2. Industrial Needs

India had opted for the industrial sector as its prime moving force, as we saw in the earlier pages. Now there were some areas of industries which the government had to invest in, due to several compulsive reasons. For industrialisation and its success, every economy needs the healthy presence of some ‘basic industries’, which are also known as the ‘infrastructure industries’.21 There are six basic industries which every industrialising economy requires, namely—

(i) Iron and Steel

(ii) Cement

(iii) Coal

(iv) Crude oil

(v) Oil refining and

(vi) Electricity

[Note: At present, there are eight Core Industries in India (with the Base: 2004–05=100), six existing ‘basic/infrastructure industries’ with two new additions, i.e., Natural Gas and Fertilizer. Core industries together have a combined weight of 37.90 per cent in the Index of Industrial Production (IIP). Individual percentages of them are: Coal (weight: 4.38 per cent); Crude Oil (weight: 5.22 per cent); Natural Gas (weight: 1.71 per cent); Petroleum refinery (weight: 5.94 per cent); Fertilizer (weight: 1.25 per cent); Steel (weight: 6.68 per cent); Cement (weight: 2.41 per cent); and Electricity (weight: 10.32 per cent).]

Similar to the infrastructure sector, these basic industries also require high level of capital, technology, skilled manpower and articulation in entrepreneurship which was again considered not feasible for the private sector of the time to manage. Even if the private sector supplied goods from the ‘basic industries’, they might not be able to sell their products in the market due to the lower purchasing power of the consumers. Perhaps, that is why again the responsibility of developing the basic industries was taken up by the government.

Out of the six basic industries, the cement industry had some strength in the private sector, while in the iron and steel industry a lone private company was present. The coal industry was controlled by the private sector and crude oil and refining was just a beginning by then. The level of demands of an industrialising India was never to be met by the existing strength of the basic industries. Neither the required level of expansion in them was possible by the existing number of private players. With no choice left, the government decided to play the main role in industrialising the country. In many of them we as a result, see a natural monopoly for the PSUs, again.