industrial policy, its spatial aspects and cluster development in ...

Fertilizer Industry
While the fertilizer industry has done well to meet the extensive domestic demand, the
current NPK mix is now seen to be leading to lower average crop yield as compared to
other countries. Furthermore, with an increasing gap in supply and demand for gas,
future viability of our primarily gas-based plants is threatened.
In view of this, the government should:
• Incentivize industry to add capacity in production of DAP. This will correct the
current NPK mix.
• Conduct energy audits of fertilizer manufacturing plants to assess their energy
efficiency, and vary their gas subsidy based on their efficiency.
• Incentivize fertilizer plants to invest in alternate modes of energy production.
• Explore the feasibility of coal as alternate feedstock.
Auto Sector & Farm Machinery
Until 2006 a deletion program was followed in the Auto industry. Due to some
structural reasons as well as poor governance leading to smuggling and under-invoicing,
the deletion program could not be as successful as one would have hoped. Indeed, by
many accounts after many years, with a few exceptions, major OEMs have achieved less
than 40% local content. This too is in components that are inherently difficult to import
(e.g., seats, batteries, tyres etc). Moreover, transfer pricing where it occurs acts as a
disincentive to produce locally. Where the auto industry has localized, it has yielded
highly favourable results generating almost 200,000 jobs and an extensive vendor
industry. Several parts are now produced competitively within the country, and in some
areas we are ideally poised to even export. However, a few barriers continue to prevent
this industry from growing further.
In view of these, we propose the following:
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