NEW DELHI: Coal, electric power, oil & gas, crude oil, steel and aluminium are the major core sector segments that are projected to record higher growth rate in the current financial year, compared to the growth rates recorded in the last fiscal. The higher projection for this year will translate into improved prospects for growth for a range of industries in the engineering, non-engineering and the services sectors, according to the latest Core Sector Survey brought out by FICCI.

The FICCI Core Sector Survey, based on responses from industry, allied industry organisations, associations, government and public sector undertakings, reveals that the coal sector is projected to grow at 6.5 per cent-7 per cent in April-March 2006-07 compared with a growth of 6.4 per cent during the corresponding period of the previous year. Likewise, electric power is slated to grow at 5.5 per cent-6 per cent (against 5.1 per cent); oil & gas 0.8 per cent-1.4 per cent (-1.4 per cent); crude oil 0.5 per cent-1.2 per cent (-5.2 per cent); steel 7 per cent-8 per cent (6.5 per cent and aluminium 8 per cent - 9 per cent (7.8 per cent).

Higher growth likely

It also confirms that the core sectors can attain projected growth rates and may even record higher growth than projected in the coming years provided some of the basic issues pertaining to each individual sector are addressed.

Some of these issues relate to inverted duty structure, anomalous import tariff, rising prices of basic raw materials with inadequate availability. Inadequate power and power cuts, poor quality of coal and unstable supply have become the major hurdles for user industries in the core sector.

Linkages between supplying coal fields and powerhouses, transportation bottlenecks in case of coal and cement over long distances, continued environmental problems, increase in water cut and increase in water oil ratio in few developing fields and less than anticipated production from enhanced oil recovery projects in the case of oil and gas, high taxes at all levels — Centre/ State/ local (over 70 per cent of ex-factory price) for cement, higher excise duty on steel and anti-dumping duties on steel are some of the sector specific issues and constraints.

Slow implementation

Some of the issues and constraints relate to slow pace of implementation or non-implementation of sectoral packages for a number of items. There is need for improving the financial health of the State Electricity Board (SEBs) and for increased investment and higher allocation and other measures for improving infrastructure.

The FICCI survey highlights the need for pro-active government action for helping the industry to achieve lower cost, improved quality and better performance in the competitive environment.

Developing a dependable payment security mechanism for the project developer is still a serious challenge because of the fact that the ultimate off-taker of these projects, the State utilities/State electricity are facing financial problems. It has been observed that hydro projects require large initial capital investment but once completed require only the O&M expenses once the debt has been serviced. Therefore, there is a need for ensuring viable fund for long-term debt financing for hydro projects.

Rising demand

The Survey notes that the New Exploration and Licensing Policy (NELP) is yet to prove its potential meeting rising demand. The situation, which looks promising, demands more liberal packages coupled with consortium approach as possible measures to step up domestic production, the survey confirms.

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