the teething stage of development and gained sufficient experience to play a larger role during the second five year plan. For this purpose, plans have been formulated by some leading firms for taking up the development of more complex items of plant and machinery in technical collaboration with foreign firms.

Regulation Of Industry

10. The two main instruments for securing the development of industries in conformity with the objectives set out in the plan were provided by the Industries (Development and Regulation) Act.1951, namely, licensing and the organisation of Development Councils for individual industries. The Act was amended in 1953 with a view to bringing additional industries within the schedule. The Licensing Committee set up in accordance with the provisions of the Act functions as an advisory body to the Ministry of Commerce and Industry for the scrutiny of applications for new units and expansions of capacity in the scheduled industries. The review of followup action on approved projects has shown the need for evolving a better definition of the "effective steps" required to be taken by licensees within periods prescribed in advance.

11. Since 1952, Development Councils have been set up for ten industries, namely. Heavy Chemicals (Acids and Fertilizers), Heavy Chemicals (Alkalis), Internal Combustion Engines and Pumps, Bicycles, Sugar, Heavy Electrical Industries, Light Electrical Industries, Drugs and Pharmaceuticals, Artificial Silk and Woollen Manufactures. These Councils have been utilised for the formulation of programmes of development for the second five year plan.

Programmes In The Second Plan

12. The first plan was regarded essentially as a period of preparation for large-scale industrial development in the country. The establishment of heavy industries entails a considerable amount of preparatory work, embracing study of a wide range of problems relating to markets, availability of raw materials and fuels, choice of processes, costs of production and the building up at different kvels of the technical and managerial experience required for running undertakings. It is also necessary to secure foreign technical assistance for the development of a number of industrial projects. Finally, the problems of how best to ensure the largescale outlay required for these projects is also and important matter to be gone into in these preparatory studies. In regard to a number of major undertakings visualised in the public and private sectors under the second five year plan these preparatory studies have been completed so that substantial development in the industrial sector is expected during the next five years.

In the context of industrialisation, important questions for consideration are (1) industrial policy with special reference ot the rules to be assigned to the public and private sectors, and (2) industrial priorities.

Industrial Policy

13. Eight years ago the Government of India made a declaration of industrial policy in their resolution dated the 6th April, 1948. Since then the constitution of India has been enacted, guaranteeing certain fundamental rights and laying down Directive Principles of State Policy, and Parliament has accepted a socialist pattern of society as the objective. These important developments have necessitated a fresh statement of industrial policy, which has to be governed by the principles laid down in the Constitution and the objective of socialism. It follows that the State has to assume direct responsibility for the future development of industries over a wider area than before. There are, however, limiting factors which make it necessary at this stage to define the fields in which the State will assume exclusive responsibility or play of dominant role. After an examination of all relevant considerations, Government liave made a fresh statement of policy on the 30th April, 1956 which will help speeding up industrialization and, in particular, to develop heavy industries and machine making industries, to expand the public sector, and to build up a large and growing co-operative sector. Under the revised policy industries specified in Schedule 'A' will be the exclusive responsibility of the State while Schedule 'B' enumerates industries which will be progressively State-owned, but in which private enterprise will also be expected to supplement the efforts of the State. In regard to industries falling outside these schedules, their future development will, in general, be left to the initiative and enterprise of the private sector. Notwithstanding these demarcations it is always open to the State to undertake any type of industrial production. These as well as other aspects of revised policy have been discussed at considerable length in Chapter II. The policy statement along with the schedules is appended to Chapter II.

Industrial Priorities

14. Within the framework of the policy set out above, the next phase in the expansion of industrial capacity has to be conceived in terms of the following priorities:—

  1. increasea production of iron and steel and of heavy chemicals, including nitrogenous fertilizers, and development of the heavy engineering and machine building industries;
  2. expansion of capacity in respect of other developmental commodities and producer goods such as aluminium, cement, chemical pulp, dyestuffs and phosphatic fertilizers;and of essential drugs;
  3. modernisation and re-equipment of important national industries which have already come into existence, such as jute and cotton textiles and sugar;
  4. fuller utilisation of existing installed capacity in industries where there are wide gaps between capacity and production; and
  5. expansion of capacity for consumer goods keeping in view the requirements of common production programmes and the production targets for the decentralized sector of industry.

The considerations underlying these priorities are explained more fully in the following paragraphs.

15. The expansion of the iron and steel industry-has obviously the highest priority since, more than any other .industrial product, the levels of production of these materials determine the tempo of progress of the economy as a whole. Conditions in India are favourable for securing the production of iron and steel at costs which are low in comparison with those of most other countries.

16. Heavy engineering industries are a natural corollary of iron and steel works. The high priority accorded to them arises both on this account and from the fact that they will provide from within the country a wide range of industrial machinery and capital equipment, such as locomotives for railways and power plants for the generation of electricity. In the absence of facilities for their manufacture, a developing economy has to depend on foreign sources of supply with attendant difficulties and uncertainties. To facilitate the production of the wide range of items going into the manufacture of plants intended to turn out a product like steel, diverse types of fabricating facilities have to be created in a large number of establishments. In other words, heavy engineering industries and workshops in the country have to be generally strengthened for undertaking such tasks as the construction of steel plants, fertilizer factories etc. In this context the creation of certain basic facilities such as the establishment of heavy foundries, forges and structural shops is absolutely necessary. It is, therefore, proposed that the establishment of these facilities, which constitute an essential and primary phase of development for the manufacture of heavy industrial machinery in the country, should be undertaken at an early date. These developments have a priority second only to that of expansion of the steel industry.

An important pre-requisite for fostering the production of heavy industrial machinery is the establishment of organisations which can undertake the task of preparing designs for plant and equipment required by heavy indsutries. Preliminary steps are being taken for the setting up of such an organisation for the fertiliser industry. Apart from other steps that may be taken to secure these facilities in a general way, it is important that Indian personnel should be intimately associated with all aspects of development work on projects in the public sector, so that designing and fabrication can be undertaken within the country as early as possible.

17. The high priority assigned to the expansion of capacity for the production of nitrogenous fertilizers arises from the growing need for fertilizers for carrying out the agricultural programme which must continue to be of basic importance in the economic development of the country.

18. Cement ranks next in importance to iron and steel as a developmental commodity and hence a high place has to be given to it in the scheme of priorities.

19. Some progress has been made during the first plan in the modernisation and re-equipment of jute and cotton textile mills. But considerable arrears of replacement still exist in these two industries, whose role in the country's economy and as earners of foreign exchange cannot be minimised. Keeping in view the developments which have taken place in India in recent years and the progress made in these two industries in other countries, it would be difficult to maintain expanding export markets in the face of competition unless an extensive programme of renovation is undertaken. In the circumstances, a high priority has been given to modernisation programmes for jute and cotton textile industries.

20. Reference has been made earlier to the levels of utilisation of installed capacity in some of the major industries. It is a basic principal of planned development that capital resources, which are scarce in relation to competing demands should be conserved, and that additional production should be achieved to the maximum extent possible through greater use of idle capacity. While this objective should be given the importance that it deserves, the technological and economic issues involved in the assessment of idle capacity which is in fact available for use have to be gone into carefully in individual industries.

21. In cases, where the need and the scope for the expansion of capacity for consumer goods is disclosed, on the basis .of an examination of relevant, factors like domestic demand, export possibilities, availability of raw materials etc., necessary developments have to permitted and even encouraged. But, in the interest of providing larger employment opportunities, the expansion of capacity of several of the large-scale consumer goods industries has to be worked out in terms of common production programmes and the targets' adopted for the decentralised sector of industry.

Programmes In The Public Sector

22. Iron and Steel.—In conformity with the priority given to iron and steel, the second five year plan envisages the construction of three steel plants of one million tons ingot capacity each in the public sector and the provision of facilities in one of these for the production of 350,000 tons of foundry grade pig iron.

The plant to be located at Rourkela is expected to entail an outlay of about Rs. 128 crores* during the period 1956-61 and to produce 720,000 tons of flat products of steel, hot and cold rolled. It is being designed to operate the L.D. process (oxygen blowing in steel production) and will be equipped for the recovery of crude benzol, coal-tar and ammonia. It is proposed that the hydrogen from the coke-oven gases and the nitrogen from the liquid air plant should be harnessed for the manufacture of nitrolirnestone fertilizer at Rourkela taking advantage of the surplus coke-oven gas expected to be available as a result of the adoption of the L.D. process.

The second plant to be located at Bhilai in Madhya Pradesh and estimated to cost about Rs. 110 crores* is expected to povide 770,000 tons of saleable steel, heavy Estimated cost of plant only. and medium products, including 140,000 tons of billets for the re-rolling industry. The third plant to be established at Durgapur in West Bengal is expected to cost about Rs. 115 crores*. It is to be equipped to produce light and medium sections of steel and billets amounting to 790,000 tones per annum.

23. The capacities of the different sections of the steel plants are indicated below:—

Steel Works at Coal carbonisation Pig Iron Steel ingots Finished steel Surplus pig iron for sale Power plants KW
Coal carbonised Coke produced
1 2 3 4 5 6 7 8
Rourkela 1.600 1.045 945 1.0 720 030 75,000
Bhilai 1.650 1.145 1.110 1.0 770 300 24,000
Durgapur 1.825 1.314 1.275 1.0 790 350 15,000

Figures in columns 2 to 7 in million tons.

24. The development of Taldih iron ores and iron ores at Dhalli Rajhara is visualised as an integral part of the Rourkela and Bhilai projects. The supplies of iron ore for the Durgapur steel plant are proposed to be obtained by organising the exploitation of Gua deposits in partnership with private enterprise. Tha Bhilai steel plant, like the Mysore Iron and steel Works, provides for the establishment of a sintering plant to utilise the iron ore fines in pig iron production. The possibility of a similar plant, depending on the characteristics of Taldih iron ore, is envisaged at Rourkela.

25. As regards coal supplies for the steel plants, a coal washery is proposed to be established at Durgapur with an hourly capacity of 360 tons for bringing down the ash content of coal to 15 per cent A second washery is to be established at Bokaro for washing the Bokaro-Kargali coal intended to be utilised at Rourkela and Bhilai. Similar washeries for meeting the requirements of steel plants for low ash metallurgical coal are under consideration in the private sector.

26. The blast furnaces at each of the steel plants will have a daily capacity of 1000 tons of pig iron. In some of these, the use of top pressure and certain new features in plant design are proposed for increasing the output. The steel production is planned so as to utilise, in addition to pig iron, scrap produced within the plants. The converters making use of the oxygen blowing method at the Rourkela steel works will have a capacity of 750,000 tons per annum. The decision to adopt the L. D. process at Rourkela was reached after a careful study of the working of plants currently operating this method in Germany, Canada and U. S.A.

27. The plans for the layout etc., of the three plants in the public sector have taken into account the possibility of their further expansion in later years. Thtts, the Bhilai steel plant provides for ultimate expansion to 2.5 million tons of ingots per annum and the Rourkela and Durgapur plants for expansion to about 1,25 million tons of ingots each. The programmes for steel production have provided for the needs of raw material for the secondary producers and re-rollers by including the production of about 140,000 tons of billets and semis in the Bhilai and Durgapur steel plants.

28. The annual requirements of mineral raw materials for capacity production are estimated to be as follows:

(Million tons)

  Rourkela Bhilai Durgapur
Coal 1.600 1.790 1.830
Iron ore 1.700 1.940 1.940
Manganese ore 312 033 064
Limestone 523 551 617
Dolomite 028 309 042

29. Provision has also been made for the expansion of steel production by the Mysore Iron and Steel Works to 100,000 tons by 1960-61. It is estimated that on the completion of these projects, the annual value of the output of steel in the public sector will amount to about Rs. 120 crores as against the present small figure of about Rs. 1 crore. Further, and exportable surplus of about 300,000 tons of steel may be available. The second live year plan makes a provision of Rs. 350 crores for the three steel projects of the Central Government and Rs. 6 crores for the expansion of the Mysore Iron and Steel Works. Some additional provision will be needed before the end of the second plan for townships for the three new steel plants. The amount of foreign assitance which is being received for these plants byway of participation in capital, deferred payments for plant and machinery and other forms of credit is estimated to amount to about Rs. 75 crores. A combined production of about 2 million tons of finished steel is expected in 1960-61 from plants in the public sector.

30. Heavy foundries, forges and structural shops and facilities for fabrication of industrial machinery: The Chittaranjan Locomotive Factory plans to increase its production capacity of locomotives from 120 to 300. Its development programme envisages the establishment of a heavy steel foundry in order that the requirements of heavy castings for railways may be secured entirely from within the country. Similarly, the National Industrial Development corporation has earmarked Rs. 15 crores out of the provision made for it for heavy foundries and forge shops and for heavy structural shops. As explained earlier, these developments are essential for carrying out plans for the production of machine, tools, heavy electrical equipment etc., which are to be implemented under the second plan.

31. The heavy machinery industries provided in the public sector of the second plan are:Provision for 1956-61.

Manufacture of electrical equipment Rs. 20 crores.
  (Rs. 25 crores for completion)
Expansion of Hindustan Machine Tools Rs. 2 crores.
Manufacture of industrial machinery and machine tools (N. I. D. C.) Rs. 10 crores.

In addition to these schemes, a provision ofRs. 1.2 crores is made for the expansion of the Government Electric Factory, Bangalore. Among other industries which fall in this group mention may be made of the aero-engine project and the electronic and wireless equipment project.

32. For developing the project for the manufacture of heavy electrical equipment, a Consultant's Agreement has been reached with Associated Electrical Industries Ltd., of U.K. It has been decided to locate the plant at Bhopal. The total investment on this project, which is expected to take about 7 to 8 years for completion, is provisionally estimated to be Rs. 25 crores. Certain sections of the plant are expected to go into production by 1960. While heavy transformers, industrial motors, traction motors and switch-gear are likely to be produced before the end of the second plan, more basic items of equipment like hydraulic turbines and generators, and generators for diesel sets will be produced in the early years of the third plan.

33. The development and expansion programme put forward for Hindustan Machine Tools, Ltd., aims at increasing the number and diversifying the range and types of machine tools. Under this programme, the production of high speed lathes of Wi" centre is expected to be stepped up to 400 and the manufacture also undertaken of lathes of larger sizes and other machine tools like milling machines and drilling machines. A provision of Rs. 2 crores has been made under the Second Plan for Hindustan Machine Tools. A Committee recently set up by Government is studying this development programme as a part of the overall development of the machine tools industry. The recommendations of this Committee have not yet been finalised.

34. The development of heavy industrial machinery will be specially fostered by the National Industrial Development corporation. With the basis for development which heavy foundries, forges and structural shops wiil provide it is considered that satisfactory progress will be made during the second five year plan in the production of industrial machinery.

35. South Arcot Lignite Project.—Having regard to the paucity of coal deposits in South India, high priority has been given to the development of the multipurpose South Arcot Lignite Project at Neiveli. According to the current provisional estimates, this project involves a total investment of Rs. 68.8 crores. The development programme envisages the mining of 3.5 million tons per annum of lignite which is to be used for

  1. generation of power in a station of 211,000 Kw. capacity,
  2. production of carbonised briquettes in a carbonisation plant of about 700,000 tons annual capacity for raw bnquettes (capacity for carbonised briquettes will be 380,000 tons per annum), and
  3. production of 70,000 tons of fixed nitrogen in the form of urea and sulphate/nitrate.

The plan makes a provision of Rs. 52 crores for this project. A clear picture of the time schedules for the completion of different sections of this multi-purpose project will be available after the water pumping tests currently in progress are completed. The additional resources which may be needed will be provided in the course of annual reviews in the light of the progress actually achieved in implementing the project.

36. Fertilizer production.—By 1960-61 the consumption of nitrogenous fertilizers is estimated at 370,000 tons in terms of fixed nitrogen. The annual capacity at present is for about 85,000 tons. There is thus a wide gap between the existing capacity and the anticipated requirements. Steps have already been taken during the first plan to secure the expansion of fertilizer production by 47,000 tons of fixed nitrogen (in terms of urea and nitrate/sulphate) through the expansion of the Sindri Fertilizer Factory by using its coke-oven gas. In the second plan, it is proposed on the basis of the recommendations made by the Fertilizer Production Committee that two more fertilizer factories should be set up, apart from the unit provided under the South Arcot Lignite Scheme. One of these plants, to be located at Nangal in the Punjab, will produce ammonium nitrate mixed with a suitable diluent corresponding to 70,000 tons of fixed nitrogen per annum. This plant which is being designed to produce heavy water also as a co-product will consume 160,000 kw of power. The third factory is to be established at Rourkela and is planned to produce nit-rolimestone equivalent to 80,000 tons of fixed nitrogen per annum. A provision of Rs. 8 crores has been tentatively made for this project, which will have to be supplemented at the appropriate stage.

37. Heavy Engineering Industries.—The Plan provides for further expansion of the Hindustan Shipyard and the Chittaranjan Locomotive Factory. As a result of these expansions, the rate of construction of ships at Visakhapatnam will be increased in the, first instance to 6 of the old type or 4 of the modem type produced at present. As stated earlier, the output of locomotives by the Chittaranjan Locomotive Factory will rise to 300 per annum before the end of the second five year plan. The development programme for the ship-building industry envisages inter alia the construction of a dry dock at Visakhapatnam and includes a provision ofRs. 75 lakhs for preparatory work in connection with the establishment of a second shipyard, such as the selection of the site and provision of training facilities. A project for manufacturing heavy marine diesel engines is also envisaged and the resources required for it will be provided at the appropriate stage.

Work still outstanding at the Integral Coach Factory at Perambur is expected to be completed during the second five year plan on the basis of the phased manufacturing programme for the production of 350 coaches from 1959 onwards. The railway plan makes a provision'of Rs. 8.5 crores for a metre gauge coach factory to be set up during the second'plan and of Rs. 7.0 crores for two engineering shops to manufacture spare parts.

38. Among light and medium industries in the public sector, the plan envisages expansion of the existing D.D.T. and anti-biotic factories and the establishment in Travancore-Cochin of a second D.D.T. plant. The expansion programme of Hindustan Antibiotics Ltd., includes schemes for developing the production of other antibiotics like streptomycin, besides increasing the capacity for the production of penicillyi. The question of the manufacture of other basic drugs from primary raw materials is receiving attention. Similarly, Hindustan Cables Ltd., the National Instruments Factory and Indian Telephone Industries will all be expanded.

With a view to achieving self-sufficiency in the supply of security and bond paper, the establishment of a security paper mill has also been included in the second five year plan. During the early years of the second plan, the Silver Refinery which is at present under construction, is expected to go into production.

39. Among industrial projects of State Governments, reference has been made already to»the expansion programme of the Mysore Iron and Steel Works. Another important project relates to the production at Durgapur by the West Bengal Government of foundry coke and by-products of coal carbonisation and the generation of power based on waste gases. Among medium sized industries which are expected to be developed in the States, the manufacture of electric porcelain insulators in Mysore and Bihar States, the re-organisation of the Praga Tool Factory in Hyderabad providing inter alia for the manufacture of air compressors, the expansion of a paper mill in Andhra, and the creation of additional capacity in the U.P. Cement Factory and in the Bihar superphosphate factory may be specially mentioned. Particulars of the industrial projects of the Central and State Governments under the second five year plan are set out in Annexure I.

40. Heavy Chemicals and by-product processing projects.—Steel plants will require considerable quantities of sulphuric acid for the recovery of by-product ammonia from coke oven gases in the form of ammonium sulphate. The combined output of ammonium sulphate production at the Durgapur and Bhilai steel plants is expected to be about 35,000 tons per annum. For meeting the requirements of sulphuric acid in ammonium sulphate production as well as certain other demands within the works, to contact sulphuric acid plants each of about 50 tons daily capacity are proposed to be set up at these two places. At the Rourkela steel plant, by-product ammonia is proposed to be recovered as liquor ammonia. The demand for sulphuric acid for the steel pickling operations at this factory is planned to be met from external sources, and the installation of a sulphuric acid plant is not contemplated. The proposal for by-product recovery in the Durgapur Coke-oven plant of the West Bengal Government provides for the production of 3,300 tons of sulphuric acid and 1,500 tons. of ammonia per annum.

41. The development of pharmaceuticals, plastics and dye-stuffs industries has so far been impeded by high prices and short supplies of primary organic chemicals like benzene, toluene, xylene, naphthalene, phenol and anthracene. The second five year plan visualises large developments in these fields as indicated later in this chapter. To ensure supplies of raw materials for these industries from within the country, provision has been made for the recovery of crude benzol from coke-oven gases at the steel plants, the South Arcot Lignite project and the Durgapur Coke-oven project. Fractionation of crude benzol for the production of benzene, toluene, xylene and other component hydro-carbon fractions is also envisaged at Bhilai and Durgapur. Plants for the distillation of coal-tar have been provided at Bhilai and under the Durgapur Coke-oven project Similar developments are under consideration at Rourkela also. These plans for the recovery of chemical raw materials from the by-products of the carbonisation plants will provide stable foundations for the rapid expansion of some of the basic chemical and allied industries. According to plans finalised so far, coal-tar distillation capacity in the public sector will reach 62,500 tons per annum. The annual capacity for phenol and naphthalene of 1,800 tons and 3,400 tons respectively will similarly be achieved in addition to overall production facilities for about 5 million gallons of benzene and 1.4 million gallons of toluene. Investments for these plants are included in the provision made for the principal projects to which they are attached.

Problems Of Technical Manpower

42. The pace of industrial development in both the public and private sectors as well as the diversity of manufactured products and processes envisaged under the second plan will, generally speaking, call for a supply of trained technical personnel at different levels considerably in excess of the numbers immediately available in the country. A recent assessment of the requirements for the three steel plants showed that about 15,000 skilled workers below the foreman category and 2,199 technicians above the rank of foreman would be needed when production is commenced. ' Of the latter, a fairly large number will have to be experienced men. To meet this situation steps are being taken to secure training facilities for selected personnel in Germany, U.S.S.R., U.K. and Australia. For planning the training of other categories of personnel a committee has been set up by the Ministry of Iron and Steel for assessing the existing facilities and recommending suitable measures.

The heavy Electric Plant project is another scheme which will draw heavily on available technical personnel. In the report of the Technical Consultants the personnel requirements estimated in different categories are administrative, 735; supervisory or trained technical, 715; skilled technical, 4,550; and semiskilled and unskilled, 6,200. The preparation of a scheme for the, training of Indian personnel after taking into account facilities available in existing workshops and advice on the establishment of a training centre are among the items included in the Consultants' agreement.

The requirements of the fertiliser factories in the public sector will be ensured to some extent through training facilities arranged at the Sindri Fertiliser Factory. Broadly speaking, the need for technically trained personnel is so important a consideration that all agreements involving foreign technical collaboration in connection with public sector projects contain special provisions regarding the training of personnel. The subject has been considered from a wide standpoint by the Engineering personnel Committee.

43. New investment on the industrial projects of the Central Government (excluding the provision for the NIDC) is expected to be of the order of Rs. 502 crores during the second plan period (vide annexure I). A provision of Rs. 32 crores is envisaged in respect of industrial projects in the States. This includes a provision of about Rs. 5.0 crores for assisting the establishment of co-operative sugar factories in different States. It also provides for assisting the development of certain industries in areas like Assam and Pondicherry.

National Industrial Development Corporation

44. A provision of Rs. 60 to 65 crores has been made in the plan of the Ministry of Commerce and Industry* for purposes of direct assistance to industries and participation in the capital of the Indian Explosives Limited, regarding which commitments have already The total provision for schemes of the Ministry of Commerce and Industry is Rs. 70 crores. Of this, about Rs. 5 to 10 crores are expected to be required for schemes which fall outside the group of manufacturing industries. been entered into by Government, and for the activities of the NIDC. Of this provision, a sum of about Rs. 55 crores will be available for the activities of the NIDC. A part of these resources (tentatively placed at Rs. 20-25 crores) is expected to be utilised for assisting the modernisation of the cotton and jute textile industries. The reasons for the priority which has been accorded to these industries have been explained earlier. The rest of the provision for the National Industrial Development Corporation, estimated at about Rs. 35 crores, will be available for pioneering new basic and heavy industries. The projects taken up for investigation by the NIDC include foundry and forge shops, structural fabrication, refractories, chemical pulp for rayon, newsprint etc., intermediates for dyestuffs and drugs, carbon black etc. Apart from these projects, it is expected that the NIDC will direct its efforts towards forstering the establishment of a new unit in the aluminium industry and the manufacture of heavy equipment for earth moving, mining etc. and rolls and rolling mill equipment required in ferrous and non-ferrous industries. A committee has recently been appointed by the Ministry of Commerce and Industry to advise on the most appropriate locations for the establishment of a new aluminium smelter during the second five year plan for attaining the capacity target of 30,000 tons recommended for this industry. Arrangements are being made for the preparation of proejct reports for heavy foundries, forges and structural shops. It is expected that facilities for undertaking design and development work in connection with these projects will also be established.

For carrying out the above programmes the NIDC may need more resources than have been allocated to it. The extent of the gap between the resources actually required and the provision of funds now proposed will ultimately depend on the pattern of financing adopted and the size of the Government's holding in the overall investments in the various projects. If due to shortage of financial resources a 'scheme of priorities has to be worked out in connection with the implementation of the NIDC projects, the highest priority will have to be given to schemes connected with the manufacture of heavy machinery or directly related thereto, in view of the desirability of ensuring conditions for the fabrication within the country of the bulk of the heavy machinery that will be required in the third five year plan.

Investment Outlay And Sources Of Finance

45. The programme .of overall development envisaged under the NIDC and the private sector (other than mining, electric power generation and distribution, plantation and small-scale industries) will entail a total outlay of Rs. 720 crores comprising Rs. 570 crores of new investments and Rs. 150 crores on replacements and modernisation. A provision of Rs. 55 crores is at present made for the NIDC under the plan as already explained. On this basis additional resources of the order of Rs. 665 crores will have to be raised for the fulfilment of the programme. As against these requirements present estimates of resources likely to be available to the private sector place them at only about Rs. 620 crores. The amounts expected from different sources and those estimated for the period 1951—56 are shown in the table below:



(Rs. crores)
1951—56 195 and —61
1. Loans from Industrial Finance Corporation and State Finance Corporations and Industrial Credit and Investment Corporation 18 40
2. Direct loans, indirect loans from equalisation fund, and State participation by the Central Government, and participation-cum-loans by State Governments -in the share capital of private undertakings 26 20
3. Foreign capital including suppliers' credit 42 to 45 100
4. New Issues 40 80
5. Internal resources available for investment (in new units and for replacements) 150 300
6. Other sources such as advances from managing agents, E.P.T. refunds etc 61 to 64 80
    340 620

note: It may be pointed out that some of the provisions shown against items 1 and 2 in the table above appear also under ' the head 'Industries and Minerals' in the public sector of the Plan. No high degree of accuracy can be claimed for the above forecast since its fulfilment will depend upon a number of factors which are not easy to assess at this stage.

46. The programmes of development presented in annexure II set out the targets for the second five year plan to be achieved by 1960-61. In formulating these targets, account has been taken of

  1. views .expressed by the different interests concerned at meetings convened by the Planning Commission during 1955 to discuss the programmes and policies relating to 22 industries;
  2. recommendations made by the Development Councils functioning under the Ministries of Commerce and industry and Food and Agriculture; and the recommendations made by the Ministry of Commerce and Industry,
  3. the actual rate of financial investment during the first five year plan, and
  4. proposals for new capacity in different industries which had been approved by Government before the end of the first plan.

Some of these targets should be regarded not as precise and essential objectives but rather as indications of the levels of development which, on the basis, inter alia, of current estimates of the probable demand over the next five years, appear to be desirable. They are not fixed and immutable, still less could they be regarded as setting ceilings for developments in different industries. Provided that relevant facilities such as power and railway transport can be ensured, it will be ot considerable advantage to reach higher levels 01 industrial development in certain lines in step with any further rise in demand. The targets will, therefore, have to be kept under constant review during the five year period. In the following paragraphs the salient features ot the development programmes are outlined.

Features Of Development In The Private Sector

47. Iron and Steel—As in the public sector, iron and steel holds also an important place among industrial projects in the private sector. A total investment of Rs. 115 crores is envisaged in this field. Investment on iron and steel expansion in the private sector under the first plan and that undertaken in the second plan will begin to bear fruit from the middle of 1958 when the combined capacity ofTata Iron and steel Company (TISCO) and Indian Iron and Steel Company (IISCO) is expected to reach 2.3 million tons as against the current level of 1.25 million tons. Among secondary producers, two new concerns, Messrs. Kalinga Tubes Ltd, and the Indian Tube Company are expected to develop the production of tubes and pipes including E.R.W. tubes and seamless tubes.

48. As regards resources for these steel expansion programmes, the decision taken in 1955 regarding a uniform retention price for the indigenous producers is expected to augment the internal resources for purposes of development. IISCO are also expected to draw upon a loan granted by the International Bank to the extent of about Rs. 13.5 crores, the amount utilised so far being estimated at about Rs. 1 crore. The expansion programme of TISCO is expected to be aided by loans proposed to be secured from foreign banking organisations. These two steel companies are also expected to raise a part of the required resources from the domestic market. Further, IISCO will draw upon the balance of the loan of Rs. 7.9 crores sanctioned by the Government of India. In this case, as in other similar cases, the Central Government have arranged for representation on the Company's Board of Directors.

49. Among other metallurgical industries in which substantial expansion is expected during the second plan, mention may be made of aluminium and ferro-manganese. The demand for aluminium is expected to increase inter alia from more extensive utilisation of AC.S.R. cables for electric power transmission and a target capacity of 30,000 tons has, therefore, been envisaged. In the case of ferro-manganese, for which a production target of 160,000 tons has been proposed, considerable expansion in domestic consumption as well as in exports is visualised.

50. Cement and Refractories.—Cement is another developmental commodity expected to be in considerable demand as a result of the high level of activity in different sectors over the next five years. It is proposed to expand capacity to 16.0* million tons and production to 13.0* million tons.

The expansion programme of the refractories industry is chiefly linked with the development in the iron and steel industry and envisages, within the production target of 800,000 tons by 1960-61, the manufacture' of silica, fireclay, magnesite and chromite refractories in the proportions needed. The capacity target for this industry has been set at 1 million tons.

51. Substantial expansion 'of heavy and light engineering industries follows naturally from the expansion of the iron and steel industry. India's requirements for the products of engineering industries, which are expected to be much more substantial under the second plan, are still being met largely from imports. The programme of development therefore assigns an important place to these industries. Structural fabrication, automobiles, railway rolling stock, castings and forgings, industrial machinery, bicycles, sewing machines, motors and transformers are a few items for which high levels of production are envisaged. In some of these industries, it is planned to achieve near self-sufficiency within a decade, in others over shorter periods. As already pointed out a nucleus of experience has been built up during the first plan for initiating larger developments in these fields in the coming years.

52. The railway rolling stock programme provides for the expansion of locomotive manufacture at the Tata Locomotive and Engineering Company. An outlay ofRs. 1 crore is expected to be made for doubling the present output to 100 locomotives. This programme, as well as the company's proposal to manufacture diesel trucks at the rate of 6000 vehicles per annum will be considerably assisted by a heavy steel castings foundry, which the Company will establish. In the development programme for the automobile industry, which aims at stepping up of the Indian content of the automobiles to 80 per cent, the main emphasis is placed on the production of trucks. The programme consists of:

  Targets for 1960-61
Cars 12,000
Trucks 40,000
Jeeps and Station Wagons 5,000

53. Industrial Machinery.—The plan for the private sector also provides for the expansion of output of industrial machinery. The investment anticipated during the period of the second plan and the level of output expected to be realised in certain lines in the course of the second plan are as follows:

Investment (1956-61) Rs.crores Value of output
(Rs. crores)
1955-56 1960-61
Cotton textile machinery 4.5 4.0 17.0
Jute textile machinery 1.3 0.06 (1954) 2.5
Sugar machinery 2.0 0.28 0954) 2.5
Paper machinery 1.3 Negligible 4.0
Cement machinery 1.0 0.56 (1954) 2.0
Electric Motors of 200 HP and below ('OOOHP) 240 600
Electric Transformers ('000 KVA-below 33KV) 540 1360*

'Includes output of plants in public sector also.

Other lines in which progress will be made are the manufacture of tea machinery, dairying equipment, agricultural machinery like trailers for tractors etc. and road making machinery, including diesel-propelled road rollers. Arrangements have also been made for the manu'acturc of heavy diesel engines of high speed type and electrically operated overhead and dockside cranes in establishments which are already in existence. In most of these industries, foreign technical assistance is required and the necessary arrangements are being made.

54. In the development of the chemical industry, soda ash, caustic soda, phosphatic fertilizers, industrial explosives, dyestuffs and intermediates occupy an important place in the programme of the private sector. This implies both quantitative expansion, wherever necessary, and also diversification of production gradewise. The dye-stuffs intermediates whose production has been tentatively envisaged comprise chlorobenzene group, nitrobenzene group, toluene group, naphthalene group, and anthraquinone group. A three to four fold increase in output has been planned for soda ash and caustic soda. The expansion of sulphuric acid production is primarily related to the demands of the iron and steel, fertiliser, rayon and staple fibre industries. The manufacture of carbon black, a vital raw material of the rubber goods industry, is to be developed by the National Industrial Development Corporation. Domestic availability of this basic chemical will be a source of strength to an important sector of the industrial economy. The second five year plan envisages establishment of a capacity of about 9000 tons per year for this material.

55. Mineral Oik—The construction of the Caltex Refinery at Visakhapatnam is expected to be completed during 1957. The total investment ?s estimated to be Rs. 12.5 crores of which about Rs. 2.5 crores has taken place during the first five year plan. The processes and crudes selected by the three petroleum refineries do not provide for the production of lubricating oils and petroleum coke which have considerable importance to the industrial economy. In planning further developments connected with this industry this lacuna in the structure of the mineral oil industry has to be filled.

56. Power and Industrial Alcohol.—The expansion of the sugar industry, referred to later, will lead to tne production of larger quantities of molasses. To provide a profitable outlet for it, a substantial increase has been proposed in the capacity for the production of power and industrial alcohol (36 million gallons as against 27 million gallons in 1955-56). Plans for developing the industrial consumption of alcohol on a much larger scale are being formulated. Expansion of the production of D.D.T., establishment of the manufacture of polyvinyl chloride and of butadiene are some of the lines of development which would' afford large-scale outlets for industrial alcohol. In this connection a scheme for the manufacture of synthetic rubber is under examination of the NIDC.

57. Plastics and Synthetic Moulding Powders.—During. the first plan some progress has been made in the manufacture of phenolformaldehyde moulding powder to meet the expanding requirements of manufacturers of finished plastic goods. While there is demand for other varieties of moulding powders also (e.g., polyvinyl chloride cellulose acetate, polystyrene and polyethylene) their production has not been established. Under the second plan, considerable advance is envisaged in this field. Production of polystyrene on the basis of the imported monomer is expected to commence in 1956-57. Schemes have recently been approved for the manufacture of cellulose acetate, polyethylene, polyvinyl chloride and urea-formaldehyde and, on the assumption that these materialise, an annual installed capacity for moulding powders of 11,400 tons is expected to be achieved by the end of the second plan a against 1180 tons in 1955-56. The manufacture of polyvinyl chloride is, based on acetylene from calcium carbide, and in the.overall target for this basic chemical adequate provision is being made for the requirements of the plastics industry.

58. Consumer Goods.—Among, consumer goods, expansion of output by about 100 per cent. is envisaged in the case of paper and paper board. The production of sugar is expected to be increased from 1.67 million tons in 1955-56 to 2.25 million tons by 1960-61. Of this increase in output the share of cooperative sugar mills is estimated to be about 350,000 tons per annum. For the achievement of the overall production target, a capacity of 2.5 million tons in terms of sugar is being envisaged. The production of vegetable oils is expected to increase from 1.8 to 2.1 million tons. The development programme emphasises the production of cotton seed oil and of oil from cakes by solvent extraction processes. Overall targets for cloth and yam production have been envisaged at 8500 million yards and 1950 million Ibs. respectively by 1960-61. A firm allocation of this output as between the mills and the decentralised sector (powerlooms and handlooms for cloth and Amber Charkha for yarn) has yet to be made. In fact, however, the spindleage already installed and licensed for installation is sufficient to produce 1950 million Ibs. of yam.

59. Pharmaceuticals. In the field of consumer goods special mention should be made of the programmes of the pharmaceutical industry. So far as synthetic pharmaceuticals like saccharin chIoramin-T, ace-tyisalicylic acid and sulpha drugs are concerned, progress will be in the direction of increased production as well as development from basic primary organic chemicals and intermediate products in place of the present operations based on penultimate products. This industry is expected to derive considerable benefit from steps taken to develop the manufacture of dyestuff intermediates which will provide several of its raw materials. In respect of vitamins, the scope for the production of vitamin A from an indigenous raw material, lemon grass oil, is under examination. As regards antibiotics, apart from the development planned in the public sector, efforts initiated by private enterprise to establish the production, of penicillin are expected to bear fruit. Further, the existing units in the field are expected to make considerable progress in the conversion of what are now predominantly processing operations into genuine manufacture. The pharmaceutical industry covers a wide range of products, and targets of development are indicated for a few of the more important products. It is expected that the investment in the private sector of the pharmaceutical industry will be of the order of about Rs. 3 crores.

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