The Growth Engine -
Ministry of Heavy Industries and Public Enterprises

This is a ministry that has truly led the way towards economic regeneration of the independent India. Its ceaseless efforts have yielded many a ‘ratnas’ and ‘mini ratnas’ thus helping India to become a global player. During the last four years of UPA rule it has played a significant role in helping to achieve the economic targets so that social progress can be made. BHEL has, as always, played the lead role in this.

The Ministry of Heavy Industries & Public Enteprises focuses on promoting the development and growth of capital goods, auto sector and engineering industry in the country, framing of policy guidelines for Central Public Sector Enterprises (CPSEs) and administratively dealing with 48 CPSEs.

The Ministry comprises two Departments:

(i)       Department of Heavy Industry

(ii)      Department of Public Enterprises.

The Ministry is under the charge of Cabinet Minister for Heavy Industries and Public Enterprises. He is supported by the Minister of State for Heavy Industries and Public Enterprises. Presently, the Ministry is functioning under the dynamic leadership of Sh. Sontosh Mohan Dev, Hon’ble Union Minister for Heavy Industries and Public Enterprises. He is ably supported by Sh. Raghunath Jha, Hon’ble Minister of State for Heavy Industries and Public Enterprises.

Public Sector Policy under National Common Minimum Programme

The Govt. is committed to a strong and effective public sector whose social objectives are met by its commercial functioning.  But, for this, there is need for selectivity and a strategic focus. The Govt. is pledged to devolve full managerial and commercial autonomy to successful, profit-making companies operating in a competitive environment. Generally profit-making companies will not be privatised.

All privatisation will be considered on a transparent and consultative case-by-case basis. The Govt. will retain existing “Navratna” companies in the public sector while these companies raise resources from the capital market.  While every effort will be made to modernise and restructure sick public sector companies and revive sick industry, chronically loss-making companies will either be sold-off or closed, after all the workers have got their legitimate dues and compensation. The Govt. will induct private industry to turn-around companies that have potential for revival.

The Govt. believes that privatisation should increase competition, not decrease it.  It will not support the emergence of any monopoly that only restricts competition. It also believes that there must be a direct link between privatisation and social needs, for example, the use of privatisation revenues for designated social sector schemes.  Public sector companies and nationalized banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors.

Department of Heavy Industry

The Department of Heavy industry (DHI) has 34 operating PSEs under its administrative control.  These PSEs are engaged in manufacturing, consultancy and contracting activities. This Department is also entrusted with the development and growth of the Automotive Industry and Heavy Electrical/Engineering Industry in the country. Out of the 34 PSEs, 16 are profit making and the remaining 18 are incurring losses. However, on an aggregate basis, PSEs of DHI have shown a profit before.

Performance of the PSEs under DHI in the last 4 years

(Rs. Crore)

Navratna & Mini-ratna PSEs of DHI

Ř        BHEL, a Navratna company, substantially improved its performance in this period by registering an average turnover growth of 37.5% per annum. Market capitalisation of BHEL went up from Rs.5,500 Crore in May, 2004 to about Rs.1,25,000 Crore.

Ř        Engineering Projects (India) Ltd. (EPI) was granted Miniratna status after achieving a turnaround in its operations. The company has started paying dividends for the last few years. This is the 4^th Miniratna company under DHI after HMT (International) Ltd., Rajasthan Electronics & Instruments Ltd. (REIL), and Hindustan Newsprint Ltd. (HNL).

Restructuring of PSEs

a)        In view of the policy in respect of Public Sector companies in the NCMP, profit making PSEs are being strengthened by providing greater autonomy and the loss making PSEs are being considered for revival/ closure. BRPSE has already given recommendations in 25 out of 26 cases of DHI referred to them. PSE yet to be considered by BRPSE is Hindustan Photo Films Ltd., while one more case (Burn Standard Company Ltd.) is yet to be referred to them by DHI.

b)        Out of the 25 PSEs where recommendations of BRPSE are available, revival/restructuring plans have been approved by the Government in 13 PSEs. These plans are under implementation. As a result, 8 of these PSEs have started showing profits.  Govt. have approved following inputs for revival –

(i)       Capital investment (fresh cash support)                                         - Rs. 674 cr.

(ii)      Other fresh cash support (OTS for banks VRS etc.)                      - Rs. 827 cr.

(iii)     Waivers/conversions etc.                                                                   - Rs.3682 cr.

c)            In case of two PSEs, namely, Bharat Ophthalmic Glass Ltd. (BOGL) and Bharat Yantra Nigam Ltd. (BYNL) closure has been approved by the Govt. In case of National Instruments Ltd. (NIL), Govt. has approved transfer of assets and liabilities to Jadavpur University, Kolkata.  Remaining 10 cases out of 25, where BRPSE recommendations are available, are at various stages of consideration. 

Status of Major Schemes being implemented by DHI

1.        National Automotive Testing and R&D Infrastructure Project (NATRIP) - As the existing testing infrastructure for the Auto Sector in the country is limited and inadequate to meet the emerging requirements of the industry, it has been decided to take steps to upgrade the existing testing facilities and setting up of new infrastructure in the country in close cooperation with the industry. The Indian automotive industry has emerged as one of the strongest industries with deep forward and backward linkages. Hence, it was felt that there is a need for developing the test facilities infrastructure in India in order to sustain the present growth of automobile industry. The need for developing testing facilities infrastructure has been recognized by the Planning Commission in view of its potential to contribute to the growth of the economy. The project is aimed at meeting the facilities gap in regulatory and developmental requirement in the automotive industry by involving among other things investment in high speed test tracks, comprehensive testing validation, emerging emission and safety norms at different sites in the country. The total cost of the project is estimated at Rs.1,718 Crore and is expected to be completed in 2011-12. Since, inception, the following milestones have been reached in furtherance of its basic objectives:-

·         Corporate and Site offices were set up in Delhi and different project sites.

·         Consortium led by IDIADA of Spain was appointed Global Consultant in January, 2006 and it submitted a Detailed Project Implementation Report (DPIR) in August, 2006.

·         Geo-Technical and Topography survey of Project Sites was completed at all sites except Rae-Bareilly where the land is yet to be made available.

·         The process of takeover of Regional Centre North (RCN), Manesar of ARAI by NATIS has been completed and it has been renamed as International Centre for Automotive Technology (ICAT). Gazette Notification has been issued by Ministry of Shipping, Road Transport and Highways for accreditation of ICAT as independent type approval agency.

·         The Govt. has notified full custom duty exemption under the project Import Regulation in May, 2006 for all project imports under NATRIP.

·         An ultra-modern Emission Lab at ARAI has been set up as first facility of NATRIP under NATRIP upgradation of ARAI. It was inaugurated by Hon’ble Minister of HI&PE in July, 2006.

·         Construction activities at the Greenfield locations have started.

·         NATRIP has signed a MoU with Vehicle Certification Authority (VCA) of the UK Govt. in October, 2006 for providing internationally valid certification for automotive exports for homologation services to be provided by the upcoming NATRIP centres.

·         BAJA SAEINDIA, a national level engineering student competition, was held at Pithampura, Indore project site of NATRIP in December, 2007.

·         Hon’ble Prime Minister, in the presence of Chief Minister, Tamil Nadu, laid the Foundation Stone of GARC, Chennai project under NATRIP in November, 2006.

·         ICAT, Manesar project of NATRIP at Manesar has exceeded its revenue target of Rs.11 Crore for 2007-08, with total revenue receipts of Rs.11.21 Crore.

·         Silchar site I at Dholchora will be completed by September, 2008.

2.        Integrated Gasification Combined Cycle (IGCC) Project - An R&D Project on Integrated Coal Gasification offers benefits of very low  emission and higher efficiency and has the potential for lower cost of power generation. BHEL has decided to set up this project with Andhra Pradesh Power Generation Corporation (APGenco). BHEL & APGenco signed an MOU in May, 2008 for setting up India’s biggest 125 MW IGCC Power Plant in Vijayawada. 

3.        Jagdishpur Paper Mill Ltd. [Subsidiary of Hindustan Paper Corporation] - In view of the likely gap between demand and indigenous supply of paper, HPC has decided to set up a new manufacturing facility in the Northern Region at Jagdishpur, Uttar Pradesh, through a new subsidiary company for which GoI has accorded approval. The capacity of new paper plant will be 3 Lakh TPA at an estimated cost of Rs.2,742 Crore. 

4.        Revival of National Pulp & Paper Co. Ltd., Nagaland - The Govt. has approved the revival of NPPC at an estimated cost of Rs.552 Crore. The implementation of the revival scheme is in progress and the plant is likely to go into production in 2009-10. 

5.        Expansion of Hindustan Newsprint Ltd. facilities - Hindustan Newsprint, a subsidiary of HPC, is implementing an expansion cum diversification plan to produce writing and printing paper for additional production capacity of 1,70,000 tonnes per annum at a cost of Rs.718.80 Crore. The project is to be financed from internal and extra budgetary resources. 

6.        Expansion of BHEL facilities - BHEL is in the process of creating additional capacity for catering to the power needs of the country in the 11^th Plan at a cost of Rs.4,200 Crore.  Capacity will be enhanced from 10,000 MW to 15,000 MW per annum by 2009. This additional capacity creation will be fully funded from the company’s internal resources.

7.            Support to Capital Goods Industry -        The Indian Capital Goods Industry has been witnessing a turnaround after a prolonged recession. Capital goods manufacturers have been experiencing excellent top and bottom line growth. Their order books are in a very healthy state which indicates the beginning of an investment cycle in India. The capital goods Industry now needs to strategise its future in order to maintain this momentum. DHI had mandated a study done by CII and a number of its recommendations are proposed to be pursued through a modernisation scheme. The scheme envisaging Govt. support of Rs.300 cr. is intended to take some key policy initiatives for development of this sector. Initially this would cover five major CG sectors, viz. Heavy Electrical Equipment, Process Plant Machinery, Mining & Construction Equipment, Textile Machinery and Machine Tools Industry, which together account for nearly 65% of the total production in the capital goods sector.

8.        The Automotive Mission Plan, 2006-2016 - In order to realise the growth potential of the Indian automotive Industry, both domestic and global, and to optimise its contribution to the national economy, DHI decided to draw up a 10-year ‘Automotive Mission Plan’ for the development of the Indian Automotive Sector into a global hub. The Development Council of Automobile & Allied Industries constituted a Task Force with a view to examining the current status and challenges and to conceptualize and document the AMP. The task Force has identified 5 thrust areas namely (i) Demand Creation Brand Building and Infrastructure (ii) Export and International Business; (iii) Competitiveness Manufacturing Standards and Technology (iv) Environment and Safety and (v) Human Resource Development. Five working groups under the chairmanship or eminent industrialists/professionals were constituted for each thrust area for making specific recommendations. To promote India as the favoured destination for automotive manufacturing, R&D and investment, the Ministry prepared an ‘Automotive Mission Plan 2006-2016’ (AMP 2006-2016), the outcome of a detailed consultation with all the stakeholders including the industry, academia and various Ministries/Departments of the Government.

The AMP 2006-2016 was launched in January, 2007 by the Prime Minister. The Mission Plan has envisioned India ‘To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion, accounting for more tan 10% of the GDP and providing additional employment to 25 million people by 2016’. The plan has identified various interventions/prescriptions at both the industry as well as the Government, to promote investment, exports & domestic demand, human resource development, labour reforms and creating R&D infrastructure in the country required to achieve the milestones/objectives of the AMP 2006-2016. It also seeks to remove the impediments in the infrastructure which come in the way of growth of the Industry and put in place the required infrastructure well in advance to facilitate growth.
 

The suggested recommendations in the AMP inter-alia include promotion of manufacture and export of small cars, MUVs, two wheelers tractors and components; to follow appropriate policies conducive for investment and export, setting up of Institutional and infrastructural support facilities to promote R&D, human resource development and to coordinate safety and emission regulations. The targets under AMP are as indicated below:
 

Department of Public Enterprises

The Department of Public Enterprises is the nodal department for all CPSEs and formulates policy pertaining to the role of CPSEs in the economy. It lays down policy guidelines for performance improvement and evaluation, autonomy and financial delegation, personnel management and other related areas in respect of CPSEs. It also collects, evaluates and maintains information on several areas in respect of CPSEs. The DPE also acts as the interface between various Parliamentary and Government organizations and CPSEs as a whole.
Performance of CPSEs

Out of the 247 CPSEs as on 31.3.2007, 217 are operating enterprises and 30 are in the formative stage. CPSEs comprise Government Companies as defined under Section 617 of the Companies Act with the shareholding of Central Government more than 50% as well as Statutory Corporations established under specific Acts of Parliament.

Investment in terms of paid-up capital and long term loans in CPSEs has gone up by Rs.71,095 Crore from Rs.3,49,994 crore as on 31.3.2004 to Rs. 4,21,089 Crore as on 31.3.2007. The turnover of operating enterprises increased by Rs.3,33,706 Crore i.e. from Rs.6,30,704 Crore in 2003-04 to Rs.9,64,410 Crore during 2006-07. The net profit of CPSEs during 2006-07 stood at Rs.81,550 Crore as compared to Rs.52,985 Crore in 2003-04, an increase of Rs.28,565 Crore. Networth stood at Rs.4,52,995 Crore during 2006-07, showing an increase of Rs.1,61,167 Crore over 2003-04 at a compounded annual growth rate of 15.78%.

The number of Profit making CPSEs went up from 139 in 2003-04 to 156 in 2006-07. The number of loss making CPSEs declined from 89 to 59 during this period. All the CPSEs cumulatively declared a dividend of Rs.26,805 Crore in 2006-07 compared to Rs.15,288 Crore  in 2003-04, an increase of Rs.11,517 Crore. By way of interest, dividend, taxes and duties, CPSEs contributed to the Central Exchequer Rs.1,47,728 Crore in 2006-07 against Rs.89,035 Crore in 2003-04 recording an increase of Rs.58,693 Crore. The dividend pay out ratio was 28.8% in 2003-04 which increased to 33.28% in 2006-07.