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Industry

Industry

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Published by Ambalika Smiti

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Published by: Ambalika Smiti on Mar 29, 2011
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1
INDUSTRY
INDUSTRIAL POLICY
Before independence, policy of the government was charaterised by laissez-faire i.e. non-interference policy in the affairs of industries. Industrial development was left to the exclusivecare of private sector. However, in the post independence era, government has been taking anactive interest in the development of industries in India. So far, government has formulated fiveindustrial policies i.e. Industrial Policy 1948, 1956, 1977, 1980 and 1991 respectively.
 
Industrial Policy Resolution, 1948
 
The first industrial policy was announced in April 1948 by the then Industrial Minister, Late Mr.S.P. Mukherjee. Its historic importance lies in the fact that it ushered in the system of 
'Mixed Economy' 
in the country i.e. it entrusted the task of industrial development on both private andpublic sectors.
 
Salient Features
 
1. Development of mixed economy
 
2. State programmes for the development of industries.
 
3. Promotion of small scale and cottage industries,
 
4. Foreign investment was allowed but effective control should be with Indians.
 
5. Classified industries into four categories : (a) Public Sector (b) Mixed Sector (c) ControlledPrivate Sector (d) Private and cooperative sector.
 
Industrial Policy Resolution, 1956
 
IPR, 1956 was the most comprehensive industrial policy which was formulated in the backdropof the adoption of the constitution and the socio-economic goals. The policy may be described asthe
'economic constitution' 
of India as it not only outlined the basic framework of the futureindustrial
 
policies (especially upto 1991) but also of the general economic policies. Its mainobjectives were to accelerate the rate of economic growth and to speed up industrialization for achieving a 'socialistic pattern of society/
 
Salient Features
 
(1) The policy divided the industries into three categories •
 
(a)
Schedule A (Public Sector)
' Seventeen industries were exclusively reserved for the publicsector. These include arms and ammunition, atomic energy, iron and steel, heavy machinery,heavy electrical parts, mineral oil, coal, air transport, railways, shipping, telephones, wirelessapparatuses, copper, lead, zinc mines and electricity.
 
(b
) Schedule B (Mixed Sector)
: Twelve industries were placed in the mixed sector of publicand private enterprise. These were to be progressively state-owned and in which state wouldgenerally set up new units. These include • machine tools, aluminium, drugs, chemical fertilizersetc.
 
(c)
Schedule C (Private Sector)
; All the remaining industries and their future developrtientwould, in general be left to the initiative and enterprise of the private sector.
 
(2) The policy laid emphasis on the state assuming a predominant role for setting up newindustrial undertakings.
 
(3) The state was to facilitate and encourage the development of industries in the private sector by ensuring the development of transport, power etc. and by appropriate fiscal and other measures.
 
(4) The state would support small-scale and, cottage industries through positive discriminatory
 
measures like reservation of items for SSI, differential taxation, subsidies etc.
 
 
2
(5) The policy stressed the necessity of reducing regional disparities. Industrially backward regionswill receive priority in the establishment of new industries.
 
(6) The policy welcomed the foreign capital but the effective control should remain in Indian hands.
Industrial Licensing
The indust 
 
ries (Development and Regulation) Act, 1951,
empowered the government to issuelicences for the setting up of new industries, expansion of existing ones and for diversification of products. The main aims of the industrial licensing policy were the development and control of industrial investment and production as per national priorities, checking the concentration of industriesand ensure balanced regional development.
 
However, from time to time, many deficiencies in the licensing system came to light. Thegovernment set up several committees for the study of the licensing system and giving suggestions for its improvement. Such committees included R.K Hazari Committee,1964
 
and Dr. Subimal DuttCommittee-1967. These committees revealed that the system of licensing had resulted in increasedconcentration of economic power in the hands of few business houses , Dr Subimal Dutt Committee(viz. Industrial Licensing Policy Enquiry Committee) was the most important, which submitted itsreport in 1969. On the basis of its recommendation, government enacted the Monopolies andRestrictive Trade Practices (MRTP)Act, 1969.
 
Industrial Policy Statement, 1977
 
 
 
The thrust of the policy was on decentralization of the industries and the promotion of smallscale and cottage industries.
 
 
It introduced the concept of tiny sector within the small-scale sector.
Industrial Policy Statement, 1980
 
 
The policy emphasized the optimum utilization of installed capacity, technological up gradationand modernization.
 
The policy selectively liberalized the industrial sector i.e. MRTP Act was liberalised, scope of licensing was reduced, simplified the procedure for regularization of unauthorized excess capacity etc.
New Industrial Policy, (NIP) 1991
 
The Government of India announced the New Industrial Policy on July 24, 1991. The main objectiveof this policy is to unshackle the Indian industrial economy from administrative and legal controls. Itsmain aim is to raise industrial efficiency to the international level through substantial deregulation of the industrial sector of the country.
Salient Features
 
Delicensing 
: The industrial licensing was abolished irrespective of the level of investment,
 
except for 18 specified industries like defence, atomic energy, etc. Since then, most of theseindustries were delicensed and now only 4 industries fall under the purview of industriallicensing.
 
Foreign investement 
: foreign capital investement limit was raised from 40% to 51% in hightechnology and high investement priority industries.
 
Foreign Technology
 
:
Automatic approval
was granted for foreign technologyagreements upto the limit of 200 crore subject to 5% royalty oh domestic sales and8% on exports.
 
3
 
Foreign Investment Promotion Board (FIPB)
:- FIPB was established toexpeditiously clear foreign investment proposals. It serves as a single windowclearing agency for the FBI proposals.
 
Industrial Location Policy
 
:
Excepting the big cities with population of one million,in other cities industrial licensing will not be required but for those industries wherelicensing is compulsory. In case of cities with population of one million or above,excepting"non-pollutant industries, all other units will be set up at a distance of 25kms from the city limits.
 
MRTP limit scrapped 
'• The threshold limit of Rs. 100 crore .worth of assets for 
 
classification of a company as MRTP company was removed, such companies wereto be recognized on case-by-case evaluation basis.
 
Phased Manufacturing Programme
was abolished Under this programme,government use to impose a condition on foreign firms to gradually reduce andfinally eliminate the use of imported inputs.
 
Mandatory Convertibilitv Clause
was abolished
It is the condition imposed by thefinancial institutions on private companies that a part of their lending would beconverted into equity at some future date.
 
New small enterprise policy
: A separate policy was announced by the government inAugust 1991 for the promotion of small-scale industries.
 
Public Sector's role diluted 
:. The following measures were undertaken to reform thepublic sector enterprises.
 1.
 
The number of industries reserved exclusively for the public sector werereduced from 17 to 8 under NIP, 1991. Now, it has been reduced to just threeviz. atomic energy, minerals specified under the schedule of atomic energyand rail transport.
 2.
 
Like the private enterprises, sick PSUs were also placed under the perview of the Board for Industrial and Financial Reconstruction(BIFR).
3.
 
Professionalisation of management by inducting non-official members in theboards of PSUs.
 
4.
 
Disinvestment of the share of PSUs was initiated.
Monopolies and Restrictive Trade Practices (MRTP) Act, 1969
MRTP Act was enacted in 1969 and MFITP commission was constituted in 1970 to prevent theconcentration of economic power and to prohibit restrictive or unfair trade practices. Under theact companies having assets beyond the threshold limit (i e. 20 crores in1985) were placed under the purview of the act. Certain restrictions are imposed on such companies like prior approval of the MRTP commission for establishment of new undertakings, expansion of undertakings mergesand amalgamations.
Competition Act, 2002
The competition act was enacted by the government in 2002 on the recommendation of the S V SRaghavan Committee. It repealed the MRTP Act and the MRTP commission was replaced by theCompetition Commission of India (CCI) The objectives of the act are to encourage competition,prevent abuse of dominance (rather than dominance as such) and to ensure a level playing fieldfor all the enterprises in the Indian economy.
PUBLIC SECTOR

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