Industrial and Licensing Policies

HISTORY OF INDUSTRIAL POLICY

Pandit Jawaharlal Nehru laid the foundation of modern India.

The goals and objectives set out for the nation by Pandit Jawaharlal Nehru were:

• Rapid Agricultural and industrial development.• Rapid expansion of opportunities for gainful

employment.• Progression reduction of social and economic

disparities.• Removal of poverty and attainment of self

reliance.

INDUSTRIAL POLICY Industrial policy refers to government policy

towards industries:

Rules, regulations, principles, policy and procedure.

Reflects the government attitude. Defines the respective roles of different sectors. State must play active role in development of

industries.

• Establishment• Functioning• Growth• Management

INDUSTRIAL POLICY OF INDIA

INDUSTRIAL POLICY RESOLUTION, 6 April, 1948

INDUSTRIAL POLICY RESOLUTION, 30th April, 1956

INDUSTRIAL POLICY FEB 2, 1973

INDUSTRIAL POLICY DEC 23, 1977

INDUSTRIAL POLICY STATEMENT OF JULY, 1980

INDUSTRIAL POLICY, JULY 24, 1991

OBJECTIVES OF INDUSTRIAL POLICY

Proper flow of scarce resources. Correct the imbalances in the

development. Enhancing gainful employment. Reducing poverty. Prevention of concentration of wealth in

few hands. Achieving economic growth. Liberalization and globalization. Updating technology and modernization of

industry. Attaining international competitiveness.

INDUSTRIAL POLICY RESOLUTION 1948

(6 April, 1948)

This industrial policy was designed to attain the following objectives:

• To establish a social order.• To promote standard of living• To increase both agricultural

and industrial promotion.• Full employment opportunities.

`MAIN FEATURES OF

INDUSTRIAL POLICY,1948 Acceptance of the importance of both private and

public sectors. Division of industrial sector:

• Industries where state had a monopoly. - arms and ammunition - atomic energy - rail transport• Mixed sector - coal - iron and steel - aircraft manufacture - ship building

MAIN FEATURE CONTINUES…

- manufacture of telephone, telegraph and wireless apparatus - mineral oils. Field of Government control: - automobiles, heavy machinery,

heavy chemicals, machine tools, fertilizers, electrical engineering, sugar, paper, cement, cotton and wooden textiles. Field of private enterprise

MAIN FEATURE CONTINUES….

Role of small and cottage industries. Other important features:

• The role of foreign capital in industrial development of the economy was recognized.

• Harmonious relations between management and labour.

- Proper working condition and fair wages• Labour participation in management.

OBJECTIVES State trading on a increasing scale

Planned national development

To provide opportunity to the private sector to growth and expand

Labour should participate in it enthusiasm

INDUSTRIAL POLICY RESOLUTION 1956(30 April, 1956)

INDUSTRIAL POLICY RESOLUTION

Emphasis in the continuous increase in production and its equitable distribution

State must play progressive role in the development of the industries

To provide justice, liberty, equality and fraternity

DIRECTION OF POLICIES

Men and women are equal

Equal pay for both men and women

Childhood and youth are protected against the exploitation

To develop the heavy industries

To develop the machine making industries

To expand the public sector

And to built the large and growing co-operative sector

WHAT TO DO TO ACHIEVE THE OBJECTIVES

Improve the life standard and the working condition for the people

To prevent the private monopolies

Concentration of economic power on the small number of individuals

CLASSIFICATION OF THE INDUSTRIES

First The industries whose development will be

exclusive responsibility of the state Second The industries which are progressively

state owned

Third It includes the all other industries

FEATURES

Private sector must fit to the framework of social and economic policy of the state

Government want to stress the role of small scale industries in developing the national economy.

{Since they provide large number of employment }

TO PROVIDE THE STEADILY SUPPLY OF RESOURCES

Lack of resourses is very common due to the lack of power supply, water , and transport facilities .

It is one of the national aims of the nation

ESSENCE

Government of India trust that this statement of the industrial policy will receive support from all section of the people and promote the rapid industrialization

INDUSTRIAL POLICY RESOLUTION

FEBRUARY 2, 1973

1. The Industrial Policy Resolution of 1956 still remained valid, but certain structural distortions had crept in the system.

2. The new policies were hence directed towards removing these distortions.

3. It provided for a closer interaction between the agricultural and industrial sectors.

4. Accorded the highest priority to the generation and transmission of power.

5. An exhaustive analysis of industrial products was

made to identify products which are capable of being produced in the small scale sector.

6. The list of industries exclusively reserved for the small scale sector was expanded from 180 items to more than 500 items.

7. Within the small scale sector, a tiny sector was also defined with investment in machinery and equipment up to Rs.1 lakh and situated in towns with a population of less than 50,000 according to 1971 census figures, and in villages.

8. Special legislation to protect cottage and household industries was also proposed to be introduced.

INDUSTRIAL POLICY RESOLUTION

23 Dec, 1977S.Industrial policy highlights on producing input needed by a large no of smaller units and making adequate marketing arrangement.

The nucleus plant would also work for upgrading the technology of small units.

The government would promote the development of a system of linkage between nucleus large plant and the satellite ancillaries.

To boost the development of small scale industries.

The investment limit in the case of tiny limits was enhanced to Rs.2 lakh of a small scale units to Rs.20 lakh and of ancillaries to Rs. 25 lakh.

A Scheme for building buffer stocks of essential raw materials for the small scale industries was introduced for operation through the small industries development corporation in the states.

The national small industries corporation in the centre.

Industry process and technology amid at optimum utilization of energy or the exploitation of alternative sources of every would be given special assistance .

And also including finance on concessionary terms.

INDUSTRIAL POLICYRESOLUTIONJul, 1980S.

It was based on the industrial policy resolution of 1956.

Optimum utilization of installed capacity.

Maximum production and achieving higher productivity.

Higher employment generation.

Collection of regional imbalances.

Promotion of export oriented industries.

Strengthen of the agriculture base through agro based industries and promotion of optimum intersectorol relationship.

Promotion of economic federalism through equitable spread of investment and dispersal of returns.

Consumer protection against high price and bad quality.

INDUSTRIAL POLICY RESOLUTION24 Jul, 1991

On 24th July 1991, the government head Mr. P.V.Narasimha Rao, announced a new industrial policy which sought to drastically alter the industrial scenario in our country.

There are several fundamental departures in the new policy. The most important initiatives are with respect to the virtual scrapping of industrial licensing and registration policies, an end to the monopoly law and a more welcoming approach to foreign investments, apart from redefining the role of the public sector. These measures, long overdue, are welcoming as they would free the industry from regulations, most of which have outlived their utility.

OBJECTIVES The objectives of the New Industrial Policy are:

Encouragement to Indian entrepreneurship, promotion of

productivity and employment generation.

Development of Indigenous technology through greater

investment in R&D and bringing in new technology to help

Indian manufacturing units attain world’s standards.

Removing the regulatory system and other weaknesses.

Increasing the competitiveness of industries for the benefit

of the common man.

Incentives for the industrialization of backward area.

In pursuit of the above objectives, the Government has decided to take a series of initiatives in respect of the policies relating to the following areas:

A. Industrial LicensingB. Foreign InvestmentC. Foreign Technology AgreementsD. Public Sector PolicyE. Monopolies and Restrictive Trade Practices

A. INDUSTRIAL LICENSING POLICY

Industrial licensing policy and procedures have also been liberalized from time to time. A full realization of the industrial potential of the country calls for a continuation of this process of change.

Major policy initiatives and procedural reforms are called for in order to actively encourage and assist Indian entrepreneurs to exploit and meet the emerging domestic and global opportunities and challenges.

The industrial licensing system has been gradually moving away from the concept of capacity licensing. The system of reservations for public sector undertakings has been evolving to the ethos of greater flexibility and private sector enterprise has been gradually allowed to enter into many of these areas on a case by case basis.

B. FOREIGN INVESTMENT

Foreign investment would bring attendant advantages of technology transfer, marketing expertise, introduction of modern managerial techniques and new possibilities for the promotion of experts.

In order to invite foreign investment in high priority industries, requiring large investment and advanced technology, it has been decided to provide approval direct foreign investment upto 51% foreign equity in such industries

Promotion of exports of Indian products calls for a systematic exploration of world markets possible only through intensive and highly professional marketing activities.

C. FOREIGN TECHNOLOGY AGREEMENTS

There is a great need for promoting an

industrial environment where the acquisition of technological capability receives priority. In the fast changing world of technology, the relationship between the suppliers and the users of technology must be a continuous one.

With a view to injecting the desired level of technological dynamism in the Indian industry, the Government will provide automatic approval for technological agreements related to high priority industries within specified parameters.

D. PUBLIC SECTOR POLICY

The Industrial Policy Resolution of 1956 gave the public sector a strategic role in the economy.

After the initial exuberance of the public sector entering new areas of industrial and technical competence, a number of problems have begun to manifest themselves in many of the public enterprises. The most striking example is the take over of sick units from the private sector. Public sector units accounts for almost one-third of the total losses of central public enterprises.

E. MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT (MRTP ACT)

With the growing complexity of the industrial structure and the need for achieving economies of scale for ensuring high productivity and competitive advantage in the international market.

Pre-entry scrutiny of investment decision not required.

MRTP act is restructured by eliminating the legal requirements.

INDUSTRIAL LICENSING POLICY

INDUSTRIAL LICENSING

License is a written permission issued by the central government to an industrial undertaking stating such details as the location, the article to be manufactured, production capacity and other relevant particulars.

Ours is one of the few countries in the world where an entrepreneur is required to obtain an industrial license from the government before venturing into new business.

OBJECTIVES OF INDUSTRIAL LICENSING

• Planned industrial development through appropriate Regulations and controls.

• Directing industrial investment in accordance with plan Priorities.

• Ensuring government control over industrial activities In India.

• Regulating the industrial capacity as per targets set for Planned economy.

• Preventing concentration of industrial and economic Power and monopoly.

• Checking unbalanced growth of industrial establishments and ensuring economic size of industrial units.

• Utilizing full capacity of large scale industries .

• Utilizing appropriate technology .

• Protecting of small scale industries against undue competition of large scale industries .

• Broadening the industrial base in India through new entrepreneurship development and ensuring industrial dispersion.

• Encouraging healthy entrepreneurship .

THE INDUSTRIES (DEVELOPMENT &

REGULATION) ACT , 1951.To implement the industrial policy.

To ensure regulation and development of important industries.

To ensure planning and future development of new undertakings .

PROVISIONS OF INDUSTRIES (D & R) ACT , 1951

Provisions of IDRA

Preventive Provision

Curative Provision

Creative Provision

PREVENTIVE PROVISIONS

Three types of provisions are included in the preventive provisions .

Registration and licensing policies

Investigation provisions

revocation of license provisions.

CURRATIVE PROVISIONS

Taking over the management or control of industrial enterprise.

Control of supply, price ,and distribution of certain commodities.

CREATIVE PROVISIONS

Creative provisions are positive in nature and involves cooperation between central government , industry, labor and consumers of goods produced by scheduled industries.

EXEMPTIONS FROM LICENSING

Items relating to an industries which is not included in the first schedule of the act .

Items to be manufactured in an undertaking which does not come under the definition of a “factory” under the industries (D and R ) Act , 1951.

Expansions which does not come under substantial expansion ,that is ,up to 25% of the existing capacity.

Small scale units subject to certain conditions .

Items which do not fall under the definition of “ new article”.

CRITICISMS OF INDUSTRIAL LICENSING

Issue of licenses tends to give an exaggerated picture of industrial capacity.

The process of consideration of applications at various levels and at various times contributes to delays and higher costs.

There is very little follow up of licensing to see that approved projects fructify in a satisfactory phased schedule.

One of the important purposes of industrial licensing of achieving regional dispersal of industries has not been achieved.

Industrial Licensing Policy

The industrial Licensing Policy in India can be studied in the following ways

1.The Industries (Development and Regulation) Act, 1951

2.Industrial Licensing Policy 1951-603.Industrial Licensing Policies for 1960-704.Industrial Licensing Policies 1970-775.Industrial Licensing Policy 1980-90

INDUSTRIAL LICENSING POLICY 1951-60

Industrial Licensing prior to 1960 aimed at achieving the following among others

1. Development of industries and encouraging industrial activity in accordance with the plan priorities

2. Checking the concentration of economic power3. Reduction of regional disparities4. Proper allocation of foreign exchange5. Development, protection, and encouragement of

small scale industries 6. Modernization of technology and achievement of

industrial growth

INDUSTRIAL LICENSING POLICY 1960-70

The Industrial Licensing policy came in for sharp criticism from various committees. The main criticism leveled against it were

promotion of large industrial houses and

Usage of some unethical practices followed by a section of large business houses

INDUSTRIAL LICENSING POLICY 1970-80

Licensing policy of 1970 Government of India banned the entry of large

industrial houses and foreign companies into any field except core industries, heavy industries, heavy investment projects, and export oriented projects. Several other restrictive policies followed

Licensing policy of 1977 A new policy statement was announced by the

government on December 23, 1977

The 1977 licensing policy provided thrust mainly in two respects:

1. Priority to small-scale, village, and tiny sector industries in future industrialization and

2. Geographical dispersal of industries from metropolitan centers to rural and backward areas.

INDUSTRIAL POLICY STATEMENT 1980-90

In pursuance of this policy, a new licensing policy was adopted, aiming at reviving the economic infrastructure inhibited by the infrastructural gaps and inadequacies in performance.

The basic objective was to transmit the fruit of industrialization and economic progress to maximum number of people, both in urban and rural areas.

In order to make Indian industry more competitive, the government felt the need for releasing the industry from bureaucratic obstructions and reducing the number of clearances.

• all new units with an investment upto Rs 75 crore in Centrally notified backward areas and Rs 25 crore in other areas were exempted from licensing.

• Import of capital good was allowed to the ttune of 30 percent of the plant and machinery.

• Export oriented units and units located in Export Processing Zones with an investment upto Rs 75 crore were de- licensed

Conclusion

In a planned economy, adequate control measures have to be exercised by the government for providing necessary direction to the industries, especially the private sector, to contribute their best towards the socio-economic objectives of the nation. Hence, the government control measures should be viewed in this light.