Aquaculture, also known as aqua farming, is rearing of aquatic organisms including fish, molluscs, crustaceans and aquatic plants in marine or fresh water, under confined and controlled conditions. Aquaculture production specifically refers to output from aquaculture activities, which are designated for consumption and thus excludes harvest for ornamental purposes. Fish farming is the principal form of aquaculture, which involves breeding fish commercially in tanks or enclosures, usually for consumption purposes.

Depending on the salinity of the water environment, aquaculture is classified into freshwater culture, brackishwater culture, and mariculture. More than half of the aquaculture production of fish, crustaceans, and molluscs comes from freshwater environments. Mariculture, a specialised branch of aquaculture, means the cultivation of marine organisms for food, either in their ‘natural environment’, or in seawater in ponds.

Fishery products are one of the many food groups that have been coming under increasing pressure, with the continuous increase in the world population on one hand and gradual depletion of world's natural fisheries resource on the other, due to overexploitation. Hence, to meet the future shortfall in fish supplies, developing aquaculture resources can be considered as one of the most promising solutions. Although aquaculture has been practised for many centuries, its expansion and intensification is a modern phenomenon with aquaculture production now contributing to nearly 32 per cent of the world supply of fisheries. As per ‘The State of World Fisheries and Aquaculture 2004’ report published by Food and Agriculture Organisation (FAO), growth in aquaculture production has been much faster than that of capture fisheries (Table 1).

Table 1: World Fisheries and Aquaculture Production
(million tonnes)
	1998	1999	2000	2001	2002	2003*
Total Capture	87.7	93.7	95.5	92.9	93.2	90.3
		(6.8)	(1.9)	(-2.7)	(0.3)	(-3.1)
Total Aquaculture	30.5	33.5	35.5	37.7	39.8	41.9
		(9.8)	(6.0)	(6.2)	(5.6)	(5.3)
Total Fisheries	118.2	127.2	131.0	130.6	133.0	132.2
		(7.6)	(3.0)	(-0.3)	(1.8)	(-0.6)
Note: Figures in the bracket denote the percentage change over the previous year. : Preliminary Estimates Source: The State of World Fisheries and Aquaculture 2004 and FAO*

The share of aquaculture production (excluding aquatic plants), in the world fisheries supply has risen from around 26 per cent (in 1998) to around 30 per cent to touch 39.8 million tonnes in 2002. Preliminary estimates by FAO has projected aquaculture production to grow by 5.3 per cent to around 42 million tonnes in 2003, which is remarkable in the back drop of expected decline of 3 per cent in the supply of capture fisheries to 90.3 million tonnes in 2003 from 93.2 million tonnes in 2002.

Total aquaculture production, including aquatic plants have increased from 51.4 million tonnes in terms quantity and US D60.0 billion in terms of value in 2002, to 54.8 million tonnes in 2003 valued at USD 67.3 billion. This growth can be attributed to higher production in China . China , with the share of about 70 per cent, has been the undisputable leader in world aquaculture production. As per the estimates of FAO, with the production of aquatic animals touching 29 million tonnes, China has continued being a top most producer in 2003 as well, followed by India (2.2 million tonnes) and Indonesia (around 1 million tonnes) (Chart A).

In fact, in 2003, the top seven producing nations belonged to Asia and accounted for 88.8 per cent of the total production of aquatic animals, followed by Europe (5.2 per cent), South America (2.4 per cent), North America (2.1 per cent), Africa (1.2 per cent) and Oceania (0.3 per cent). As per ‘The State of World Fisheries and Aquaculture 2004’ (FAO), growth of aquaculture production of fish, crustaceans and molluscs in developing countries have exceeded the corresponding growth in developed countries; proceeding at an average annual rate of 10.4 per cent since 1970. For example, developing countries accounted for 58.8 percent of production in 1970, while in 2002 their share has risen to 90.7 per cent. In developing countries other than China , production has grown at an annual rate of 7.8 per cent. Conversely, aquaculture production in developed countries has been increasing at an average rate of 4.0 per cent per year.

With the exception of marine shrimp, the bulk of aquaculture production in developing countries in 2002 comprised omnivorous/herbivorous fish or filter-feeding species. By contrast, 74 percent of the finfish culture production in developed countries was of carnivorous species. Production of group of species with highest production has been displayed in descending order (Table 2).

Table 2: Composition of Top 10 Species
(million tonnes)
Species	2003	2002	2000
Carps, barbels and other cyprinids	17.22	15.45	16.69
Oysters	4.50	4.00	4.32
Miscellaneous freshwater fishes	4.25	2.86	3.74
Clams, cockles, arkshells	3.79	2.63	3.43
Salmons, trouts, smelts	1.83	1.55	1.80
Shrimps, prawns	1.80	1.14	1.29
Tilapias and other cichlids	1.68	1.27	1.51
Mussels	1.59	1.37	1.44
Miscellaneous marine molluscs	1.23	1.59	1.35
Scallops, pectens	1.18	1.15	1.23
Source: The State of World Fisheries and Aquaculture 2004, FAO

As far as individual species are concerned, the Pacific cupped oyster (with 4.4 million tonnes in 2003) has the highest production volume, followed by three species of carps - silver carp, grass carp and common carp. In terms of ISSCAAP (International Standard Statistical Classification of Aquatic Animals and Plants) groups of species, by far the most production is in the group consisting of carps and other cyprinids (Table 2). If aquatic plants are included, the species with the highest production is Japanese kelp (Laminaria japonica) with a production of 4.6 million tonnes.

In terms of value, carps, as a group, have reported to attract highest value - USD 15.4 billion in 2003 They have been followed by shrimp and prawns (USD 9.3 billion), miscellaneous freshwater fishes (USD 5.6 billion), salmons and trouts (USD 5.6 billion), clams and cockles (USD 4.3 billion) and oysters (USD 3.8 billion). The highest reported value for a single species has been USD 3.8 billion for the whiteleg shrimp, followed by Pacific cupped oyster, giant tiger prawn and Atlantic salmon.

Domestic Scenario

Domestic aquaculture has grown at a CAGR of around 10 per cent during 1950 to 2004, with freshwater aquaculture contributing over 95 percent of the total aquaculture production. Aquaculture contributed over one third of the country's total fish production of 6.1 million tonnes in 2003. The total aquaculture production has been 2.2 million tonnes (valued at USD 2.5 billion), of which carp alone has constituted for as much as 1.87 million tonnes. The aquaculture production has been estimated to post an increase of around 7 per cent to touch 2.5 million tonnes in 2004 (FAO statistics).

Aquaculture in India , in general, is practised with the utilisation of low to moderate levels of inputs, especially organic-based fertilisers and feed. Aquaculture resources in the country consists of 2.36 million hectares of ponds and tanks, 1.07 million hectares of beels, jheels and derelict water supplies in addition 0.12 million km of canals, 3.15 million hectares of reservoirs and 0.72 million hectares of upland lakes. However, only about 0.8-0.9 million hectares have been utilised for aquaculture purposes.

The rapid growth of the aquaculture sector has generated huge employment opportunities for professional, skilled and semi-skilled workers for the different support activities such as construction and the management of farms, hatcheries, feed mills, processing units etc. It has been estimated that over 300 000 jobs have been generated in the brackishwater sector alone in the main and supporting areas for shrimp culture, although information on exact numbers involved in aquaculture is not available.

Freshwater Aquaculture

Ponds and tanks are the prime resources for freshwater aquaculture in the country. Freshwater aquaculture activity is prominent in the eastern part of the country, particularly the states of West Bengal, Orissa and Andhra Pradesh and it is gaining grounds in the states of Punjab, Haryana, Assam and Tripura. Production of freshwater aquaculture has grown at a CAGR of 10.2 per cent during the last 55 years, to touch 2.4 million tonnes in 2004. With freshwater aquaculture being a homestead activity in several parts of the country, besides adding to the nutritional security it also helps in bringing additional income to rural households.

Carp form the most important species farmed in freshwater in India . While the 3 Indian major carps, namely, catla (Catla catla), rohu (Labeo rohita) and mrigal (Cirrhinus mrigala) contribute as much as 87 percent of the total domestic aquaculture production, 3 exotic carps namely, silver carp (Hypophthectareslmichthys molitrix); grass carp (Ctenophectaresryngodon idella) and common carp (Cyprinus carpio), forming second important group, constituting as much as 0.169 million tonnes (2002). Apart from this, the pond culture of catfish, which involves mainly magur (Clarias batrachus) and singhi (Heteropneustes fossilis), is practised in states like Bihar, West Bengal and Orissa.

In fact, it is the establishment of the Pond Culture Division at Cuttack in 1949 under the name of the Centre of Central Inland Fisheries Research Institute (CIFRI), that has given an impetus to development of freshwater aquaculture in the country. Significant developments ha taken place thereafter with the standardisation of induced breeding techniques and the development of hatchery systems and composite carp culture with the three Indian major carps and three exotic carps, forming the basis for carp polyculture systems. An All India Coordinated Research Project (AICRP) on 'Composite Culture of Indian and Exotic Fishes' initiated by the CIFRI during 1971 virtually laid the foundation for scientific carp farming in the country by demonstrating high production levels of 8-10 tonnes/hectares/year.

Freshwater aquaculture has further witnessed diversification through the incorporation of high valued species like freshwater prawn, with a production of over 30 000 tonnes in 2002-2003 from approximately 35 000 hectares of water. Among the freshwater prawns, the giant river prawn, Macrobrachium rosenbergii is the most important species followed by the monsoon river prawn, M. malcolmsonii.

The state of Andhra Pradesh dominates the sector with over 86 per cent of the total production in the country and approximately 60 percent of the total water area dedicated to prawn farming, followed by West Bengal . Mixed farming of freshwater prawn along with carp is also very much accepted as a technologically sound culture practice and a viable option for enhancing farm income.

Brackishwater Aquaculture

Brackishwater aquaculture is mainly concentrated on the coasts of Andhra Pradesh, Tamil Nadu, Orissa and West Bengal . The importance of brackishwater aquaculture was recognised only after the initiation of an All India Coordinated Research Project, (AICRP) on 'Brackishwater Fish Farming' by ICAR in 1973. The project developed several technologies pertaining to fish and shrimp farming, however, scientific and commercial culture at present is restricted to farming of shrimps. Studies on maturation and the breeding of shrimps were initiated by the Central Marine Fisheries Research Institute (CMFRI) in the early 1970s. In the late 1980s MPEDA established the Andhra Pradesh Shrimp Seed Production and Research Centre (TASPARC) and the Andhra Pradesh and Orissa Shrimp Seed Production and Research Centre (OSPARC) based in Orissa which provided assistance for the establishment of a number of private hatcheries. Development of more commercial hatcheries, the formation of Brackishwater Fish Farmers' Development Agencies (BFDA) in the maritime states and the implementation of various governmental programmes to support the shrimp farming sector, assisted its further development.

Though the brackishwater aquaculture sector in the country is mainly supported by shrimp production, other species like giant tiger prawn, Penaeus monodon, also form a significant part of production followed by the Indian white prawn, P. indicus. Although India possesses several other potential species of finfish and shellfish, production of these is still very low key. In seawater the major farmed species are the green mussel (Perna viridis), brown mussel (Perna indica), Indian backwater oyster (Crassostrea madrasensis), Japanese pearl oyster (Pinctada fucata) and seaweed species like Gracilaria edulis.

Mariculture

The earliest attempt at mariculture in the country was made at the Mandapam centre of CMFRI in 1958-59 with the culture of milkfish. Over the last three decades, CMFRI has developed various technologies for a number of species including oysters, mussels and clams among sedentary species, as well as for shrimps and finfish.

The CMFRI initiated a pearl culture program in 1972 and successfully developed the technology for pearl production in Indian pearl oysters, success in controlled breeding and spat production of the Japanese pearl oyster in 1981 and the blacklip pearl oyster in 1984 was another important breakthrough. The status of mariculture is still low in the country and portrays vast potential.

Market and Export

With regards to the domestic market, the main areas of consumption for freshwater fish are in West Bengal, Bihar , Orissa and northeastern part of the country. While people of eastern part of the country prefer freshwater fish, people from southern Indian prefer marine fish and thus depend on the capture fisheries. As the second most important producer of freshwater fish after West Bengal, Andhra Pradesh markets the bulk of its produce in the eastern and northeastern states of India through an organised and established marketing network. The government has no regulatory control over the domestic marketing system for aquaculture produce and the price is influenced by supply and demand, furthermore, no certification system is available for the sale of the fish on the domestic market.

As for the marine exports are concerned, cultured brackish water shrimps occupy the major portion of export basket (Table 3).

Table 3: Contribution of Cultured Shrimp Export
	Total Shrimp Exports		Contribution of Cultured Shrimps
Years	Quantity (tonnes)	Value (Rs crore)	Production (live weight) (tonnes)	Product weight Exported (tonnes)	Value of Exports (Rs crore)	Percentage Contribution to Export (Quantity)	Percentage Contribution to Export (Value)
1991-92	76107	966.2	40000	26000	544.8	34.2	55.8
1992-93	74393	1180.3	47000	30550	766.3	41.1	64.9
1993-94	86541	1770.7	62000	40300	1288.9	47.1	72.8
1994-95	101751	2510.3	82850	53853	1866.2	52.9	74.4
1995-96	95724	2356.0	70573	47922	1531.7	51.0	64.1
1996-97	105426	2701.8	70686	45945	1642.6	43.6	60.8
1997-98	101318	3140.6	66868	43454	2086.0	42.9	66.4
1998-99	102484	3344.9	82634	53712	2511.0	52.4	75.1
1999-00	110275	3645.2	86000	54000	2782.0	49.0	76.3
2000-01	111874	4482.0	113700	67144	3870.0	60.0	86.4
2001-02	127656	4132.0	127170	74826	3545.0	58.6	85.8
2002-03	134815	4608.3	145770	80997	3793.9	60.1	82.3
2003-04	129768	4013.1	148650	78713	3347.9	60.7	83.4
Source: Marine Products Export Development Authority

The share of aqua farmed shrimps in total shrimp exports has been continuously increasing since the mid eighties. The share of cultured shrimp in the total shrimp export has jumped from 34 per cent in 1991-92 to 60.7 per cent in 2003-04 in terms of quantity. However, in terms of value, it has surged to 83.4 per cent in 2003-04 from 56 per cent in 1991-92. This value realization has mainly resorted to the bigger and uniform size composition of the cultured shrimps. There was a decline in contribution of cultured shrimps in 1994-95 and the subsequent two years, due to the disease outbreaks and the stoppage of culture activities in the Coastal Regulatory Zone (CRZ) area and the resultant decrease in production from aqua farms. During the three years (1998-99 to 2000-01) however, the culture production increased and the contribution also showed significant rise, registering an all time high of 58.8 per cent in terms of volume and 86.4 per cent in 2000-01.

Policy Initiatives

In the recent years, there has been a spurt in the growth of aquaculture in the country. However, in spite of the vast resources of culturable water bodies as well as availability of proven technology for aquaculture, the levels of production and productivity are not adequate and there is a large gap between the potential and actual yields. Therefore, increase in productivity and production of fish/shrimps from freshwater and brackish water areas under ongoing programmes have undertaken during the Tenth Plan. The central government has plans to undertake aquaculture activities for development of cold-water fisheries in the hill areas of the ecologically fragile zone. Programmes to enhance fish production would be formulated on a large scale on the basis of experience of pilot projects taken up for fisheries development in reservoirs during the terminal year of the Ninth Plan. An integrated approach to marine and inland fisheries designed to rational exploitation and to promote sustainable aquaculture practices, would be adopted. Bio-technological applications in the field of genetics and breeding, hormonal application, immunology and disease control would be given special attention for increasing aquaculture production. The Centre has decided to enforce strict quarantine measures for breeding diseases-free and diseases-resistant species of fish/shrimp.

Marine Products Export Development Authority since its inception has played a key role in formulating guidelines as well as periodically modifying and implementing the development plan for export promotion. Aquaculture Section-Subsidy Assistance Schemes (As on September 1, 2002) provided by MPEDA has been listed in Table 4.

Table 4: Subsidy Schemes of MPEDA
Sr. No	Name of Scheme	Objectives	Quantum of Subsidy
1	Subsidy for new farm development	For development of new prawn / shrimp farms	@25 percent of the capital cost, subject to a maximum of Rs.30, 000/- per ha. water area, restricted to Rs.1.5 lakh per beneficiary.
2	Subsidy for small-scale hatcheries	For setting up of shrimp hatchery with a minimum production capacity of 10 million seeds per annum	@ 15 per cent of the capital cost or Rs.1.50 lakh for private hatcheries, 25 per cent or Rs.2.50 lakh to co-operative sector and 50 of Rs.5.00 lakh to government sector.
3	Subsidy for medium- scale hatcheries	For setting up of shrimp hatchery with a minimum production capacity of 30 million seeds per annum	@ 25 per cent of the capital cost, subject to Rs.5.00 lakh per beneficiary / hatchery (about 7 districts excluded, being overcrowded already).
4	Subsidy for setting up of PCR labs in hatcheries	To establish PCR labs in hatcheries	@ 50 per cent of capital cost, subject to a maximum of Rs.5 lakh per beneficiary /hatchery.
5	Subsidy for effluent treatment system (ETS) in Shrimp Farms.	To set up effluent treatment systems attached to shrimp farms	@ 25 per cent of the capital cost, subject to Rs.1.50 lakh for shrimp farms with a minimum water area of 5.00 ha and up to Rs.6.00 lakh per beneficiary.
6	Subsidy for establishment of chill room facilities in shrimp / prawn farming areas	To set up facilities for post harvest care of farm raised shrimp/prawn.	@25 per cent of the cost of establishment of chill room, subject to a maximum of Rs.3.00 lakh per beneficiary / farmer.
7	Subsidy for purchase of water testing kits / equipment for shrimp / prawn farms	To encourage & support the farmers to use water testing kits / equipment in their farms	@ 25 per cent of the cost of water testing kits / equipment purchased for use in the farm, subject to a maximum of Rs.30,000/- per beneficiary / farmer.
Source: Marine Products Export Development Authority

With a view to providing a greater boost to aquaculture research and development, the Indian Council of Agricultural Research (ICAR) in New Delhi has reorganised the fisheries research institutes in 1987, which led to the establishment of three separate institutes namely: the, Central Institute on Freshwater Aquaculture (CIFA) at Bhubaneswar; the Central Institute of Brackishwater Aquaculture (CIBA) at Chennai and the National Research Centre on Coldwater Fisheries (NRCCWF) at Bhimtal in Nainital. For encouraging and publicising freshwater aquaculture, the Indian government introduced a scheme known as the 'Fish Farmers' Development Agency (FFDA)' during 1973-74 at the State level, presently there are 422 FFDAs providing cover to the districts indicating major potential in the country.

Considering the high market demand for catfish and the availability of a huge potential resource in the form of swamps and derelict waters, commercial farming of these species are being given important attention at present.

Conclusion

India , with its 7,500 km long coastline, a large inland water system and rich natural resources, has good prospects of becoming a dominant supplier of seafood in the global market. With only 40 per cent of capacity utilization of aqua-resources, there is a vast scope for horizontal and vertical expansion of these sectors. When properly balanced with social and environmental needs, commercial aquaculture can bring benefits of poverty reduction and hunger elimination to the disadvantaged, through the generation of employment and stimulation of the economy. Marine scientists have been experimenting to introduce biotechnology to aquaculture to maximise the output of marine products. The challenge for aquaculture in the new millennium is the expansion of sustainable aquaculture. There is every prospect that this can be realised if the mechanisms can be found to improve support to existing producers, spread successful methods to new regions, and boost the regional and international transfer of information and technology.

References:

· Food and Agriculture Organisation (2004), ‘State of World Fisheries and Aquaculture – SOFIA ’, Fisheries Information Centre.

· Food and Agriculture Organisation (2005), ‘National Aquaculture Sector Overview – India ’, Inland Water Resources and Aquaculture Service (FIRI).

· Modayil M. Joseph et al (2006), ‘Marine Farming: Country Analysis – India ’, Background Paper – Draft 2, Central Marine Fisheries Research Institute (CMFRI)

· Government of India (2002), ‘ Tenth Five-Year Plan (2002 – 2007)’, Sectoral Policies and Programmes (Volume II), Planning Commission.

· Website of Marine Products Export Development Authority (www.mpeda.com)

(* This note has been prepared by Ms. Pallavi Oak.)

The government of Maharashtra has announced a grant of Rs 20 per bird for all poultry farmers, who were rearing poultry in February, irrespective of whether their birds were culled during the bird flu outbreak or not in the state as a relief measure. The state government has allocated about Rs 80 crore for the relief package. This relief package of state government would be given over and above the central government’s provision of grant of Rs 40 per bird, Rs 30 per broiler and Rs 10 per chick culled or destroyed during the bird flu outbreak.

According to the statistics provided by Solvent Extractors’ Association of India, imports of vegetable oil (edible and non-edible) has increased by 37 per cent to 3.9l lakh tonnes in June 2006 from 2.8 lakh tonnes of the last year. On the other hand, imports of non – edible has jumped from 0.2 lakh tonnes in June 2005 to 0.8 lakh tonnes in June 2006, posting a whopping growth of 264 per cent. Edible oil imports between November – June 2005 – 06 has recorded a decline of 15 per cent to 25.9 lakh tonnes against 30.6 lakh tonnes in the same period last year. Imports of non – edible oil, during the same period, has shot up 84 per cent to 4.2 lakh tonnes from 2.3 lakh tonnes in the last comparable period.

The Centre has increased the base import price on edible oils. The base import price for crude palm oil has been increased from USD 428 to USD 432 per tonne, for RBD palm oil it has been increased from USD 443 to USD 459 per tonne, for crude palmolein it has been increased to USD 460 a tonne from USD 450 and on RBD palmolein it has been increased to USD 463 a tonne from USD 453. The base import price of crude soyabean oil has been increased from USD 529 a tonne to USD 566.

Agriculture sectors such as horticulture, floriculture, development of seeds, animal husbandry, pisciculture, aquaculture, cultivation of vegetables, mushroom under cultivated conditions and services related to agro and allied sectors have been open to 100 per cent foreign direct investment (FDI) through the automatic route. The Department of Industrial Policy and Promotion (DIPP) has clarified that FDI up to 100 per cent with prior approval of the government has been permitted in the tea sector subject to the condition of disinvestment of 26 per cent equity of the company in favour of the Indian partners or parties within five years and prior approval of the state government concerned in case of any future land use changes.

The ministry of commerce has plans for replantation of tea in 60 thousand hectares in north Bengal at an estimated cost of Rs 1,300 crore and is likely to follow the Tata Tea model of workers participation in weak tea gardens, as part of its efforts to revive the industry.

As per the estimates of Tea Board, tea exports from the country has risen by 20 per cent to 14 million kg in May 2006 over a period of one year. Exports in May moved up, after falling in April, partially on increased buying following rise in prices of Kenyan tea due to drought in Kenya . However, in terms of value, exports have registered a drop of 3.4 per cent to Rs 112 crore over the last year. Tea output in May has fallen 6.71 per cent to 69.50 million kg on account of adverse weather condition. Exports rose on increased buying from traditional importers following a spurt in prices of Kenyan tea due to drought in that country.

As per the figures of farmers’ suicide compiled by the ministry of agriculture ministry on the basis of reports sent by different states, Karnataka has witnessed the maximum cases of farmers' suicides (around 8600) followed by Andhra Pradesh (over 2000) during 2000-01 to 2005-06. Maharashtra , the government reported 981 farmer suicides between 2001 and 2005, has been at third position in terms of numbers.

The government of Kerala has drawn up a "district purchase" scheme, aiming at purchasing coir and coir products worth Rs 7 crore, to help small-scale coir and coir products manufacturers who have been burdened with unsold stocks. The Kerala State Coir Corporation would be in charge of implementing the scheme. The regional centres of the Coirfed would procure the coir stocks, while the Coir Corporation would procure the coir products. The scheme would be available only to those manufacturers who have been paying statutory wages to the workers.

Industry

Overall

Buoyed by a strong 10.9 per cent growth in the manufacturing sector, the country's overall industrial output has grown by 9.8 per cent in April-May 2006, up from 9.5 per cent in the corresponding period last year. The mining and electricity sectors, however, have continued their poor performance to record sharp decline in growth for the period under review. While the mining sector grew only 3.2 per cent in April-May 2006, lower than 4 per cent in April-May 2005, the electricity sector growth rate was down to 5.3 per cent against 6.7 per cent in the previous year. While capital goods showed strong growth performance at 21.1 per cent in April-May 2006 (13.9 per cent in April-May 2005), the consumer goods growth declined to 9 per cent (15.9 per cent). The decline in consumer goods growth levels could be attributed to the sharp fall in growth rates of consumer non-durables.

The National Manufacturing Competitiveness Council (NMCC) has proposed a National Manufacturing Competitiveness Programme at a cost of Rs 956 crore to enhance the competitiveness of the manufacturing sector, including the small scale industries. It had also been decided that NMCC and Ratan Tata-led Investment Commission would coordinate their work through periodic discussions in specific sectors, like textiles and garments, food and agro processing, and power sector. These sectors had been identified in view of their immediate potential for growth and employment. The programme had also suggested bringing in the world’s best practices, including those aided by the information technology, to strengthen SSIs in the country. The NMCC has also supported the recommendations to increase foreign and domestic investments in the manufacturing sector to $110 billion in the next five years.

The finance ministry has agreed to provide an additional Rs 1,000 crore under the popular technology upgradation fund scheme (Tufs) for the textiles sector during the current financial year 2006-07. The provision of the additional funds would be made in the supplementary budget. In the meantime, the government has asked banks to continue the processing of applications for interest subsidy under Tufs on loans for upgrade of textile machinery. The government had provided Rs 535 crore as budgetary allocation for 2006-07, but almost the entire sum has been exhausted in the first quarter of this fiscal itself. The requirement during 2006-07 under the scheme has been estimated at about Rs 1,515 crore and additional funds of Rs 1,000 crore.

Domestic passenger car sales have continued their growth momentum in June 2006, increasing by 24.5 per cent to 80,283 units over 64,470 units in June 2005, aided by higher demand for vehicles of Maruti Udyog, Hyundai and Tata Motors. The momentum in sales could partly be a result of announcements on impending price hikes by carmakers over the last two months. Meanwhile, demand for motorcycles has remained high with sales jumping by 26.9 per cent at 5,27,434 units in June against 4,15,598 units in the corresponding month last year. Segment leaders Hero Honda and Bajaj Auto have seen healthy demand while others like TVS Motors, Yamaha and Honda Motorcycle and Scooter India (HMSI) have also saw increase in sales. Overall two-wheeler sales, including scooters and mopeds, have grown by 23.9 per cent in June at 6,31,687 units against 5,09,769 units in June 2005. Domestic commercial vehicle sales have grown by 25.5 per cent in June at 33,954 units against 27,034 units in the corresponding month last year. In the medium- and heavy-commercial vehicles segment (M&HCV), numbers have moved up by 20.8 per cent at 19,584 units while light commercial vehicle sales have risen by 32.7 per cent at 14,370 units against 10,827 units in June 2005.

The Planning Commission has voiced dissent over the chemicals and fertilisers ministry’s proposal to broaden the ambit of price control in the pharmaceutical sector stating that price controls act a disincentive for investment as they curtail profitability and constrain research and development (R&D) expenditure. The Commission has, however, acknowledged that there might be a need for regulating the prices of patented drugs.

Food and Drug Administration (FDA) of the US plans to open an office in India to facilitate faster clearance of applications of Indian pharma companies who intend to do business in the US . This move will reduce the time taken to process the applications to 10-12 months from the current 27 months. Ficci India Inc is also going all-out to attract investments from California , the fifth largest economy in the world.

Infrastructure

India Infrastructure Finance Company Ltd (IIFCL), set up for the financing of core sector projects, will now begin mobilising resources, with the finance ministry releasing guarantee for the company’s borrowings up to Rs 5,000 crore which would be raised from various sources in a phased manner during the second and third quarters of 2006-07, including multilateral and bilateral borrowings (from the likes of the World Bank, Asian development bank, JBIC and KfW). As for the domestic borrowings, the IIFCL will first raise bulk resources from institutions and later go for tapping the retail market through bond issues. IIFCL has also applied to the department of economic affairs for permission to raise external commercial borrowings.

The government has approved two transmission projects of the Power Grid Corporation of India Ltd (PGCIL) entailing a total investment of Rs 5,779 crore. The Cabinet Committee on Economic Affairs (CCEA) has green signalled PGCIL’s Rs 5,221 crore project for strengthening the western grid and also approved the transmission line associated with the National Hydroelectric Power Corporation’s Rs 557 crore worth hydro power plant in Himachal Pradesh with a 520 MW capacity. The western grid project which would facilitate drawal and dispersal of power, imported from other regions, to various load centres of the western region and improve the reliability of the regional grid is being implemented in two parts. While the first part would be executed by PGCIL at an investment of Rs 3,581.40 crore, the second part would be implemented through 100 per cent private participation at a cost of Rs 1,639.83 crore.

ONGC is expecting a marginal increase in on-shore crude oil production, from 8.1 million tonnes in 2005-06 to 8.33 million tonnes in 2006-07 while on shore natural gas production is expected to remain same at 5.5 billion cubic metres.

The government is expected to issue the first tranche of oil bonds to compensate state retailers for selling fuel below cost by end of July 2006. Finance ministry will issue Rs 28,000 crore worth of oil bonds to help oil firms bridge the gap in retail prices of petrol, diesel, lpg and kerosene and cost of production in this fiscal year. The bonds are to be released every quarter based on the under-recovery in revenue in the quarter. Oil firms have been projected to loose Rs 73,500 crore this fiscal year on selling fuel below cost of production. A part of this gap was met by a Rs 4 per litre increase in petrol and Rs 3 a litre hike in diesel prices, cut in customs duty and contributions from upstream firms (ONGC/GAIL/OIL) and standalone refiners including Reliance industries. For the rest, the government has decided to issue oil bonds.

The Union Government will set up a special economic zone (SEZ) for manufacturing and testing renewable energy equipment. A special purpose vehicle (SPV) has been formed to promote this venture. The SPV - Future Energy Zone India Ltd ( FEZ ) - has been promoted by Malavalli Power Plant and European investors, said Mr K. Krishnan, Chairman, Malavalli Power Plant. The SEZ will house industrial R&D units, laboratories such as CPRI, testing units, educational and vocational training centres. Besides, an area for vendors will also come up. Later, industrial parks, convention centres and a logistics and transportation zone will be considered. Two private sector proposals for special economic zones have been approved, one each in Tamil Nadu and Maharashtra and proposals have also come from the Mangalore-Udipi region and Nagpur . Depending on the demand, four more such SEZs may be set up over the next two-three years.

The fifth phase of the National Highways Development Project (NHDP) has been launched with the National Highways Authority of India (NHAI) signing an agreement to six-lane the Bharuch-Surat section of National Highway (NH)-8. Under this phase of NHDP, about 6,500 km of National Highways including the golden quadrilateral would be widened from four lanes to six lanes at a cost of Rs 41,210 crore. This will include development of corridors or sections having high traffic density, which are important economically or for tourism. These corridors have already been four-laned under the first phase of NHDP, and will be six-laned under the fifth phase. Projects will be undertaken through public-private partnerships on build-operate-transfer basis. The phase is to be completed by 2012.

As per expectations, Indian railways have clocked earnings of Rs 14,858.60 crore, registering an increase of 14.22 per cent, from April to June 2006. The total goods earnings of railways had gone up from Rs 8,605.58 crore to Rs 9,973.91 crore for the period, an increase of 15.9 per cent. Passenger revenue earnings have also increased to Rs 4,347.26 crore, a jump of 9.25 per cent over Rs 3,979.30 crore for the same period last year. It seems that the railways ministry’s strategy of “increase volumes-reduce unit costs” is proving to be very profitable. The ministry, upbeat with the first quarter results, is hoping to overshoot its target of Rs 59,978 crore as gross traffic revenue collection in 2006-07.

To widen operations on key routes, Shipping Corporation of India (SCI) has plans to buy 70 vessels by 2012 at a cost of Rs 16,000 crore, of which four would be for its US and Europe operations. Of the four, two are 4003 TEU (twenty-foot equivalent units) ships, to be delivered by the end of 2006 and the remaining two are 5000 TEUs that will be delivered by July 2007. SCI s to spend $ 60-70 million on buying each of these ships and the investment will be a little less if we they opt for a re-sale ship or a second-hand ship.

The airline industry globally is once again likely to post losses in 2006 at $ 3 billion, albeit little less than what it posted a year back at $3.2 billion. However, the industry is expected to register net profit of $3.3 billion in 2007, according to new financial forecast by International Air Transport Association (IATA). The association has attributed the continued losses to increase in the price of oil ($66 a barrel). Though, IATA foresees net profitability of $3.3 billion in 2007, the situation is not rosy since it observes that this amount would only imply a return on capital of less than 2 per cent, which is far below the 7-8 per cent necessary to pay investors what they expect from investments in other industries of similar risk.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) has gone up to 4.96 per cent for the week ended July 1, 2006 from 4.84 per cent during the previous week. The inflation rate was lower at 4.14 per cent in the corresponding week last year.

The WPI in the week under review has declined a tad by 0.1 per cent to 203.3 from 203.6 in the previous week (Base: 1993-94=100). The index of ‘primary articles’ group (weight 22.02 per cent) has declined substantially by 1.3 per cent to 203.0 from the previous week’s level of 205.7, mainly due to a considerable decline in the price index of ‘food articles’ as compared to the previous week. The index of ‘food articles’ has gone down to 204.9 from 208.8 in the previous week, mainly due to the lower prices of fruits and vegetables, masur, milk, tea and bajra. The index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) has declined marginally to 326.3 from the previous weeks’ level of 326.4, mainly due lower prices of furnace oil. The index of ‘manufactured products’ group constituting the maximum of 63.7 per cent of total weight, has risen by 0.3 to 176 from the previous weeks’ level of 175.5, mainly due to higher prices of base metals, textiles, ‘chemical and chemical products’ and ‘transport equipment and parts’.

The latest final index of WPI for the week ended May 6, 2006 has been revised upwards; as a result both, the absolute index and the implied inflation rate stood at 200.5 and 4.37 per cent as against their provisional levels of 199.7 and 3.96 per cent, respectively.

Banking

The Reserve Bank of India (RBI) has released quarterly statistics on deposits and credit of scheduled commercial banks for the quarter ended March 2006. As per the statistics, out of the total deposits of Rs 20,93,042 crore for the quarter ended March 2006, nearly 54.1 per cent of the deposits came from metropolitan areas as compared to 50.6 per cent in the previous quarter. Around 20 per cent deposits were contributed from urban areas (21.3 per cent previous quarter), while 10.8 per cent were from the rural areas (11.6 per cent previous quarter). On the credit front out of the total bank credit of Rs 15,17,497 crore about 65.3 per cent was disbursed by metropolitan areas (63.1 per cent previous quarter), nearly 10 per cent was contributed by semi-urban areas (11.2 per cent previous quarter), whereas the rural areas contributed 8.4 per cent (9.3 per cent previous quarter).

The country largest private sector lender ICICI Bank Ltd has reported zero non-performing assets (gross) at the end March 31, 2006 for certain sectors including power, in which the bank’s NPAs where at a staggering Rs 737 crore a year back. However, the sticky assets from farm sector for the bank have reported a steep increase in 2005-06. The other sectors which also reported nil or negligible sticky assets are services (finance), cement and telecom. Gross NPAs emanating from the chemical sector has also decreased substantially from Rs 400 to Rs 200 crore in the reporting period. However, the agricultural sector has proved to be a dampener where sticky assets increased from Rs 27 crore to Rs 80 crore thus contributing 3.5 per cent of the total NPA portfolio. The other sectors, which have also shown an upward trend in NPAs, are automobiles (including trucks) and services other than financial services non-performing assets in the retail portfolio at March 31, 2006 were at 0.77 per cent of retail loans.

Financial Markets

Shirdi Industries limited which had tapped the primary market, on June 29, with its 100 per cent book built issue of 65 lakh shares and had offered its shares through a price band of Rs 69.78 per share, has decided to withdraw its IPO. As it received only 74 per cent of the subscription, the company could mop up only Rs 33 crore as against the targeted Rs 45 crore.

During the week, the trends in Asian markets have influenced the movement and sentiments of the domestic bourses. Trading for the week began on firm note as the sensex jumped by 175 points to settle at 10684.30 points, on back of recovery in the Asian markets, easing of the global crude oil prices and short coverings in the derivative segment. However, on the very next day, weakness in the Asian market coupled with the serial bomb blasts in Mumbai saw the sensex trading in a range of 137 points, before ending with a loss of 69.95 points. Nevertheless, on July 12, strong first quarter from the Infosys Technologies and its upward revision of financial year 2006-2007 earnings and revenue guidance, buoyed the market sentiments as the sensex jumped by 316 points, also with the FIIs net buying in the equity market during the day also supported the market sentiments. But, the rising international crude oil prices, which hovered around $ 75 a barrel and the weak global markets weighed down the market sentiments as the sensex fell by 72 points. On July 14, the sustained spurt in the global crude oil prices, weak global market sentiments, as well as hiked in its overnight call money rate by 25 basis points from zero per cent by the Bank of Japan, resulted into he sensex falling sharply by 180 points to settle at 10678.22 points. Thus, the sensex has gained around 1.61 per cent on a weekly basis over its previous week’s closing value, while S & P CNX Nifty has gained 1.54 per cent as it closed the week at 3123.35 points over its previous week’s closing value. Among the sectoral indices, BSE IT index has registered the highest weekly gain of 6.29 per cent as it closed at 3934.59, followed by BSE TECk at 4.96 per cent as it closed at 2597.64 points.

Meanwhile, the FIIs have turned net sellers in the equity market to the extent of Rs 227.4 crore with purchases worth Rs 5231 crore and sales of Rs 54584 crore. On the other hand, the mutual funds have played the role of counterforce against the FIIs, as they remained net buyers during the week to the extent of Rs 118.3 crore with purchases of Rs 1534.41 crore and sales of Rs 1396.16 crore.

BSE has tightened the eligibility criteria for new companies entering the market through IPO and for listed companies issuing new shares through follow-on public offerings. The new norms will come into force from August 1. The exchange has classified companies as small cap and large cap, with respect to eligibility for them to list on the exchange and these criteria are in addition to the conditions prescribed in the Sebi (DIP) Guidelines, 2000.

Derivatives

The total turnover on the NSE’s F & O segment has risen on a weekly basis to Rs 110430 crore from Rs 94727 crore in the previous week, correspondingly, the average daily turnover has also risen to Rs 22086 crore from Rs 18945 crore. Meanwhile, product-wise, stock futures continued to contribute bulk of the trading at Rs 51491 crore and index futures turnover stood at Rs 44014 crore.

Primary Market

Under the weekly treasury bills auctions, the RBI mopped up Rs.2, 500 crore and Rs.525 crore through 91-day treasury bills and 182-day treasury bills, respectively. From this, the RBI raised Rs.1500 crore and Rs.25 crore under the Market Stabilisation Scheme (MSS) through 91-day treasury bills and 182-day treasury bills, respectively. The cut-off yields for the 91-day and 182-day T-Bill were 6.3977 per cent and 6.7368 per cent, respectively.

Meanwhile, the RBI conducted the sale (re-issue) of 7.59 per cent 2016 paper and 7.50 per cent 2034 paper for a notified amount of Rs.5000 crore and Rs.2, 000 crore respectively. There was devolvement on primary dealers of Rs.3385.62 crore and Rs.1894.54 crore for 10-year paper and 28-year paper, respectively. The cut-off yield for 10-years paper and 28-years paper was 8.2902 per cent and 8.7504 per cent, respectively.

The RBI also conducted the auctions of State Development Loan (SDL), 2016 for seven states for an aggregate amount of Rs.1458.32 crore. The cut-off yield of SDL 2016 for five states, Andhra Pradesh, Jharkhand, Meghalaya, Mizoram , Sikkim was set at 8.65 per cent, for Madhya Pradesh was set at 8.66 per cent and for Rajasthan it was set at 8.62 per cent.

During the week, ambiguities ahead of the Rs 7,000 crore auction and the spiraling international crude oil prices have kept the market sentiments weak. Moreover, apprehensions ahead of the impending policy review and the hardening of global interest rates also dampened the market sentiments. Meanwhile, the prices of gilt securities fell sharply after a major portion of Rs 7,000 crore auction got devolved on primary dealers and the yield on the benchmark 10-year paper rose to 8.38 per cent. In the call money market, the call rates have traded around the reverse repo throughout the week to close flat at 5.75-5.85 per cent. Though the demand ahead of auction kept the borrowing requirements high, the surplus liquidity available in the market resulted into the demand for funds being comfortable met. The daily average outstanding amount under the reverse repo averaged to Rs 47079 crore as against Rs 61781 crore in the previous week, while no bids were received at the repo auction.

Bond Market

During the week, the corporate bond yields have shown mixed trend. The yield on triple-A rated 5-year benchmark paper rose to 8.65 per cent, while its spread over the comparable gilt was at 63 basis points.

Foreign Exchange Market

During the week, huge and consistent demand for dollar by the corporates, especially oil companies in the wake of spiralling global crude oil prices has weighed down the rupee movement against the dollar. The domestic currency has fallen to Rs 46.37 per dollar from Rs 46.05 per dollar in the previous week. The rupee fell close to Rs 46.50 per dollar before receiving support later in the week backed by exporters who sold dollars to take advantage of cheaper rupee and it closed the week at Rs 46.37 per dollar. Meanwhile, in the forward premia market, the premia has eased with the six-month annualised forward premia closing at 0.97 per cent as on July 14 as compared to 1.10 per cent as on July 04.

Commodities Futures Derivatives

Interestingly, NCDEX, which had announced launch of onion contracts on July 7, has reportedly put the decision on hold on account of non-availability of some regulatory approvals, which had forced the exchange to postpone the launch. Meanwhile, MCX, which was equally bullish on such contracts and secured necessary approvals from the Forward Markets Commission (FMC), has also backtracked.

FMC has, in a move to contain excessive speculation in wheat and pulses after analysing the price trends, trading volume and open interest position, further tightened the risk management norms for wheat and chana trading on the commodity bourses. The regulator has increased the cooling off period to 30 minutes once the price hits the 4 per cent circuit limit and imposed 5 per cent additional margin on chana with immediate effect.

ICRA has reaffirmed ’LAA+’ rating with a positive outlook to the outstanding subordinated bond programmes of UTI Bank Limited (UTI Bank). The agency has also reaffirmed the ‘A1+’ rating assigned earlier to the Rs. 25 billion certificates of deposit programme of UTI Bank. Both the assigned ratings factors in the bank’s improving profitability supported by strong rise in net interest income, healthy fee income profile, all-round growth in credit, focus on strengthening its asset quality and adequate capitalisation.

ICRA has downgraded the rating assigned to the Rs. 150 million bond programme of Bharat Heavy Plate & Vessels Ltd (BHPV) from ‘LBB (SO)’ with Rating Watch to ‘LC (SO)’. The original rating was based on an unconditional and irrevocable guarantee by the Government of India (GoI), and a structured payment mechanism monitored by an independent trustee. The rated bonds were due for redemption on March 27, 2006. However, there was a default by BHPV in redeeming the bonds on the due date, and the company had sought an extension till June 30, 2006 for redemption of bonds. Subsequently, on June 30, 2006 as well, the company has not redeemed the bonds. Further, the time-bound structured mechanism stipulated by ICRA has also not been adhered to, and the GoI guarantee has not been invoked as per the terms of the structure.

ICRA has assigned ‘A1+’ rating to the Rs. 7.50 billion commercial paper programme of ICICI Home Finance Company Limited (ICICI Home). The assigned rating takes into consideration ICICI Home’s strong parentage, its role of the in-house outsourcing agent for the ICICI Bank group, the high financial flexibility that the company enjoys as a wholly owned subsidiary of ICICI Bank, besides its access to committed lines of credit from banks.

CARE has assigned ‘AAA’ rating to the Upper Tier II bond issue of Rs 2500 crore of State Bank of India . The assigned rating factors in the additional risk of deferred of interest/ principal payment arising due to existence of lock-in clause in the Upper Tier II bonds. Nevertheless, the banks long standing track records of operations, its dominance in the domestic banking sector with its huge asset size and extensive branch network, majority ownership by the RBI, reduces the additional risk associated with the bonds.

CARE has assigned ‘ AA +’ rating to the proposed Upper Tier II bond issue of Rs 500 crore of Oriental Bank of Commerce. The assigned rating draws strength from the majority ownership by the central government of the bank, long standing track record of operations and sustained business growth in the past.

Corporate Sector

Bharat Heavy Electricals Limited (BHEL) has secured an order form Tata Power Company to set up a 250-mega watt thermal power plant in Maharashtra . BHEL would design, manufacture and commission the thermal power station at Tata Power’s Unit 8 in Trombay.

IVRCL Infrastructures and Projects Limited has received several orders worth Rs 290 crore. The break up of the orders is as follows; Rs 184.86 crore order awarded by the Irrigation and CAD department of Andhra Pradesh for Koli Sagar lift irrigation scheme stage 1. The other orders relate to power projects of Rs 55.26 crore, sewerage and water pipelines of Rs 32.39 crore and building of Rs 17.78 crore.

Engineering major Bharat Earth Movers Limited has secured order valued at Rs 42 crore from Tunisia and Syria for supply of mining equipment and spares.

JSW Steel has witnessed a substantial increase in its metal output during April-June 2006; Pellet production has risen by 7 per cent to 0.97 million tonne (MT), hot metal production has stood at 0.61 MT, an increase of 8 per cent while crude steel at 0.56 MT, up by 5 per cent. Production of hot rolled plates has stood at 0.042 MT, higher by 83 per cent compared to 0.023 MT over the first quarter of 2005. However, the production of hot rolled coils has gone down by 52 per cent at 0.249 MT and galvanised products at 0.132 MT, lower by 18 per cent.

Global information technology services company, HCL Technologies has entered into a five-year, $ 70 million multi-service outsourcing deal with Teradyne, a US based supplier of automatic test equipment. Through this deal HCL will almost take the entire IT operations of the company including IT consulting, application development and IT infrastructure management involving data centre, network security and help desk services. HCL will absorb Teradyne’s existing IT staff.

Hero Honda Motors has registered a 20 per cent growth in its sales turnover during April-June 2006 to Rs 2,416 crore over the same period a year ago and its net profit has grown by 16 per cent to Rs 237 crore, despite a substantial increase in the prices of steel, aluminium and rubber.

Triveni Engineering has reported a 19 per cent rise in net sales to Rs 299.9 crore during the durst quarter of the current year. The company has posted a growth of 28 per cent in net profit at Rs 32.4 crore. The company has an order book of over Rs 577 crore, which is 71 per cent higher than the turnover for the previous year ended.

Infosys Technologies has posted a healthy growth of 45 per cent in net sales at Rs 2,867 crore for the first quarter ended June 2006 and net profit has surged by 54 per cent at Rs 805 crore. The company has benefited from the depreciation of rupee against all major currencies during the quarter.

Aztec Software and Technology Services Limited has posted a 26 per cent growth in its net profit at Rs 9.3 crore on a consolidated basis for the first quarter of the current year as against Rs 7.4 crore over the same period previous year. The company has added 16 new clients during the quarter; the total number of active clients of the company has increased to 80.

Blue Dart has registered a 21.7 per cent increase in income form operations at Rs 157 crore during its second quarter ended June 2006 against Rs 129 crore over the same period a year ago. The company’s net profit has risen almost by 7 per cent to Rs 11.12 crore against Rs 10.4 crore. The company has added seventh aviation hub in Ahmedabad.

Education

In relation to the ongoing OBC quota in premier academic technical and engineering institutions like IITs, National Institutes of Technology (NITs) and management institutions like IIMs, the government may have to reconsider its decision to implement 27 per cent reservation for OBCs which is proposed to enforce from July 2007. Currently, the total quota for scheduled castes (SCs) and scheduled tribes (STs) accounts to 22.5 per cent (15 per cent and 7.5 per cent for SCs and STs, respectively). Thus, unreserved seats presently account to 77.5 per cent of the total. If the OBC quota of 27 per cent is enforced, the share of unreserved seats will drop to 50.5 per cent from the existing 77.5 per cent. In order to accommodate increased reserved seats for OBCs, the institutions would require to increase their seats by 54 per cent in a years time. These institutions, however, have expressed their inability to do so on account of lack of faculty and infrastructure, coupled with the time taken from the government to receive funds.

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.

Table 1: World Fisheries and Aquaculture Production