3rd Five Year Plan
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Chapter 26:


The past decade has witnessed the beginning of an industrial revolution in India. During this period the growth and diversification of industry have been quite remarkable and particularly rapid in the five years of the Second Plan. In this short space of time three new steel works, each of one million tons capacity, have been completed in the public sector and two existing steel works in the private sector have been doubled so as to bring their ingot capacity to two and one million tons respectively. The foundations have been laid of heavy electrical and heavy machine tools industries, heavy machine building and other branches of heavy engineering, and the production of machinery for the cement and paper industries has been started for the first time. In the field of chemical industries there has been an advance on a wide front, leading not only to larger units and greatly increased output of basic chemicals, cg., nitrogenous fertilisers; caustic soda, soda ash and sulphuric acid, but also to the manufacture of a number of new products e.g., urea, ammonium phosphate, penicillin, synthetic fibres, industrial explosives, polythylene. newsprint, and dyestuffs. The output of many other industries has increased substantially, e.g. bicycles, sewing machines, telephones, electrical goods, textile and sugar machinery. New skills have been learnt by the workers and, at the other end of the scale, a large and growing class of industrial managers has come into being. In overall terms organised industrial production has practically doubled in ths last ten years, the index of industrial production having risen from 100 in 19 50-51 to 194 in 1960-61.

2. This bare recital of facts hardly docs justice to the progress that has beer achieved. To the eye of the beholder much more impressive testimony of the upsurge of industrial activity is conveyed by the great new steel works, the huge new open cast mines, the new industrial townships and the various factories _spring-ing up in the environs of the main cities of the country. Viewing the industrial scene as a whole, independent expert opinion ha? borne testimony to the great progress achieved in quite a short space of time and has characterised the broadening of the industrial base and the buoyancy of manufacturing enterprises as the most striking change in the Indian economy since the beginning of the Second Plan.

3. There can be no doubt that in the industrial field far-reaching gains have been secured. It must, however, be recognised that this success, considerable though it is, has so far been insufficient to make any great impact on the general condition of the mass of the population or radically to alter the structure of the economy. Moreover, compared with the industrial targets which the country set itself, there have been some large shortfalls. Thus, while the setting up of the three new steel plants under the Second Five Year Plan was by itself a most impressive achievement, their combined output of steel was only 0.6 million tons in 1960-61 as against the target of 2 million tons. Similarly in the case of the Tata Iron and Steel Works (TISCO) production has fallen short of the target set for the Second Plan period, the actual output of saleable steel for the five-year period being only 4.5 million tons as against 5.2 million tons reckoned upon in the 1955 forecasts of the Tariff Commission. In the field of fertilisers, the expansion of the Government Sindri Fertilizer Factory and, in the private sector. the ammonium chloride project at Varanasi were not completed till 12 to 18 months after the scheduled date and have since been facing serious teething troubles in reaching capacity output. The three new fertiliser plants in the public sector at Nangal, Neiveli and Rourkela, have all been delayed by one or two years; whereas they were all planned to be more or less in full production in 1960-61, the Nangal plant came into partial production only in January, 1961, while the other two are still under construction. The delay in their case, as also in that of the Heavy Electrical Project at Bhopal is mainly due to foreign exchange difficulties. The same cannot be said of the Heavy Machinery, the Mining Machinery and the Foundry/Forge Projects. All these three projects which should by now have been quite far advanced in their construction are still in their initial stages and instead of making a valuable contribution to the Third Plan will only begin to yield output at the end of it. In the case of the project for the manufacture of organic intermediates, which is of cardinal importance for the dyestuffs, plastics and drugs industries, the delay in implementation has been due, apart from the time involved in denning the exact scope and content of the project and other preliminaries, to difficulties in concluding negotiations with overseas collaborators. The experience of the Second Plan has shown that the gestation period of a project; especially in the case of heavy engineering industries, is "'nerally longer than expected. This highli'ghts the importance of advance planning.

4. The main industrial targets which have not been achieved arc those set for iron and steel, fertilisers, certain items of industrial machinery, e.g. paper and cement plant machinery, heavy castings and forgings, aluminium, newsprint, raw films, chemical pulp, soda ash, caustic soda, dyestuffs and cement. The shortfalls have unfortunately occurred in some of the very industries which are of crucial importance and have deprived the economy of benefits reckoned on for the start of the Third Plan. The relevant figures are given below :

Table 1 Production targets for 1960-61 and actual performance

unit production targets actual production
steel finished million tons 4-3 2-2
nitrogenous fertilisers (in terms of nitrogen) . 000 tons 290-0 110-0
phosphatic fertilisers (in terms of PsO;) 000 tons 120'0 55-0
textile machinery Rs. crores 17-0 9'0
cement machinery Rs. crores 2'0 06
paper machinery Rs. crores 4'0
aluminium 000 tons 25-0 18-5
newsprint 000 tons 60-0 25-0
chemical pulp tons 30000-0
soda ash 000 tons 230-0 145-0
caustic soda 000 tons 135-00 100-0
dyestuffs million Ib. 22-0 11-5
cement million tons 13-0* 8-5

*Revised to 10-11 million tons in May 1958,

Most of the other targets of capacity and production have been approximately fulfilled and in some cases, e.g. power driven pumps, disel engines, electric motors, A.C.S.R. cables, electric fans, radio receivers and sugar exceeded.

5. Broadly speaking, it can be said that the industrial advance has been in keeping with the avowed objective of enabling the economy to reach as soon as possible the stage of self-sustaining growth, for, despite the shortfalls, notable progress has been achieved in the development of iron and steel, heavy engineering and other capital goods industries.

6. The actual cost of many of the projects has been more than what was envisaged when the Second Plan was drawn up. For instance, on the basis of preliminary project reports, a provision of Rs. 425 crores was made in the Second Plan for the three public sector steel plants, their townships, ore mines and quarries. The first detailed estimates available by the end of 1956 indicated the revised investment requirements as Rs. 559 crores exclusive of escalation. The latest estimate of the actual outlay on the steel plants and ancillaries referred to above amounts to Rs. 620 crores. The further rise in cost as compared to the 1956 estimates has been explained as due primarily to increases in the quantities of work and to escalation. Similar divergences between actual outlay and the project cost estimates have occurred in the case of TISCO in the private sector. The capital expenditure on their expansion programmes has increased by about Rs. 30 crores over the initial estimates. While differences of this kind may have been inescapable in the past in view of the lack of experience in project engineering, the importance of achieving more accurate estimates requires to be emphasised. In other countries consultant organisations specialising have played an important part in this field and in the last few years similar agencies have begun to spring up in this country also, and they should be able to assist entrepreneurs in project evaluation and in estimating capital costs in a more thorough and scientific manner.

7. In the last ten years, some success has been achieved in the dispersal of industry. The selection of the locations for the three new steel plants (Bhilai. Rourkela and Durgapur), the Heavy Machinery Plant (Ranchi) and the Heavy Electrical Project (Bhopal) and the decision to exploit the lignite deposits at Neiveli in Madras, justified as these all were on purely economic grounds, have also had the effect of creating new centres of industry in areas of the country hitherto untouched by it. Preference in fact has always been given to the location of public sector projects in relatively backward areas whenever this could be done without significant prejudice to technical and economic considerations; and this will be the guiding principle for the future also. Similarly in the licensing of private sector projects the claims of under-developed regions have generally been kept in view to the extent possible.


8. The overall fixed investment on public sector projects in 1956-61 has been about Rs. 770 crores as against the original estimate of Rs. 560 crores. For the private sector, the corresponding investment figures are Rs. 850 crores and Rs. 685 crores respectively. Except in the case of the expansion of the Sindri Fertiliser Factory, where internal resources played some significant part in financing new investment, public sector projects were carried out by means of advances from Government in the form of equity capital and loans. The foreign exchange cost of Government steel works, machine-building, mining equipment and heavy foundry/forge projects was met mainly from credits advanced by friendly countries. The equity participation that was originally proposed by Krupp-Demag in the Rourkela Steel Works was the only sizeable private investment envisaged in a public sector project. This was given up in 1956 in the course of negotiations regarding contracts for the purchase of machinery. The steel expansion programmes in the private sector were assisted to the extent of Rs. 70 crores by the International Bank for Reconstruction and Development (I.B.R.D.) and by credits from other international sources and by Rs. 20 crores of interest-free advances from the Government of India. The high levels of investment recorded by private enterprise in other fields were facilitated by deferred payment arrangements resorted to on a considerable scale.

9. The quantum of funds drawn by private enterprise from each of the recognised sources as compared with the Plan expectations is currently estimated as follows:

Table 2 Sources of supply and quantum drawn by private enterprise
(Rs. crores)

Second Plan expectations latest estimate for the Second Plan
loans from institutional agencies 40 80
direct loan participation by Central and State Governments 20 20
foreign capital including suppliers credil 100 200
new issues 80 150
internal and other resources 380 400
total 620 850

10. The current assessment of the break-up of the overall investment in organised industries as compared with the estimates as forecast in the Introduction to the volume on the Programmes of Industrial Development : 1956-61 (page ix) is as follows :

Table 3 Overall investment break-up
(Rs. crores)

forecast under the Second Plan current
metallurgical industries (iron and stee aluminium and ferromanganese . 502-5 770-0
engineering industries (heavy and light) 150-0 175-0
chemical industries (heavy chemicals, fertilisers, drugs and pharmaceuticals, coal carbonisation, dye-stuffs, plastics and chemical pulp) 132-0 140-0
cement, electric porcelain and refractories 93-0 60-0
petroleum refining 10-0 30-0
paper, newsprint, security paper 54-0 40-0
sugar 51-0 56-0
cotton, jute, woollen and silk yarn and cloth 36-3 50-0
rayon and staple fibre 24-0 34-0
others 41-5 115-0
replacement and modernisation 150-0 150-0
total 1244.3 1620-0

11. In spite of the large investment (about 30 per cent above the Plan estimate) the physical targets set under the Second Plan are broadly estimated to have been achieved to the extent of only about 85 to 90 per cent. The wide gap between the rather high target originally setter the cement industry and the capacity actually achieved accounts for a high proportion of the overall shortfall in the physical performance.


12. The industrial plan for the period 1961-66 has to be governed by the over-riding need to lay the foundation for further rapid industrialisation over the next 15 years, if long-term objectives in regard to national income and employment are to be achieved. From this point of view it is essential to stress forward with the establishment of basic capital, and producer goods industries—with special emphasis on machine building programmes—and also with the acquisition of the related skills, technical know-how and designing capacity, so that in the following Plan periods the growth of the economy in the fields of power, transport, industry and mineral production will become self-sustaining and increasingly independent of outside aid.

13. There are, however, other factors which have also to be kept in mind. Thus, while long-term objectives require concentration on capital goods industries and increased production of processed industrial raw materials, the industrial programme for the Third Plan has also to provide, to the extent possible, for meeting the demand likely to be generated over the next 5 years for a wide range of other manufactured goods. Owing to the need to devote a large portion of available resources to laying the foundation for future development, it may be difficult to meet this demand in all cases. The aim is to provide fuUy for essential needs, but restraint on consumption will bo unavoidable, especially in the case of goods of luxury or semi-luxury character the production of which it will be difficult to increase pari passu with the growth of demand.

14. The operation of industries depends not only on markets but also on the supply of raw materials, power, fuel and facilities for transport. Industrial programmes have, therefore, necessarily to take into account, and will in fact be limited by, the rate at which the supply of raw materials, power, etc. can be increased. In particular, power and fuels are likely to be inhibiting factors in the first half of the Third Plan period. This may entail forgoing in some instances the adoption of industrial processes which make a heavy demand on electric power, notwithstanding their attractiveness.

15. Industrial policy.—The expansion of industry will continue to be governed by the Industrial Policy Resolution of April, 1956. As in the Second Plan the roles of the public and private sectors are conceived of as supplementary and complementary to one another. For example, in the case of nitrogenous fertilisers where the public sector has already assumed a dominant role, it is envisaged that during the Third Plan the private sector will enter this field in a bigger way than in the past and supplement the efforts of the public sector. In the case of pig iron, the policy has been relaxed to allow the establishment of plants in the private sector with a maximum capacity of 100,000 tons per year as compared to units of 15,000 tons permitted so far. Programmes for the manufacture of dyestuffs, plastics and drugs in the private sector will be largely complementary to the programme for the manufacture of primary aromatic compounds as by-products at the steel works and of organic intermediates to be undertaken in the public sector. Similarly, whereas the manufacture of bulk drugs will be organised in a big way in the public sector, the further processing of bulk drugs will also he undertaken in the private sector.

16. Against the background of the goal of a socialist pattern of society, it is necessary in encouraging and approving programmes in the private sector to guard against industrial development being concentrated in the hands of a few entrepreneurs and leading to complete or partial monopolies. This matter has been discussed in paragraphs 26 to 29 of Chapter I.

17. Industrial priorities.—Plans for industrial expansion have to hold a balance between different and competing claims of nearly equal importance. There are, however, certain general considerations which require to be mentioned. In the first place, where there are wide gaps between capacity and production or where, by multi-purpose shift operation or the addition of balancing equipment, it is possible to secure greater output at diminishing cost, fuller utilisation of existing installed capacity must take precedence over expansions or the setting up of new units. Secondly, expansion of existing plants will have to be given preference over establishment of new units since the creation of additional capacity m this manner will not only be quicker but will also assist in bringing down the investment costs per unit output. For example, the expansion of the Bhilai, Rourkela, and Durgapur Steel Plants will lower the investment from about Rs. 2000 to Rs. 1500 per ton of finished steel and have a beneficial effect on the level of retention prices.

18. As regards new developments the accent will have to be on projects which, by contributing to exports, will earn or, by replacing imports, will save foreign exchange. It will not be possible to allow significant expansion of industries, which are heavily dependent on the import of raw materials and whose expansion, therefore, until these materials are available within the country, swells the demand or foreign exchange or maintenance account. On the other hand, having regard both to the short-term and the long-term needs of the economy, special attention will have to be given to the development of industries for whose products there are reasonable prospects of finding export markets.

19. Subject to these general considerations the emphasis to be given to programmes and projects over the next few years will have to be broadly in accordance with the following priorities :

  1. Completion of projects envisaged under the Second Five Year Plan which are under implementation or were deferred during 1957-58 owing to foreign exchange difficulties.
  2. Expansion and diversification of capacity of the heavy engineering and machine building industries, castings and forgings, alloy tool and special steels, iron and steel and ferro-alloys and step-up of output of fertilisers and petroleum products.
  3. Increased production of major basic raw materials and producer goods like aluminium, mineral oils, dissolving pulp, basic organic and inorganic chemicals and intermediates inclusive of products of petrochemical origin.
  4. Increased production from domestic industries of commodities required to meet essential needs like essential drugs, paper, cloth, sugar, vegitable oils and housing materials.


20. The development programmes for industries and minerals envisaged under the Third Plan will entail in all about Rs. 2993 crores of investment in order to reach the physical targets set for achievement. Their foreign exchange component is placed at about Rs. 1338 crores. The details of the break-up are as under :

(Rs. crores)

public sector private sector public and private sectors
total foreign exchange total foreign exchange total foreign exchange
(a)new investment
(i) mineral development 478 200 60 28 538 228
(ii) industrial development 1330 660 1125 450 2455 1110
total 1808 860 1185 478 2993 1338
(b) replacement 150 50 150 50

The fixed investment of Rs. 1808 crores for industries' and minerals in the public sector shown in the Table above differs from the figure of Rs. 1882 crores given elsewhere as the outlay requirements of the public sector for industries and minerals. The difference arises from the fact that the latter figure includes (a) assistance to plantation industries, which do not strictly fall within the scope of manufacturing industries, (b) the cost of the construction subsidy given to Hindustan Shipyard, (c) programmes of the National Productivity Council and the Indian Standards Institution and expenditure on the extension of the metric system of weights and measures, and assistance to the private sector through the National Industrial Development Corporation (N.I.D.C.) and direct loans and State participation in private undertakings.

21. The estimate of investment on replacement shown in the above Table falls short of the minimum requirements of the cotton textile, jute textile and woollen textile industries in regard to which special studies have been made recently. The backlog of replacements in these three industries alone has been estimated at about Rs. 169 crores. The estimate that investment on replacement account in the Third Plan will be of the order of Rs. 150 crores is more or less a projection of the actual performance during the Second Plan. Even so, it is on the optimistic side in view of (a) the pressure on the available resources of private enterprise and institutional agencies for new investment and (b) the fact that mills with large backlogs of replacement are in no position to provide resources for renovation commensurate with needs and (c) the small allocation made in the Plan to enable the N.I.D.C. to assist these programmes financially.

22. It is necessary to emphasise that in the case-of several projects the estimates of cost, on the basis of which the overall figures have been calculated, lack at this stage the required degree of precision, since these projects are in very preliminary stages of formulation in respect of scope, processes, location and other relevant particulars. Further, some of them fall under industries about which no experience is available in the country which might facilitate more accurate estimates. The esimates of foreign exchange requirements have been made on the assumption that payments will be made in cash and that, broadly, machinery and equipment will be obtained from the cheapest sources of supply. These estimates will be vitiated if changes have to be made in these underlying assumptions. For instance, the estimates will go up considerably if, in order to utilise the credits that have been made available by different countries, a large part of the equipment has to be obtained from sources which are not the cheapest.

23. As compared to these estimates of requirements, the resources available both for the public and the private sector programmes are expected, on present reckoning, to be deficient. The current allocations for industries, and minerals in the public sector and the estimates of resources likely to be available for private sector programmes amount only to Rs. 2570 crores—Rs. 1470* crores for the public sector and Rs. 1100 crores tor the private sector. In addition, it is hoped that about Rs. 150 crores will be forthcoming for meeting the continuing arrears of replacement and modernisation in certain pre-war industries.

24. These estimates point to the probability that in both sectors there will be a sizeable spillover into the Fourth Plan and that the physical targets will not all be achieved by the end of the Third Plan period. Some spill-over would be probable in any case considering the very preliminary stage which some of the projects have so far reached, the uncertainties about foreign exchange and the relatively long gestation periods in the case of heavy industries. It is difficult at this stage to forecast with any great degree of accuracy which projects will get delayed and spillover into the Fourth Plan and which of the physical targets will not be achieved. The matter is, however, discussed further in connection with the public and private sector programmes.


25. General observations.—The industrial and mineral programmes of the public sector, exclusive of defence industries and projects of the Ministries of Railways and of Transport and Communications designed to meet their own operational requirements, e.g. electric and diesel locomotives, telephones and teleprinters are shown in Annexures I and II. Their overall cost is about Rs. 1882** crores, whereas the provision that it has been possible to make for them is only Rs. 1520 crores (Rs. 1450 crores at the Centre and Rs. 70 crores in the States). It is probable, therefore, that, as already stated, their full implementation will take rather more than five years. It is not possible at present to say what stage each one of the public sector projects will have reached by 1965-66 but some general indications can be given. It will be seen that in Annexure I projects of the Central Government have been grouped in three categories, viz.

  1. projects under execution and carried over from the Second Plan;
  2. new projects for which external credits are already assured wholly or partly; and
  3. new projects for which external credits have yet to be arranged.

It may reasonably be assumed that all the projects falling in category (1) will be completed during the Third Plan. This should also apply to most of these in category (2); at any rate considerable progress should be made with all these projects. But some of them e.g. the precision instruments project and the two heavy electrical projects are still only at the preliminary stage of formulation and their scope and content are yet to be defined. It is possible, thereiore, that some of these projects may spillover to some extent into tne Fourth Plan. Obviously, the largest element of uncertainty attaches at present to those projects falling in category (3). Some of these, however, e.g. the alloy steel plant, are of very high priority and every thing possible will have to be done to expedite them.

26. The industrial programme for the Third Plan takes into account the contribution towards meeting civilian needs that can be expected from expansions envisaged by the defence establishments in the field of alloy steels, tractors, trucks, electric equipment, nitrocellulose and chemical products, the possibilities in this regard are expected to be exploited by making full use of the capacity in the ordnance factories with a view to maximising and diversifying production and achieving consequent investment economies.

27. The major industrial projects in the public sector included in the Third Plan are in the field of iron and steel, industrial machinery, heavy electrical equipment, machine tools, fertilisers, basic chemicals and intermediates, essential drugs and petroleum refining These are briefly reviewed later in this Chapter under individual industries alongwith developments in the private sector in allied groups of indiistrips

28. Financing of Central Government projects.—Although, as in the Second Plan, the bulk of the funds required for industrial projects in the public sector will be found by Government, quite considerable contributions are likely to be made by some undertakings from their own internal resources. Thus, based on the forecasts of production from public undertakings, it is estimated that about Rs. 300 crores will be available from their internal resources for financing industrial investments. The bulk of this amount will be contributed by the steel plants and fertiliser factories established in the public sector. It is also proposed that the Hindustan Machine Tools should set up one or two new machine tool works under its aegis, financed mainly from its own internal resources in respect of rupee expenditure.

29. Assistance to institutional agencies and other miscellaneous requirements.—The Central Government's plan for industries has also to take into account the resources required to be made available to the Industrial Finance Corporation and the National Industrial Development Corporation to enable them to operate at somewhat higher levels than in the Second Plan. Provisions have also to be made for plantation industries, the National Productivity Council, the Indian Standards Institution and the extension of the metric system. The financial requirements of all these miscellaneous activities reckoned on an austere basis are shown in Annexure I.

30. Industrial projects of State Governments.—The major projects proposed for development as public sector undertakings by State Governments are shown in Annexture II. Many of these are spill-over projects from the Second Plan, e.g. the expansion of the Mysore Iron and Steel Works and of the Andhra Paper Mills, the doubling of the Durgapur coke ovens and the piping of gas from Durgapur to Calcutta. The major new projects of State Governments are the third stage expansion of FACT for additional production of ammonium phosphate, ammonium sulphate and ammonium chloride alongwith coordinated developments at Travancore-Cochin Chemicals, and the organic chemicals project of the Durgapur Industries Board for the manufacture of caustic soda, phenol, phthalic anhydride and some other organic chemicals.

31. Within the allocation for industries in the plans of State Governments, funds have to be round not only for the above projects but also for the State Financial Corporations and for the financing of industrial development area schemes. The latter are intended to contribute to the growth of industries in regions which are at present relatively backward industrially. The idea is to acquire in industrially backward regions suitable tracts of land at focal points where good communications exist or can be easily developed, to develop factory sites thereon, provide the basic facilities like power, water, sewage, etc. and then offer them for sale or on long lease to prospective entrepreneurs. The outlay proposed in the State plans for industrial development area schemes amounts to Rs. 5.4 crores.


32. General observations.—Under the Industrial Policy Resolution of April, 1956, a very extensive field of activity is open to private enterprise outside the Schedule A Industries which are reserved for the State. Private enterprise has not been slow to take advantage of these opportunities; reference has been made earlier in this Chapter to the buoyancy of manufacturing enterprise. It must not, however, be forgotten that to this lively development of the private sector the large programme of public investment undertaken in the last ten years has very materially contributed both directly, by the provision of the necessary overheads, and indirectly, by stimulating demand and so, creating an atmosphere favourable to industrial growth. The further large-scale public investment planned for the next five years is likely to maintain the same favourable conditions for the operations of the private sector; but these, of course, will have to fit themselves into the overall framework of industrial development and conform to the priorities outlined in paragraph 19 above. Moreover, shortages of foreign exchange and of power are likely to impose throughout the period of the Third Plan limitations on the free growth of the private sector such as have only begun to be seriously felt during the closing years of the Second Plan, Whereas during the Second Plan several'of the original industrial targets were raised, in the Third Plan any revision of the industrial targets would have to be considered from the point of view of a totality of circumstances, including foreign exchange, domestic resources, transport, power supply and trained personnel as well as the priorities laid down in the Plan.

33. With a view to formulating capacity and production targets for the Third Plan, the Planning Commission had discussions with representatives of various industries prior to as well as following the publication of the Draft Outline in June, 1960. The Commission has also had before it the recommendations made by Development Councils and by other agencies who had been requested to consider the targets for specific industries. On wider issues, such as the financial resources likely to be available to the private sector for investment during the Third Plan. discussions have also been held with premier industrial and commercial organisations of the country.

34. The statement at the end of the Chapter (Annexure III) shows the targets proposed for various industries under the Third Plan. These are overall targets for both the public and private sctors. For the engineering industries they are based on utilisation of installed capacity on double shift operation.


35. Sources of supply of investible funds for financing gross fixed assets formation in the private sector during the Third Plan period and the quantum available from each source arc estimated as follows :

Table 4 Sources of supply of funds for industrial and mineral programmes of the private sector
(Rs. crores)

sources Third plan period
institutional agencies 130
direct loan participation by Central and State Governments and other assistance 20
new issues 200
internal resources (net of repayment liabilities) 600
direct foreign credit participation in capital 300
total 1250

According to these estimates the funds likely to be available fall short of the requirements of the private sector programmes which are estimated to amount to Rs. 1350 crores. Apart from the overall shortage of financial resources, there is the still more difficult problem of finding the foreign exchange required for achieving all the targets. This is estimated to amount to not less than Rs. 530 crores. Foreign aid or credit to meet these requirements in full is not at present in sight. It cannot be said at this stage in which specific industries the actual performance will fall short of the targets. Much will depend on the success- attained in securing foreign collaboration and investment in industries where these are felt to be desirable. An endeavour will, however, be made to ensure the full achievement of targets in the case of industries of high priority. To this end, it is intended that the industrial programmes should be regularly reviewed and allotments of foreign exchange/credit made every six months for individual industries in the light of the progress achieved and the priorities which may suggest themselves from time to time. In this way it is hoped to achieve balanced progress.

36. In determining priorities, an important consideration will be the contribution an industry can make towards mitigating the pressure on foreign exchange either through a reduction in the level of imports or through additional exports. Thus industries which will directly save or earn foreign exchange will be given priority over industries which would only contribute to an increase in the supply of manufactured goods for the home market. In estimating import savings more stringent criteria will have to be applied than hitherto.


The salient features of the development programmes of major industries in the Third Plan are discussed in the following paragraphs:


37. Iron and steel.—The overall targets proposed under this industry are 10.2 million tons of steel ingot capacity and 1.5 million tons of pig iron for sale. The estimates of requirements of pig iron and of finished steel by 1965-66, which have provided the background for the planning of this industry, are indicated below alongwith the figures of the installed capacity available at the start of the Third Plan. A basic assumption made in connection with the demand forecast is that the current selling price of steel will hold good for the Third Plan period.

Table 5 Category-wise break-up of demand for iron and steel
(000 tons)

end product of steel

estimated demand by 1965-66 capacity in existence in early 1961
heavy rails and fishplates 400 345
heavy structurals and broad flanged beams 550 445
sleepers and crossing sleepers 200 180
medium and light structurals 550 680
rounds and flats including rounds
for nuts, bolts and screws 2200 1305
tin plate 300 150
plates 3/16" and up 650 300
wires including wire ropes 400 220
hoops and box strapping 50 45
sheets 1200 740
strips and skelp for tubes 400 188
forging blooms and billets 300 132
wheels tyres and axles 100 30
total 7300 4760
pig iron for sale 1500 870

38. The share of the private sector in the steel target is 3.2 million tons of ingots. The existing installed capacity of TISCO and IISCO is 3.0 million tons. The expansion of capacity for steel in the private sector is expected to come from the installation of scrap-based electric furnaces which will augment the supplies of billets to re-rollers. The supply of billets to re-rolling mills from the main producers of steel is visua"-lised at one million tons by the end of the Third Plan. As regards saleable pig iron, the output from the private sector is provisionally placed at about 0.3 million tons to be achieved through expansions of iron making capacity based on low shaft bias; furnaces and/or electric smelting of iron ores.

39. As regards the public sector, rapid achievement of capacity output from the new steel plants whose construction was completed by 1960-61 will be the most important task in the initial years of the Third Plan. New developments included in the Plan comprise the expansion of the Bhilai, Durgapur and Rourkela steel plants and of the Mysore Iron and Steel works and the establishment of a new steel plant at Bokaro. In addition there is included in the Plan a project for a pig iron plant based on low shaft blast furnace techniques and the use of coke from the Neiveli lignite. The levels of capacity to be reached under these programmes are :

(million tons)

scheme target steel ingots capacity pig iron
(a) expansion of : Bhilai 2.5 0-3
Rourkela 1.8
Durgapur 1.6 0-3
Mysore iron and steel works 0.1
(b) Bokaro Steel Project 1.0 0-35
(e) Neiveli pig iron project capacity to be still decided

40. The Neiveli pig iron project on which considerable preliminary investigations have still to be conducted in regard to the process as well as the raw materials intended to be used, represents an intermediate stage towards the establishment of a steel plant of about 0.5 million tons in the Southern region. The financial provision included for this scheme in the Third Plan covers mainly the requirements of a high temperature carbonisation plant for the production of lignite ooke.

41. The expansion programme of the Mysore Iron and Steel Works comprises mainly the spillover expenditure on the ferro-silicon plant and provision for steel making by the L.D. process and for a light structural mill.

42. The layout of the new steel plant at Bokaro is being planned for a capacity of two million tons of steel ingots, but in the first phase of development it is proposed to instal facilities for the production of one million tons. This plant -s expected to specialise in the production of different types of flat products. The exact types to be produced in the first phase and the nature of the finishing facilities to be provided therefore currently under examination.

On the completion of these development programmes, the capacity for mild steel of the public recto;- steel works will be raised from three m;"ion tons to seven million tons, making along w'th the capacity of the private sector a total of [0.2 million tons of ingots.

43. The overall investment required for the public sector steel development programmes included in the Third Plan is estimated at Rs. 525 crores. This is inclusive of the investments required for increasing the production of limestone at Nandini and iron ore at Dalli Rafnra and Barsua in the case of the expansion programmes. It also includes the investments required for the additional production of coal and iron ore for the Bokaro steel plant and the expenditure on townships at all the four steel works.

44. The total production of finished steel in the country during the Third Plan period is tentatively estimated to be of the order of 24.1 mil'ion tons inclusive of an output of 0.3 million tons from the Bokaro steel plant in 1965-66. The annual break-up of production is visualised as follows:

Estimate of finished steel production

year million tons
1961-62 3-5
1962-63 4-0
1963-64 4-3
1964-65 5-5
1965-66 6-8
total 24.1

On the basis of the above forecast of production and of the tonnages of different end-products likely to be available, shortages are expected to be significant, particularly in the initial years of the Plan period, in the case of flat products, e.g. tin plate sheets, skelp and plate. This will call for the formulation of a scheme of priorities for determining the quantum of imports and allocation of flat products to different classes of consumers. Prima facie, it should be possible to narrow down the margin between the demand and the indigenous supply of steel products in short supply by free inter-change of steel ingots between the public sector plants so as to achieve (he most intensive use of the rolling mill facilities for flat products. This possibility should receive attention in production planning in the light of the situation that may obtain from year to year.

45. The output of the main producers of steel will include electrical steel sheets produced by TISCO and at Rourkela. Similarly finished steels turned out by the producers operating on electrical furnace billets and by the ordnance factories will include spring steels and free-cutting steels. The level of production of these special varieties of mild steel will be related to the demand estimated for 1965-66 placed at 75,000 tons for spring and free-cutting steels and 70,000 tons for electrical steel sheets.

46. Tool, alloy and stainless steels.—The Second Five Year Plan envisaged the establishment of an alloy, tool and special steel plant in the public sector. Preliminary project reports for a plant of 25,000 tons annual output in terms of different finished products were received in 1958 from some of the leading producers abroad. Action on the implementation of this scheme was delayed as a result of the decision taken to get a more detailed project report the scope of which was modified in t.he course of its preparation, to facilitate the establishment of a more viable unit in line with the higher levels of demand for alloy steels visualised under the Third Plan. After the receipt of the report from the consultants in July, 1960, it was decided in November, 1960, to establish at Durgapur an alloy and tool steels plant of 48,000 tons annual output with built-in capacity in certain primary units so that it could be rapidly expanded to 100,200 tons.

47. The current heavy demand for imports of these high priced but essential raw materials of the engineering industries is a serious problem on maintenance account. The manufacture of tool, alloy and stainless steels has, therefore, to be assigned very high priority in the Third Plan from the point of view both of the requirements over the five-year period and of the probable long-term growth of demand for these products. The demand estimates for 1965 and 1970, which have been kept in view as a guide for planning in this field, are indicated below along with the end-product pattern of the public sector project to be established at Durgapur.

Table 6 Projection of demand for alloy tool and special steels
(tons of finished steel exclusive of eletrical steel sheets, srring steels and free cutting steels)

1965 1970 output capacity of the Durgapur alloy steel project
tool steels 42000 70000 13000
constructional sheets 100000 241000 17500
stainless steels 50000 68000 17000
die and other alloy steels 8000 10000 500
total 200000 389000 48000

48. The projected Durgapur alloy steel plant will incorporate some of the latest equipment and processes for the manufacture of these products developed recently in advanced countries. Thus, it is proposed to instal electric soaking pits in preference to gas-fired pits. The desirability of using sponge iron instead of scrap as the starting raw material and of introducing continuous casting facilities is expected to be kept in view in connection with the further expansion of this plant. In the current phase of development, it is planned that the plant should draw supplies of pedigree scrap from the adjoining Durgapur steel works. The outlay on the project is estimated at Rs. 50 crores in all of which Rs. 20 crores would be the foreign exchange element.

49. The ordnance factories of the Ministry of Defence are expected to function as a second source of supply of alloy steels in the public sector. The combined output of the Ishapur and Kanpur ordnance factories, mainly in the category of constructional steels but including some output of spring steels as well, is estimated at 50,000 tons.

The rest of the development in this industry is envisaged in the private sector where additional production facilities will be planned having regard to the deficits in different categories of these products still outstanding.

50. Aluminium.—In the field of non-ferrous metals, aluminium is expected to continue to retain its dominant position. The target of 87,500 tons set for 1965-66 is expected to be achieved as a result of the following projects in the private sector which have already been cleared for implementation:

  1. Expansion of the Indian Aluminium Company's plant at Hirakud by 10,000 tons per annum and the Alwaye plant by 5000 tons per annum;
  2. Establishment of a smelter at Riband of 20,000 tons annual capacity;
  3. Establishment of a smelter at Koyna of 20,000 tons annual capacity;
  4. Establishment of a smelter near Salem of 10,000 tons annual capacity; and
  5. Expansion of the plant of the Aluminium Corporation of India by 5000 tons per annum.

51. In the context of the rising demand for electrolytic copper and the relatively meagre possibilities of substantially increasing its domestic production during the Third Plan, further expansion of capacity for aluminium production appears prima facie desirable. The amount of such expansion would mainly have to be determined by the pace at wh'ch it is considered feasible from the technological angle to substitute aluminium for copper over the next five years, though the possibility of exporting aluminium would also be a relevant consideration. The additional foreign exchange needed for developing further capacity would be quite considerable if, as seems almost certain, arrangements have also to be made for the connected power facilities. The attractiveness of new proposals for further expansion of aluminium production would depend largely upon the extent to which they can provide for these additional foreign exchange requirements.

52. Copper.—The production of electrolytic copper will commence in the early years of the Third Plan with the commissioning of the unit at Ghatsila by the Indian Copper Corporation. The smelter and the electrolytic refinery associated with the Khetri and Daribo copper mines for an annual production of 11,500 tons of electrolytic copper are likely to be established by the middle of 1964.

53. Zinc.—The production of zinc for the first time in India is expected to be achieved by the middle of the Third Plan period with the commissioning of the zinc smelter based on zinc concentrates from the Zawar Mines in Rajasthan. The annual capacity of the plant will be 15,000 tons. It is also being equipped to operate a by-product sulphuric acid plant based on the smelter gases which will be used for the manufacture of phosphatic fertilisers.


54. Large-scale developments arc proposed in this sector in view of the prospects of increased supplies of pig iron and steel, the emphasis on machinery manufacture and the scope in many instances for wide employment opportunities in relation to investment. The public sector will mainly concentrate on projects for the production of heavy machinery and heavy machine building. Apart from this, targets have been proposed within this field, to be achieved mainly by private enterprise, in respect of an extensive range of manufactured items, i.e. agricultural machinery and constructional equipment like tractors, diesel engines, road rollers dumpers and shovels; power distribution, and measuring equipment like transformers (below 33 KV), electric cables and wires, and house service meters; rail and road transport items like locomotives, wagons, passenger coaches, commercial vehicles (buses and trucks); complete plants for the setting up of new units for the sugar, paper, cement and textile industries and certain chemical industries, steam-raising equipment (boilers) and machine tools, consumable stores like welding electrodes and durable consumer goods like passenger cars, sewing machines, bycycles and electric fans. These targets do not, however, cover all lines of expansion.

55. The production of new items in this field, of which various types of machinery are the most important, is expected to be developed both in independent plants specially established for the purpose like the A.V.B. (Associated Cemcnt-Vickcrs-Babcock Wilcox) plant at Durgapur for the manufacture of equipment for the cement industry and high pressure boilers, and also by the deversification of the output of engineering workshops already in operation or currently -under establishment. In the latter case, the investment required for developing the production of new items of machinery will be substantially lower than would otherwise be the case. This is the explanation for the apparently low estimates of investments vis a vis estimates of output in certain industries. In some of the manufacturing programmes, there is also the practice of entrusting the production of certain components to ancillaries or even major establishment with surplus capacities. In the circumstances, the normal relationship between output and investment cannot be applied.

In the following paragraphs the programmes in the principal sectors of the engineering industries are briefly outlined.


56. Foudry/forge capacity is of crucial importance for the machinery manufacturing programmes. Within the overall targets set for this field in the Third Plan—1.2 million tons of grey iron castings, 200,000 tons each of steel castings and forgings—the accent in the public sector programmes is largely on production in the higher tonnage ranges for heavy machinery manufacture. The facilities which are being planned in the public sector projects are as follows:

Capacity for 45,000 tons of steel castings, 38,000 tons of grey iron castings and about 70,000 tons of steel forgings will be created in the foundry/forge which is being set up at Ranchi. Further capacity will become available from foundries attached to the steel plants at Durgapur, Bhilai and Rourkela, to the Heavy Electrical Project, Bhopal, to the Mining Machinery Project, Durgapur, and to the Hindustan Machine Tools. A steel foundry is under construction at the Chittaranjan Locomotive Works. The total capacity expected to be created in the public sector as a result of these schemes is as follows :

Table 7 Capacity for castings and forgings in the public sector

(figures in tons)
grey iron castings steel castings steel forgings
Foundry/Forge project, Ranchi OH stage) 38000 45000 69700
Durgapur Mining Machinery PIant (30000 tons capacity for mining machinery) . 11000 6000 7000
Hindustan Machine Tools, Bangalore 6000
steel plants:
Bhilai Rourkela 75000 15000
Chittaranjan Locomotive Works, Chittaranjan 3000 10000
Others (including foundries attached to railway workshops) 6000
total 139000 76000 76700

Castings and forgings will also be required by several t»ther machinery projects in the public sector included in the Third Plan, but a clear picture of these requirements and the best arrangements for meeting them, i.e. whether through captive foundry/forges or through independent units, or a combination of both will only emerge when the project reports are received.

57. A substantial part of the new capacity in the private sector is expected to come up as the result of demand stemming from the expansion of the automobiles industry and the manufacture of machinery for textiles, cement, sugar, paper and similar capital goods industries.


58. The principal projects of the public sector in this field are the Heavy Machinery Plant near Ranchi; the Mining Machinery Project, Durga-pur; the Heavy Electrical Equipment Plant, Bhopal and two other heavy electrical projects for which locations are currently under study by an expert committee.

59. The heavy machinery plant, which is being set up near Ranchi, on its expansion to 80,000 tons output per year will be able to supply the bulk of the equipment required for adding to steel making capacity at the rate of about one million tons annually. The expanded mining machinery project at Durgapur is being designed for an annual output of 45,000 tons of equipment. The three heavy electrical equipment projects are designed to ensure from indigenous sources a wide range of electrical equipment sufficient to enable power generation to be increased at an annual rate of two million kW per year from 1971 onwards. They will also produce heavy motors, rectifiers and control equipment. Manufacture of high pressure boilers for thermal power plants with an annual capacity of about 28,000 tons (2500 tons of steam per hour) is another heavy engineering project tied with assistance from Czechoslovakia. Though it was originally visualised as a part of a composite heavy electrical equipment project, it is now proposed to develop it as an independent plant specialising in manufacture of high pressure boilers.

60. The targets set for the production in the private sector of complete plants to meet the demands of cement, paper, sugar and cotton textile mills and the levels of indigenous content envisaged under each are as follows :

Table 8 Production targets for selected items of industrial machinery
(Rs. crores)

item standard size of
plant (tons per day)
number of plants value of plants
excluding electricals
indigenous content (per cent)
cement mill machinery 500 6 to 7 4.0 to 5-0 90
paper mill machinerty :
(a) large plant 50 4
(b) small plant 10 4 6 -5 to 7-0 70
sugar mill machinery 1000 to 1200 of sugar cane 14 10-0 85
cotton textile mill machinery :
(a) spining mill
(b) composite mill
12000 spindles
12000 spindles and 300 looms


sulphuric acid plant 50 10 1-3 80

It is highly desirable that the targets set for 1965-66 in respect of machinery items should be achieved and on the basis of the indigenous content specified in each case. The consortium approach for the manufacture and supply of complete plants for factories by groups of firms in association—which has bgen adopted for the manufacture of sugar mill machinery—may facilitate a speedy advance .in other fields also.


61. Exclusive of the contribution from the small-scale sector reckoned at about Rs. 5.0 crores, the target for machine tools is envisaged at Rs. 30 crores worth of output by 1965-66 as against an estimated production of Rs. 7 crores on the same basis in the last year of the Second Plan. Though there would thus be nearly a threefold increase of output, this target of production falls substantially below the Rs. 50 crore level of yearly demand forecast for machine tools by the end of the Third Plan. There are physical limitations to a bigger step-up of production in this field arising from the large demand for skilled labour and the wide diversity in the categories of machine tools required. This is, however, a field of high priority where further developments should be undertaken, if feasible.

62. In the public sector, it should be possible within the foreign exchange arrangements so far made to proceed at once with the expansion of Hindustan Machine Tools, Jalahalli (HMT) and Praga Tools, Hyderabad, and with the establishment of a new heavy machine tools plant near Ranchi and one more machine tool works of the same size and type as HMT to be located in Punjab. It is estimated that the combined output of these machine tool works in the public sector inclusive of the contribution exped-ted from the proto-type factory, Ambernath, of the Defence Ministry, will rise to about Rs. 15.0 crores.

63. The expansion programmes in the private sector will broadly have to be complementary and supplementary to the public sector plans and formulated against the background of the demand forecast for the different groups and families of machine tools.


64. In this field the most important development in the public sector will be the diversification of the Chittaranjan Locomotive Works so as to include the production of electric locomotives. The traction motors for these electric locomotives are proposed to be manufactured at the Heavy Electricals Ltd., Bhopal. The project for the manufacture of diesel electric and diesel hydraulic locomotives included in the Railway Plan will make a major contribution towards the achievement of self-sufficiency in respect of railway equipment. The Rs. 12 crore diesel loco project will have an annual capacity of 140 units with a turnover value of Rs. 10.0 crores. The diesel hydraulic engines would also make use of the Suri transmission, an improved design developed recently by an engineer of the Indian Railways which has been licensed for exploitation in West Germany. The private sector will continue to manufacture electric multiple coaches, wagons and meter gauge steam locomotives.


65. The programmes under this head include the expansion of Hindustan Shipyard Ltd. and the construction of a drydook at Vishakhapat-nam. With the completion of these developments, the Visakhapatnam . shipyard will be capable of producing ships of a total tonnage of 50,000—60,000 D.W.T. per year.

A second shipyard at Cochin and a scheme for the manufacture of marine diesel engines form part of the public sector programme. The former is estimated to cost Rs. 20 crores and the latter Rs. 5 crores.

66. Manufacture of smaller vessels for coastal and river traffic, tugs and boats and propelling machinery therefor wilt continue in the private sector. Construction activity will be mainly on a jobbing basis and no specific targets have, therefore, been fixed for these 'custom-built' items.


67 As against the current structural fabrication capacity estimated at 500,000 tons, inclusive of the capacity of wagon builders, the target for the last year of the Third Plan is visualised at 1.1 million tons. The accent is expected to be much more on developing fabrication facilities for heavy structurals than has been the case in the past. Allied to these structural shops, facilities for the manufacture of items like pressure vessels, heat exchangers and other types of chemical plant and equipment are envisaged to the developed through the establishment of heavy plate and vessels works. The manufacture of cranes is another important line of allied activity.

68. In the public sector plan, detailed proposals have been worked out for a heavy structural works and a plate and vessel works to be established at a single location in the Nagpur-Wardha area. The former would have a capacity of 10,000 tons and the latter 18,000— 20,000 tons per year on single shift basis. Together, these plants are estimated to cost Rs. 10.1 crores.


69. In addition to the capacity to be developed in the public sector under the Czech-aided heavy electrical project, facilities for the production of boilers for power plants as well as for meeting the steam raising demand of different industries are planned for development in the private sector. The value of the output of boilers in 1965-66 is envisaged at Rs. 25.0 crores.


70. The levels of development proposed for these industries are broadly in keeping with the recommendations made by the ad hoc Committee on the Automobile Industry in its Report of March, 1960 and by the Development Council for Automobiles and Ancillary Industries. The capacity targets in respect of all the items conform to the minimum targets recommended by the Development Council with the exception of passenger cars, for which a lower figure as proposed by the ad-hoc Committee has been accepted. The targets tentatively proposed for passenger cars, commercial vehicles, jeeps, motor cycles and scooters are :


passenger cars 30000
commercial vehicles 60000
jeeps and station wagons 10000
motor cycles, scooters and three wheelers 60000

The target for commercial vehicles includes 4000 units expected to be produced at the ordnance establishments.

71. To reach the targets of production of automobiles without excessive and continued strain on foreign exchange resources, it will be necessary to achieve at least 85 per cent indigenous content by 1965-66 as compared with less than 60 per cent at the start of the Third Plan. Investment designed to increase the indigenous content has to take precedence over investment for establishing new units or expanding existing capacity. Priority has also to be given to the production of commercial vehicles. Exclusive of the investment on facilities for producing castings and forgings to meet the full requirements of the automobile industry, the direct investment in this field vis-a-vis the targets is placed at about Rs. 85 crores with a foreign exchange element of Rs. 40 crores. Even more important than the direct investment is the demand for foreign exchange on maintenance account which for the Third Plan period, as a whole, has been estimated at Rs. 175 crores.


72. With the exception of the following projects in the public sector, the expansion of capacity under other engineering industries vis-a-vis the targets in Annexure III to this Chapter is expected to be secured through the efforts of private enterprise:

  1. Precision Instruments project.
  2. Expansion of Precision Instruments Factory, Lucknow.
  3. Expansion of Hindustan Cables, Rup-narainpur.
  4. Expansion of the Government Electric Factory, Bangalore.
  5. Heavy Compressors and Pumps project.
  6. Ball and Roller Bearings project.
  7. Surgical Instruments project, Guindy.

The precision instruments project is of fundamental importance in relation to future growth and covers new ground in a highly specialised field. Manufacture of control instruments and equipment with an ultimate annual turn-over of about Rs. 20 crores is envisaged under this project. The surgical instruments plant near Guindy has been planned for the manufacture of 25 groups of instruments valued at about Rs. 2.7 crores per year. The expansion of Hindustan Cables is, like the Diesel Loco Project, linked with the growing demands of Government in the field of communications.

Where no targets have been fixed for specific items in this as well as in other fields, developments are expected to be regulated by ad hoc reviews.


73. The largest and most important investment under this head during the Third Plan will be in the field of fertilisers. Large-scale development of nitrogenous fertilisers has become necessary as a result of the steep rise in the demand for them in connection with the agricultural programme and has been facilitated by the availability of waste gases from the petroleum refineries and coke-oven plants, the associated gas. liberated in the mining of crude petroleum and, most important of all, petroleum naphtha. Naphtha has also given a fillip to organic chemical industries which have so far had to depend mainly on alcohol from molasses and acetylene from carbide. A favourable climate for the production of organic intermediates has been created by the recovery of organic hydrocarbons, e.g., benezene, toluene, naphthalene, anthracene and xylene which is expected to be further stepped up in the public sector pari passu with the increased coking of coal at the steel plants. The extraction of some of these hydrocarbons is considered feasible at some of the petroleum refineries by marginal modification and additions.

The programmes of some of the major industries falling under this head are briefly described below.


74. Fertilisers.—The demand for nitrogenous and phosphatic fertilisers is expected to expand to about one million tons in terms of nitrogen and 400,000 tons in terms of PaOg by 1965-66. In the case of phosphatic fertilisers the end-product will have to be at least 50 per cent water soluble in order to meet the requirements of the users. In the case of nitrogen, the following end-product pattern forms the basis for production planning :

Table 9 End-product pattern for nitrogenous fertilisers
(000 tons of N)

ammonium sulphate 230
ammonium sulphate-nitrate 30
nitrochalk and nitrolimestonc 160
nitrophophate complex fertiisers 45
urea 305
ammonium phosphate 200
ammonium chloride 30
total 1000

It will be seen from the above that a significant portion of the additional output of nitrogen is being planned in the form of compound and/or complex fertilisers so that a part of the phosphate (PaO^) requirements will also be met simultaneously. The pattern of production is expected to keep within reasonable limits dependence on sulphur and gypsum.

75. In addition to the completion of fertiliser projects carried over from the Second Plan, it is proposed that further capacity for nitrogenous fertilisers should be established in the public sector by both the Central and some of the State Governments. At the time of the publication of the Draft Outline it was provisionally thought that the public sector capacity for nitrogenous fertilisers would be expanded to 800,000 tons and that the balance of 200,000 tons required to reach the target of one million would be provided by the private sector. It now seems probable that the private sector will undertake rather more than previously contemplated and that the c'apacity in the public sector by 1965-66 will be somewhat less than 800,000 tons. Applications from private enterprise have so far been approved, apart from the doubling of the Varanasi factory of Sahu Chemicals to 20,000 tons, for a plant at Ennore near Madras (8,250 tons of N) ; in Madhya Pradesh (50,000 tons of N); at Vishakhapat-nam (80,000 tons of N) and Kothagudiam (80,000 tons of N) in Andhra Pradesh; and in Rajasthan (80,000 tons of N). In addition, private enterprise in partnership with the West Bengal Government is expected to put up a fertiliser factory at Durgapur (58,000 tons of N).

It has also been proposed that fertiliser factories should be set up in Gujarat and Mysore, but their details are still being examined.

76. The capacity in the public sector by the end of the Third Plan is at present expected to be about 730,000 tons as shown below:

Table 10 Capacity for nitrogenous fertilisers in the public sector
(tons of)

existing capacity (Sindri, Nangal, FACT) 217000
Rourkela 120000
Neiveli 70000
Trombay 90000
Nahorkatiya 32500
further expansion of FACT . 40000
Gorakhpur 80000
one more fertiliser plant in tht public sector 10000
total 729500

As a general rule, the size of the new plants will be fixed at 70,000 to 80,000 tons of nitrogen in order to provide guidance and facilitate the planning of the manufacture of fertiliser plant equipment.

77. Under straight phosphatic fertilisers, a capacity of 200,000 tons in terms of P2O5 has already been planned. No further expansion of capacity is envisaged in terms of superphosphate.

78. The production of nitrogenous and phosphatic fertilisers is expected to be somewhat as follows during 1961-66 :

Table 11 Estimates of production of Nitrogen and P2O5
(000 tons)

N P.O.
1961-62 140 100
1962-63 200 150
1963.64 300 225
1964-65 500 300
1965-66 800 400

The overall investment and the foreign exchange cost of the fertilisers programme on capital account are estimated at Rs. 225 crores and Rs. 100 crores respectively.

79. Sulphuric acid.—As a major barometer of industrial activity, the target of 1.75 million tons set for sulphuric add provides an indication of the tempo of all-round expansion planned. The growth of sulphuric acid production in the public sector is visualised in conjunction with fertiliser production, by-products recovery and pickling operations at the steel plants, petroleum refining and manufacture of organic intermediates and drugs, and uranium extraction from the ores. The overall demand for the acid in the public sector by 1965-66 is expected to be about 550,000 tons as against a c'apacity of about 150,000 tons in existence in the public sector at the end of the Second Plan.

The break-up of the estimated consumption of this acid in 1960-61 and the requirements in 1965-66 are assessed as follows:

(000 tons of suphuric acid)

esitmated consumption in 1960-61 estimated requirement in 1965-66
fertilisers 210 1090
steel works 26 30
rayon and staple fibre . 59 135
Sulphates and other inorganic 24 49
salts pctroltum refining 8 20
mitcallaacous 33 185
total 360 1500

80. Whereas the production of sulphuric acid has so far been based on sulphur, a part of the capacity proposed to be set up in the Third Plan period will be linked with by-product smelter gases (zinc and copper smelters) and with pyrites from the Amjor deposits in Bihar. The pyrites-sulphuric acid plants, if established in conjunction with large-scale fertiliser plants near the steel works at Durgapur and Bokaro, could find a profitable outlet for the 'spent oxide' for use in the sintering of iron ore.

81. Sulphur.—It has been estimated that the consumption of sulphur will increase from about 175,000 tons in 1960-61 to about 600,000 tons inclusive of the sulphur equivalent of pyrites and by-product smelter gases in the last year of .the Third Plan. With the development of new sources of sulphur supply in other countries, no serious rise in the import price of this basic industrial raw material is anticipated. Even so, it still remains important to establish some indigenous source of sulphur. A major effort at tackling this problem will be made during the Third Plan. A public sector project has been included in the Plan for the recovery of sulphur from pyrites (vide Chapter XXVII, para 50).

82. Caustic Soda and Soda Ash.—The targets for these chemicals are based on meeting the estimated requirements for 1965-66 in full from indigenous sources. With the exception of the expansion programme of Travancbre-Cochin Chemicals and the organic chemicals scheme of West Bengal, the development in these two industries rests entirely with private enterprise. The additional production required in order to reach the target for caustic soda is expected to be based on both the electrolytic and the chemical processes. The relative shares of the capacity for caustic' soda, processwise, in the last years of the Second and Third Plans are :


1960-61 1965-66
chemical caustic . 27000 50000
electrolylic caustic 97435 350000
total 124435 400000

The expansion of soda ash production is also expected to cover the production of heavy soda ash. An indication of the growth of capacity for heavy and light soda ash is given below :


1960-61 1965-66
soda ash (light) 220000 370000
soda ash (heavy) nil 160000
total 220000 530000

83. Miscellaneous.—Apart from the major heavy chemicals whose programmes have been outlined above, the Third Plan envisages specific levels of development for other produc'ts like titanium dioxide, calcium darbide, sodium hy-drosulphite, sodium sulphate, potassium hydroxide and barium chemicals against the background of the expansion of demand.

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