Industrial Policy

Industrial policy •Refers to the Government’s policy towards the establishment of industries, their working and management. •Industrial development of a country largely depends on the industrial policy adopted by the government. •During British days, the government was a spectator without participating as an entrepreneur. •The dawn of independence created new hopes and aspirations in the field of industry and the responsibility of industrialization of the country was on Indian Government. •The first industrial Policy resolution on Independent India was formulated and announced by the Govt. in April 1948.

Industrial Policy Resolution 1948.objective • Justice and equality of opportunity to all the people. • Promotion od standard of living by exploiting resources • Increase agriculture and industrial production • Opportunities of employment to all. • To establish a national planning commission • Determination of state responsibility and regulation of private enterprise.

Classification • The govt classified the industries into four categories • State monopoly • Basic and Key industries • Private industries controlled by State • 100% private sector industries

Classification

industries

State monopoly Defense, arms and ammunitions, Atomic energy Railways Strategic industries

Basic key industries Iron and steel Aircraft Ship Telephones Mineral oil

Private controlled by state Cotton textiles

Sugar Cement Paper Heavy chemicals

100% private New industries and existing industries

Defects of the policy • Damage to private enterprise • Lack of Co-ordination ( between state and Union Govt ) • Evils of Bureaucracy

Industrial policy resolution -1956 • • • •

The industrial Policy was revised in 1956 Objectives areReduction of disparities in income and wealth Prevention of monopolies and concentration of economic power • Build up large and growing public sector. • Developing heavy and machine making industries • Accelerate the rate of industrialization and economic growth.

Steps to achieve the objectives • State to assume predominant role and responsibility by starting and developing new industries • Cottage and small industries to be supported as they provide large scale employments. • Disparities in the levels of employment among different regions should be reduced by extending power and transport facilities to backward areas • Managerial and technical personnel should be provided to meet the needs of the public sector and small industries by introducing elaborate training facilities.

Steps to achieve the objectives • Proper and increased incentives will be provided for all those engaged in industries for improving working and living conditions raising the standard of efficiency . • Public sector undertakings ought to set an example.

New classification of industries • • • •

Classified into three categories Schedule A Schedule B Schedule C

Schedule A •

Seventeen industries were listed

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

Arms and ammunitions Atomic energy Iron and steel Heavy castings and forgings of iron and steel Heavy machineries Heavy electrical plants Coal and lignite Mineral oil Mining Processing copper, lead, zinc, tin etc Minerals specified in the schedule in Atomic Energy Aircraft Atr transport Railways Ship building Telephones Electricity

Schedule B • 2. 3. 4. 5. 6.

Consists of 12 industries All other minerals Aluminum and other non-ferrous metals Machine tools Ferro-alloys and tool steels Intermediate products required for chemical industries like drugs/dyestuffs/plastics 7. Anti-biotic 8. Fertilizers, synthetic rubber, chemical pulp, road, sea and transport

Schedule C • Remaining industries

Limitations • Increased the scope of government participation in industries and reduced the part of private enterprise. This was criticized unfair.

Industrial policy statement of July 1980 • This is an updated version of the 1956 Industrial Policy Resolution • Emphasized the commitment of the government toward rapid and balanced industrialization of the economy so as to benefit the common man in the form of increased availability of goods, higher per capita income and larger employment generation

objectives • Increase industrial production through optimum utilization of installed capacity • Rapid and balanced industrialization of the country and increasing the availability of goods at reasonable prices • Solve industrial inputs like energy, transport and coal • Correcting regional imbalance • Development of small, medium and large enterprises • Promotion of export oriented and import substitution industries • Development of S,M,L industries • Employment generation

Steps taken to achieve objectives • To generate more employment ( decided to permit additional capacities in industries over and above the approved) • To promote growth of small scale industries, investment limits for small scale sector raised from Rs 10 lakhs to Rs 20 lakhs. Limit of ancillary units increased from Rs 15 lakhs to Rs 25 lakhs

Steps taken to achieve objectives • Industrial policy statement gave ample scope for the private sector to expand its activities and set up industries in the sector reserved for state in 1956 resolution. • In order to encourage production for export, exemption given in production for export

New industrial Policy 1991 • The main objectives of NIP are to build on the gains already made, correct the distortions and weakness that have crept in, rejuvenate the dormant industrial sector, growth in employment and productivity. • All-round international competitiveness.

New industrial Policy 1991 -Aims • Bring out radical changes in the following spheres • Industrial licensing • Foreign investment • Foreign technology agreements • Public sector management • Monopolies and restrictive trade practice act

Changes- INDUSTRIAL LICENCING No licenses are required to set up new units, expand or diversify the existing line of manufacture except in certain industries related to security, hazardous chemicals, strategic reasons-in all 34 industries • Areas where security and strategic concerns predominate, will continue in public sector. • Automatic clearance for projects where imported capital goods are not required. • A flexible location policy

Changes- FOREIGN INVESTMENT • Approval will be given for direct foreign investment up to 51% of foreign equity in high priority industries and trading companies engaged in export activities. • The payment of dividends will continue to be monitored by RBI to ensure outflows and inflows. • A specially empowered board will be constituted to negotiate with international firms and approve foreign investment in select areas.

Changes – FOREIGN TECHNOLOGY • Automatic permission for foreign technology agreements in high priority industries and no permission is necessary for hiring of foreign technicians or technology.

Public sector management • As per the new industrial policy the role of Public Sector in the industrial development is reduced considerably. • It may be recalled that Industrial Policy Resolution of 1956 had accorded priority to Public Sector by reserving all 17 major industries known as Schedule A. Besides,12 other industries known as schedule B were identified for the entry of Public sector. Moreover, state will have an over ridding power to start any industry other than these 29 industries.

Public sector management • Under the New Industrial Policy, the priority areas of the public sector industries have been confined to • Essential infrastructural goods and services • Exploration and exploitation of oil and minerals • Technology development • Defense equipments

Public sector management • As much as three-fourths of the industrial activities are now being made available for the private sector. • Further, PSUs will be made more professional and given greater autonomy.

Monopolies and Restrictive Trade Practices Act • With the introduction of liberalization, the government amended the MRTP Act of 1969 on 27th Sept 1991.

Monopolies and Restrictive Trade Practices Act

• The following changes have been effected. • The requirement for larger companies to seek prior approval of the Government for expansion, establishment of new units, merger, amalgamations, take over, appointment of Directors has been eliminated.

Monopolies and Restrictive Trade Practices Act • The public sector companies will also be covered under this act. • MRTP commission would be strengthened both in terms of manpower and judicial provisions. • However, Government undertakings engaged in the production of Defense equipment, specified minerals, atomic energy, govt mints will be kept out of the purview of the act from security point of view.

New policy for Small Scale Industry • • • • • • • • •

August 6, 1991 More facilities and concessions to small scale industries Investment ceilings were raised. Equity participation by other industrial undertakings in the SSI not exceeding 24% of the total shareholding. Investment limit of ancillary units and export oriented units rose to Rs 75 lakhs Compulsory quality control for products relating to health and life Package for handloom and handicraft sector Fund for loom modernization by replacing Janatha cloth scheme Act to limit the new and non-active partner’s liability to the capital invested