Problems of core industries

The Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP) and are as follows:-

  1. Coal
  2. Crude Oil
  3. Natural Gas
  4. Refinery Products
  5. Fertilizers
  6. Steel
  7. Cement
  8. Electricity


  • The reality of India’s energy sector is that around three-quarters of our power comes from coal powered plants and this scenario will not change significantly over the coming decades. Thus, it is important that India increases its domestic coal production to provide energy security and reduce its dependence on imports. The following steps needs to be undertaken to boost coal production and distribution –


  • At the institutional level, an independent organisation should be created to develop and maintain the repository of all coal related geological information in the country. The proposal to set up a Coal Regulator for fostering competition in the coal sector apart from advising Central Government on the formulation of the principles and methodologies for determination of price of raw coal and washed coal should be implemented.



  • Using market mechanisms to open the coal-mining sector for commercial mining. (Discussed later).


  • Critical role of railways in coal distribution should be leveraged. In 2014, 50 million tons of coal could not be distributed in a timely fashion due to rail limitation. For instance, there is a need to complete the three critical Railway lines namely Tori-Shivpur, Jharsuguda-Barpalli and Mand-Raigarh to significantly augment coal evacuation.



  • The government should employ more Coal-Handing and Preparation Plants (CHPP) that wash coal before shipping. This process removes ash and debris, thereby increasing the energy content per tonne by 10-20%. Also, steps need to be taken to adopt clean-coal technologies including coal gasification.


  • Finally, to boost production, the on-going auction process and transfer of mining lease and other related activities of captive mines to the new successful bidders should be expedited. The production from captive blocks has been targeted at 400 MT by 2020; the yearly targets should


  • be devised and, where required, coalmines should be re-allocated to achieve the above target.


Crude Oil and Natural Gas

  • India has 0.5% of the oil and gas resources of the world and 15% of the world’s population. This makes India heavily dependent on the import of the crude oil and natural gas.


  • India the third-largest oil consuming nation in the world: India’s oil consumption grew 8.3 per cent yearon-year to 212.7 million tonnes in 2016, as against the global growth of 1.5 per cent.



  • India is the fourth-largest Liquefied Natural Gas (LNG) importer after Japan, South Korea and China, and accounts for 5.8 per cent of the total global trade.


  • Government aims to increase the share of gas in the country’s energy mix to 15 per cent by 2020 from about 6.5 per cent now to curb pollution and carbon emissions.



  • Draft National Energy Policy target to reduce oil imports by 10% from (2014-15 levels) by 2022


  • According to the Minister of State for Petroleum and Natural Gas, India’s oil demand is expected to grow at a compound annual growth rate (CAGR) of 3.6 per cent to 458 Million Tonnes of Oil Equivalent (MTOE) by 2040, while demand for energy will more than double by 2040 as economy will grow to more than five times its current size.



  • The Cabinet Committee on Economic Affairs chaired by the Prime Minister gave its approval for issuing a notification amending Oil Fields (Regulation and Development) Act, 1948 (ORD Act, 1948)


  • Government had earlier issued a notification in 2015 granting rights to CIL and its subsidiaries for exploration and exploitation of CBM from all coal bearing areas for which they possess mining lease for coal. However, permission was required for Mining Lease (ML) for CBM by Ministry of Petroleum and Natural gas.



  • Now with new amendment, requirement of permission has been done away with for CIL and its subsidiaries.



  • All plants need certain mineral nutrients to survive. These minerals occur naturally in the soil and are taken up from the soil by the roots of the plants. Most soils usually have enough of these minerals to keep plants healthy.
  • However, some nutrients are gradually used up by the plants, or are washed out of the soil, and need to be replaced to maintain optimal growth and appearance.
  • The most common mineral nutrients that need replacing are Nitrogen (N), Phosphorus (P) and Potassium (K).
  • The term “fertilizer material” means a commercial fertilizer containing one or more of the recognized plant nutrients, which is used primarily for its plant nutrient content.
  • Fertilizers are derived from a wide variety of natural and manufactured materials and are sold in solid, liquid and gaseous form (anhydrous ammonia). These materials are designed for use or claimed to have value in promoting plant growth or increasing plant-available nutrient levels in soils.

Complete versus Incomplete Fertilizer

  • A fertilizer is said to be a complete or mixed fertilizer when it contains nitrogen, phosphorus and potassium (the primary nutrients). Examples of commonly used complete fertilizers are 6-12-12, 10-10-10, 15-15-15 and 20-10-10.
  • An incomplete fertilizer will be missing one or more of the major components. Examples of incomplete fertilizers are: 34-0-0 (ammonium nitrate), 46-0-0 (urea), 18-46-0 (diammonium phosphate), 0-46-0 (triple super phosphate) and 0-0-60 (muriate of potash).
  • Incomplete fertilizers are blended to make complete fertilizers. As an example, if 100 pounds of 46-0-0 (urea) were combined with 100 pounds of 0-46-0 (concentrated super phosphate) and 100 pounds of 0-0-60 (muriate of potash), a fertilizer grade of 15-15-20 would result. When these quantities are combined, each quantity is diluted by the other two materials by one-third, provided each fertilizer material contributed equal weight to the blend

Imbalance in use of fertilizers in India

  • The manufacture, sale, and distribution of fertilizers in the country is regulated by the Ministry of Chemicals and Fertilizers, under the Essential Commodities Act, 1955.
  • There are three major types of nutrients used as fertilizers: Nitrogen (N), Phosphatic (P), and Potassic (K). Of these, the pricing of urea (containing N fertilizer) is controlled by the government, while P and K fertilizers were decontrolled in 1992, on the recommendation of a Joint Parliamentary Committee.
  • It has been observed that urea is used more than other fertilizers. While the recommended ratio of use of the NPK fertilizers is 4:2:1, this ratio in India is currently at 6.7:2.4:1. Overuse of urea is especially observed in the states of Punjab, Haryana and Uttar Pradesh.
  • An imbalanced use of urea may lead to a loss of fertility in the soil over a period of time, affecting productivity.
  • Urea (N) is the most produced (86%), consumed (74%) and imported (52%) fertilizer in the country. The government determines the quantity of fertilizers to be imported based on their domestic availability.
  • However, the process of fixing the quantity to be imported and actually receiving the imports takes about 60-70 days, since only three companies are allowed to import urea into the country.
  • Thus shortages are often caused in the urea market. Since farmers have to ensure that urea is applied to their crops on time, it leads to the growth of black markets selling urea, often at prices above the maximum retail prices.
  • The level of fertilizer required for a crop depends upon the soil type, level of yield, and water availability, in addition to the type of crop.
  • Certain crops such as rice, wheat, maize, cotton and sugarcane require larger quantities of nitrogen as compared to pulses, fruits and vegetables.
  • Although the ratio of N, P, and K fertilizer usage across crops has increased, the quantity of fertilizers used by India is still lower as compared to other countries.
  • The average consumption of fertilizers increased from 106 kg per ha in 2005-06 to 128 kg per ha in 2012-13. In comparison, Pakistan consumes 205 kg per ha and China consumes 396 kg per ha.
  • To meet the production target of 300 million tonnes of food grains by 2025 which was mentioned earlier, 45 million tonne of fertilizers would be required. Of this, 6-7 million tonnes may be met from organic fertilizers, but the rest would be met by chemical fertilizers (containing N, P and K). The domestic production of fertilizers would have to be increased to meet this demand.

Nutrient based subsidy policy for Fertilizers

  • The central government launched the nutrient based subsidy policy (NBS) in 2010 for P and K fertilizers. The policy was formulated with the objective of promoting a balanced use of N, P and K fertilizers.
  • The policy allowed the manufacturers of P and K fertilizers to fix their maximum retail prices (MRPs) at reasonable levels. The subsidy provided would be based on per kilogram of the nutrient.
  • The policy also provided for an additional subsidy to be paid to indigenous manufacturers of fertilizers.
  • The Comptroller and Auditor General of India, in its report on the performance of the NBS policy stated that in the five years since its implementation, the policy had not succeeded in bringing about a balanced use of fertilizers. The fertilizer usage ratio of urea increased from 4.3 in 2009-10 to 8.2 in 2012-13.

Fertilizer Subsidy in India

  • To promote the use of fertilizers by farmers, the central government provides a fertilizer subsidy to the producers of fertilizers.
  • In 2017-18, Rs 70,000 crore has been allocated for fertilizer subsidy, which is the second biggest expenditure on subsidy after food subsidy.
  • Allocations for fertilizer subsidy have been increasing at an annual rate of 11.4% between 2000 and 2016. Of the subsidy allocated for 2017-18, Rs 49,768 crore has been allocated for subsidy on urea.
  • Currently the amount of subsidy to be given is determined based on the cost of production of the fertilizer company. Companies with a higher cost of production receive greater subsidies. This reduces the companies’ incentive to reduce their cost of production.
  • Although the consumption of urea has been increasing over the past decade, no new domestic production capacity has been added in the past 15 years.
  • A Committee that examined the role of Food Corporation of India recommended that cash transfers should be made to farmers to replace the current fertilizer subsidy regime. This would allow farmers to choose fertilizers in the combination best suited to their needs, and help them to fix the fertilizer imbalance in soil.
  • In the Union Budget 2016-17, it was announced that a direct benefit transfer program for fertilizers would be launched on a pilot basis in a few districts across the country. In July 2016, the government announced that it would be conducting pilot studies of direct benefit transfers in 16 districts in 2016-17


Iron and Steel Industry:


  • Pig Iron
  • Pig iron is the intermediate product of smelting of iron ore with a high-carbon fuel such as coke and charcoal and is the basic raw material in Foundry and Casting Industry for the manufacture of various types of castings required for engineering sector. Pig iron usually has very high carbon content of 3.5% to 4.5%. The main sources of pig iron have traditionally been the integrated steel plants of SAIL besides plants of Tata Steel and Rashtriya Ispat Nigam Ltd. The domestic production of pig iron did not keep pace with the demand. Efforts were, therefore, made to increase pig iron manufacturing facilities in the secondary sector
  • As a result of various policy initiatives taken by the Government, Private Sector did show considerable interest in setting up new pig iron units, specially in the post-liberalised period. Of the total 6.87 million tonnes production in 2012-13, the Private Sector accounted for over 90% of the total production for sale of pig iron in the country.
  • In 2012-13, 6.87 million tonnes pig iron was produced against 5.37 million tonnes in 2011-12. Location and capacity of principal pig iron units in Private Sector are furnished in Table-2. M/s Usha Martin Industries Ltd, M/s Jindal Steel & Power Ltd have integrated mini-blast furnaces (MBF) for manufacture of steel through Electric Arc Furnace (EAF). M/s Hospet Steel (a joint venture of Kalyani and Mukand) and M/s Southern Iron & Steel Co. Ltd had integrated their MBF with energy optimising furnace to produce steel.
  • Sponge Iron
  • Commercial production of sponge iron in India commenced in 1980. Sponge Iron India Ltd was first to set up a plant in 1980 at Palwancha of Khammam district in Andhra Pradesh with a capacity of 0.039 million tonnes/year.
  • In the last few years, combined use of hot metal and sponge iron in electric arc furnace have been in practice for production of liquid steel, consequently production of sponge iron too went up substantially to meet the demands. The installed capacity of sponge iron increased from 1.52 million tonnes per annum in 1990-91 to 37.30 million tonnes per annum in 2012-13. The production also increased from 0.9 million tonnes in 1990-91 to 23.01 million tonnes in 2012-13


  • Iron and steel is a basic industry and is the backbone of industrial development of any country.
  • The first unit, which was able to produce pig iron successfully, in the country came up at Kulti in 1874 and was named the Bengal Iron Work Country. Another plant came up at Sakchi (now Jamshedpur) in 1907, set up by the Tatas and called the Tata Iron and Steel Company (TISCO). In 1919, the Indian Iron and Steel Company (IISCO) plant was set up at Burnpur. In 1923, another plant came up, called the Mysore Steel Works (later named the Visveshwaraiya Iron and Steel Limited—VISL)
  • The plant at Durgapur, in Bardhman district of West Bengal started operating in 1962. It was set up with help from the United Kingdom. The alloy steel plant at Durgapur produces ingot steel. Iron ore for the Durgapur steel plant comes from Bolani mines in Kendujhar; coal from Jharia, and power is supplied by the DVC. Limestone comes from Sundergarh and manganese from Kendujhar. Durgapur steel plant is situated on the Kolkata- Asansol rail line. This way, it is connected with Kolkata port and the major markets.
  • The Bokaro steel plant is situated in Hazaribagh district of Jharkhand at the confluence of Bokaro and Damodar rivers. It was established during the Third Plan, but started operating in 1972. It was set up with Soviet help. Iron ore for the plant comes from Kiriburu in Kendujhar district of Orissa and partly from Salem, Mangalore and Ratnagiri by sea route.
  • Coal comes from Jharia and power is supplied by the DVC. Limestone supplies are drawn from Bhavantpur and Daltonganj in the Palamau district, and dolomite from Bilaspur in Madhya Pradesh. The location of the steel plant is favourable, as it is nearest to the industrial region of southern Uttar Pradesh (Varanasi, Kanpur, Ferozabad, Mugalserai) and also has access to Delhi and Amritsar.
  • The plant at Salem in Tamil Nadu was planned during the Fourth Plan, but it could come into operation only in 1982. Earlier, due to lack of suitable raw materials in the area for making iron by the conventional blast furnace process, the proposal for a steel plant could not get materialised. Salem area is rich in iron ore and this iron ore is beneficiated to a higher grade concentrate, agglomerated and then smelted in electric furnace. The Salem plant produces stainless steel.
  • The Visakhapatnam Steel Plant, which came into operation in 1992, is the first plant in the shore region. It is also the most sophisticated modern integrated steel plant in the country. A number of modern technological features have been incorporated in the plant. Being located at a port site, the plant has the flexibility to opt for imported coking coal, thereby relieving the pressure on Indian coal mines.
  • Also, its products can be easily exported. Visakhapatnam is well connected with the coalfields of Damodar Valley. The iron ore deposits are obtained from Bailadila in Chhattisgarh. Fluxes like limestone, refractories and ferroalloys can be obtained from the adjacent areas.
  • Neelachal Ispat Nigam Ltd. and government agencies have set up Orissa’s second integrated iron and steel plant at Kalinganagar, in Jajpur district

v  Mini Steel Plants:

  • Apart from the integrated steel plants, steel is also produced by electric arc furnace units which are popularly known as mini steel plants, from steel scrap/sponge iron. The integrated steel plants mainly produce mild steel and alloy steel, including stainless steel. These plants are located in areas away from the integrated steel plants to meet the demand there. Their period of construction and gestation is short and they offer greater flexibility in operation.



  • Cement, an important infrastructure core industry, is one of the most advanced industries in the country. The country was deficient in cement and it had to resort to imports to fill the gaps in supplies until the complete decontrol of price and distribution on March 1, 1989 and introduction of other policy reforms; since then, the cement industry has made rapid strides.
  • Cement is made mainly from limestone and clay. Other raw materials include shale, coal and gypsum. Thus, cement factories are located near limestone deposits. Since coal and gypsum are brought generally from long distances and cement has to be dispatched to far-off consuming centres, the cement plants are located close to rail routes. Sludge from fertiliser plants, blast furnace slag and sea-shells are used instead of limestone in some cement plants.
  • For instance, the cement plants at Bhadravati (Karnataka) and Chaibasa (Jharkhand) use slag and the plant at Sindri uses sludge. Limestone is available at a number of places in most of the states of India, but basalt covered areas of Maharashtra and Chhattisgarh, and the northern alluvial plains are without limestone based cement manufacturing plants. At Dalmia Dadri in Haryana, there is a cement plant based on kanker (limestone nodules).
  • The major producer states of cement and major cement producing centres are given below.
  • Tamil Nadu:
  • TiruneFveli, Ramanathpuram, Tiruchchirappalli, Salem and Coimbatore.
  • Chhattisgarh:
  • Durg and Raipur.
  • Madhya Pradesh:
  • Jabalpur and Gwalior.
  • Gujarat:
  • Ahmedabad, Sikka, Sewree, Dwarka, Porbandar, Sewalia and Ankaleshwar.
  • Jharkhand:
  • Sindri, Ranchi, Palamau, Japla and Chaibasa.
  • Bihar:
  • Dalmianagar
  • Rajasthan:
  • Bundi, Sawai Madhopur, Chittor- garh, Udaipur.
  • Andhra Pradesh:
  • Karimnagar, Kurnool, Vijaywada, Krishna, Sullurpet and Anantpur.
  • Karnataka:
  • Shahbad, Wadi, Kurkunta, Bagalkot, Bhadravati and Tumkur.
  • The Indian cement industry not only ranks high in the production of cement in the world but also produces quality cement to meet global standards. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially. Apart from meeting the entire domestic demand, the industry is also exporting cement and clinker.
  • The working group on cement industry for the formulation of Tenth Five Year Plan and other studies on global competitiveness of the Indian cement industry highlighted constraints such as high cost of power, high freight cost, inadequate infrastructure and poor quality of coal. Additional capacity creation is hampered by the lack of long- term coal linkages.

In order to utilise the excess production capacity available with the cement industry, the government has identified the following thrust areas for increasing demand:

  • Further push to housing development programmes;
  • Promotion of concrete highways and roads;
  • Use of ready-mix concrete in large infrastructure projects; and
  • Construction of concrete roads in rural areas under Prime Minister’s Gram Sadak Yojana.


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