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INDUSTRIAL AND LICENSING

POLICY
What is Industrial Licensing?
 Industrial policy means rules, regulations, principles, policies and
procedures laid down by government for regulating, developing
and controlling industrial undertakings in the country.
 It prescribes the respective roles of the public, private, joint and
co-operative sectors for the development of industries.
 Incorporates fiscal and monetary policies, tariff policy, labour
policy and government attitude towards foreign capital, and role to
be played by multinational corporations in the development of the
industrial sector.
 Government of India has formulated policies for industrial growth
and development.
History of Industrial Licensing
Pre- Independence
1. East India company
2. First World War
3. Second world war
East India company
 The Britishers came to India in the year 1600 as
traders of the East India company. During the
British rule in India, government policy towards
industry and business was indifferent. The first
century of British rule saw the decline of nearly
all indigenous industries for many reasons –
technological, economic and political.
 Modern industrial enterprises in India developed
after 1850.Its earliest manifestations came in
the wake of the construction of railways, which
made it essential to have modern workshops for
repair and maintenance of the rolling stock.
First World War
 The outbreak of the First World War brought an end to the policy of
hostility between British Bengal Chamber of Commerce and the
government and forced on the government a more progressive policy
that included selective encouragement of some industries and
protective tariff.
 In 1916 the famous Indian Industrial Commission was set up to
examine and report the possibilities of further industrial development
in India, and submit recommendations for a permanent policy of
industrial stimulation.
 Its proposals were based upon the fundamental principles that in the
future the government must play an active part in the industrial
development of the country.
Second World War
 This was the time when major watershed in the development
of government business relations in India. India became the
main base of the Allied War efforts in the Far Eastern and
Middle Eastern fronts its industrial development received a
tremendous boost from the substantial orders for locally
manufactured goods and through setting up of a large number
of new industrial units in fields hitherto in conceivable.
 During the two brief years that intervened between the end of
the war(1945) and independence(1947), government efforts
were mostly directed at dealing with shortages that developed
in large numbers of items both consumers goods and essential
war materials.
Post Independence
Government's Role

Pandit Jawaharlal Nehru laid the foundation of modern India The goal
and objectives set out for the nation by Pandit Nehru on the eve of
independence were :

 Rapid agriculture and industrial development of the country


 Rapid expansion of opportunities for gainful employment
 Progressive reduction of social and economic disparities
 Removal of poverty and attainment of self –reliance
Objectives of Industrial Policies
 Achieving a socialistic pattern of society.
 Achieving industrial growth.
 Achieving economic growth.
 Developing heavy and capital goods industry.
 Providing opportunities for gainful employment .
 Alleviating poverty.
 Achieving a self-sustained economy .
 Protecting and developing a healthy small-scale sector.
 Updating technology and modernization.
 Liberalization and globalization of economy.
Five Year Planning
 First Five Year Plan (1951-52 to 1956-57)
 Second Five Year Plan (1951-57 to 1961-
62)
 Third Five Year Plan (1961-62 to 1965-66)
 Fourth Five Year Plan (1969-70 to 1973-74)
 Fifth Five Year Plan (1974-75 to 1978-79)
 Sixth Five Year Plan (1978-79 to 1982-83)
 Seventh Five Year Plan (1985-86 to
1989-90)
 Eight Five Year Plan (1992-93 to 1996-97)
 Ninth Five Year Plan (1997-98 to 2001-02)
 Tenth Five Year Plan (2001-02 to 2005-06)
First Five Year Plan
(1951-52 to 1956-57)
 Prioritized agriculture, irrigation and power
projects in order to reduce the country’s
dependence on food grain imports, solve
the food crisis and ease raw material
problem, particularly in jute and cotton.

 Almost 45% of the resources was allocated


to agriculture, while industry got a paltry
4.9%
Second Five Year Plan
(1956-57 to 1961-62)
 Agriculture was given a complementary role and
emphasis was on industrial sector, especially
heavy goods industry.

 Agricultural programs were aimed at meeting raw


material requirements of industry besides
meeting the food needs of the increasing
population.

 Industrial sector was perceived as the leading


sector which could enable the economy to grow
at a rapid pace.
Third Five Year Plan
(1961-62 to 1965-66)
 Agricultural production was once again
given top priority as it was found that
growth in agricultural production was the
limiting factor in economic growth.

 Allocation to power sector was enhanced


considerably to 14.6% of the total outlay,
as power generation was considered an
important factor in ensuring rapid growth
of the industrial sector which could lead to
self sustaining economic growth.
Fourth Five Year Plan
(1969-70 to 1973-74)
 Emphasis shifted towards providing
necessary consumption benefits to the
less privileged and weaker sections of the
society through employment and
education.

 The plan also aimed at accelerating the


momentum of economic development and
improving stability of food grain
production.
Fifth Five Year Plan
(1974-75 to 1978-79)
 Concentrated on reigning inflation faced during
the Fourth Plan and achieving stability in the
economic situation.

 Aimed at improving the quality of life of


especially the downtrodden section of
economy.

 Several new economic and non-economic such


as nutritional requirements, health and
family planning, were incorporated in the
planning process.
Sixth Five Year Plan
(1978-79 to 1982-83)
 Formulated by the Janata Government,
sought to achieve higher production
targets with the concomitant increase in
employment opportunities for the poorest
section of the society.

 Emphasis on irrigation and power and the


shift in approach was laudable, the
government lacked political will to forge
ahead.
Seventh Five Year Plan
(1985-86 to 1989-90)
 Food grain production grew by 3.2%
despite severe drought conditions
during the first three years of the Plan.

 Policies aimed at rapid growth in food


grain production, higher employment
levels etc, and several special programs
like Jawahar Rozgar Yojana were
introduced.
Eight Five Year Plan
(1992-93 to 1996-97)
 Launched immediately after the severe
balance of payment crisis, accentuated by
the Gulf War in 1990.

 Several structural adjustments policies such


as a substantial devaluation in the
value of rupee, dismantling of licensing
requirements, reducing trade barriers,
reforms in the financial sector and tax
systems were introduced in order to put the
country on higher growth path and remedy
the precarious balance of payments
situation.
Ninth Five Year Plan
(1997-98 to 2001-02)
 Key task was to improve the living
conditions of the poop and provide them
with adequate employment opportunities.

 It made serious efforts raise the level of


agricultural and rural incomes and target
programs at small, marginal farmers and
landless laborers.

 Also aimed to check the growth of


population.
Tenth Five Year Plan
(2001-02 to 2005-06)
 Formulated keeping in line with the
Prime Minister’s vision of doubling per
capita income in the country and
creating 100 million employment
opportunities in the next 10 years.
INDUSTRIAL POLICY
OF INDIA
INDUSTRIAL POLICY RESOLUTION , 1948

INDUSTRIAL POLICY RESOLUTION , 1956

INDUSTRIAL POLICY RESOLUTION , 1973

INDUSTRIAL POLICY RESOLUTION ,1977

INDUSTRIAL POLICY RESOLUTION ,1980


INDUSTRIAL POLICY
RESOLUTION, 1948
Industrial policy Resolution of 1948,government
recognized the need for a mixed economy and
reserved national monopolies only for atomic energy,
and rail & road industries.
while many industries held by private firm could
continue, the government had the exclusive right to
initiate project in six other industries –coal, iron, and
steel, aircraft manufacturing, shipbuilding, telephone,
and minerals. Yet it could seek the aid of the private
sector if necessary. Moreover, the government could
regulate and license 18 other industries of national
importance.
INDUSTRIAL POLICY
RESOLUTION, 1948
Contid….

The main thrust of the (1948) industries policy was


to lay the foundation of a mixed economy in which
both private and public enterprises could march hand
in hand to accelerate the process of industrial
development.
INDUSTRIAL POLICY
RESOLUTION, 1956
The role of government was, enlarged
tremendously under the new industrial policy
announced in April, 1956.
This policy expanded the area Of operation of public
sector by bringing in 17 Industries under the
exclusive monopoly of this Sector and adding
another 12 industries to the Domain of public sector.
The classification of
industries policy 1956 is discussed below:
Classification of Industries
The industrial policy of 1956 adopted the
Following classification of industries into
Three categories,
(1). Schedule A industries
(2). Schedule B industries
(3). Schedule C industries
SCHEDULE ‘A’
INDUSTRIES
This category included 17 industries. The
Future development of these industries
Was to be the exclusive responsibility of
The state. These industries include arms
And ammunition, atomic energy, railways,
Aircraft building, ship building, iron and
Steel, coal, heavy electricals, etc.
SCHEDULE ‘B’
INDUSTRIES
There were 12 industries placed in schedule B.
In regard to the developed of these
Industries, the state was generally to take
Initiative in setting up new undertaking.
However, the private was also expect to
Supplement the effort of the state in this
Category of industries Some industries in
SCHEDULE ‘C’
INDUSTRIES
All the remaining industries fell in the schedule C, the
future development of which was left to the initiative of the
initiative of the private sector. The state, however, was to
provide necessary assistance to private sector for
development of industries.
It is thus clear that the public sector was assigned a
Dominant role in industrial development with 29 industries
Sector under it.The public sector was given a commanding
Position in the industrial sector. With this, the government
Assumed the role of the major partner’s in the country’s
Industrialisation process. The scope of private sector in
Industrial programmes was thus not only limited to a few
Spheres, but was also rigidly controlled by the licensing
CONT….

System which was a part of government’s


industrial policy.
This industrial policy of1956, with minor
modifications in 1977 and 1980, continued to
govern India’s industrial development till July
1991 when the new Industrial policy was
announced.
INDUSTRIAL POLICY, 1973
1. It was decided that compulsory export obligations,
merely for ensuring the foreign exchange balance of
the project, would no longer be insisted upon while
approving new industrial capacity.

2. In the areas of price control of agricultural and


Industrial products, the prices would be regulated to
ensure an adequate return to the investor.
INDUSTRIAL POLICY
RESOLUTION, 1973
3. 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.

4. Special legislation to protect cottage and household


industries was also proposed to be introduced.
INDUSTRIAL POLICY
RESOLUTION, 1973
5.Accorded the highest priority to the generation and
transmission of power.
6.An exhaustive analysis of industrial products was
made to identify products which are capable of being
produced in the small scale sector.
7.The list of industries exclusively reserved for the small
scale sector was expanded from 180 items to more
than 500 items.
INDUSTRIAL POLICY
RESOLUTION, 1977
In December 1977, the central government
Announced a new industrial policy by way of a
Statement in the Parliament. The industrial policy,
despite some desirable elements, resulted in certain
distortion viz.,” Unemployment increased rural-urban
disparities widened .”and real investment stagnated.
On an average, the growth of industrial sector was
not more than three to four percent per annum. The
incidence of industrial sickness also become wide
spread.
INDUSTRIAL POLICY
RESOLUTION, 1977 Contd……

The trust of the industrial police statement of


December 1977 was on effective promotion of the
cottage and small industries widely dispread in rural
areas and small towns. Emphasized that the
whatever can be produced by small and cottage
industries must only be so produced. The focus
point of development of small scale industries were
taken away from the big cities to districts.
INDUSTRIAL POLICY
RESOLUTION, 1977 Contd……

The concept of district industries Centers was


introduced for the first time. Each district would
have such a district center which would extend all
the support and services required by the small
entrepreneurs. These included economic
investigations of the districts, supply of the
machinery and equipments, raw material and other
resources, arrangement for credit facilities, call for
quality control, research.
INDUSTRIAL POLICY
RESOLUTION, 1977 Contd……

1. 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.

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

3. It was also decided that compulsory export obligations, merely for ensuring the
foreign exchange balance of the project, would no longer be insisted upon while
approving new industrial capacity.

4. In the areas of price control of agricultural and Industrial products, the prices would
be regulated to ensure an adequate return to the investor.
INDUSTRIES POLICY
RESOLUTION, 1980

The industrial policy statement of 1980 focused on


the need for promoting competition in the domestic
market, technologies up gradation modernization.
The policy laid the foundation for an increasingly
competitive export base and for encourage foreign
investment in hi-tech areas. The policy, therefore
suggested the following measures:
INDUSTRIES POLICY
RESOLUTION, 1980 Contd……

 Effective operational management of the public


sector.
 Integrating industrial development in the private
sector.
 Regularization of unauthorized access capacity
installed in the private sector.
 Encouragement of merger and acquisition of sick
units.
INDUSTRIES POLICY
RESOLUTION, 1980 Contd……

The industrial policy 1980 was guided merely by


considerations of growth. It liberalized licensing for
large and big business but by blurring the distinction
between small scale and large scale industries. It
sought to promote the latter at the cost of the
farmer. Broadly speaking, the industrial policy chose
a more capital intensive path of the development
and thus, it underplayed the employment objective.
INDUSTRIAL POLICY
1991
The new industrial policy was announced on 24th July 1991 by Mr. P.V.
Narasimha Rao which was a kind of revolution due to the drastic
changes in the previous policies which opened up our economy from
its closed/secured state

The main changes made in industrial policy 1991 included following :

 Industrial licensing policy


 Foreign investment policies
 Foreign technology policies
 Public sector policies
 EXIM
FEATURES
The features of the New Industrial Policy are:
 Self Reliance

 Grater emphasis placed on developing our ability to pay for


imports from our own foreign exchange earning

 Government is committed to the development of indigenous


capabilities in technology and manufacturing as well as up
gradation of living standards.
 To encourage entrepreneurship
 To bring new technology
 Dismantling regulatory system
 Reformation of PSU
 Manufacturing activity to be thrown open to private competition
Now lets discuss the following in
brief :

A. Industrial Licensing
B. Foreign Investment
C. Foreign Technology Agreements
D. Public Sector Policy
E. MRTP
A. INDUSTRIAL LICENSING
POLICY
 Automatic clearance if (where imported capital good is required)

i) In case for-ex availability is assured through foreign equity


ii) If CIF (corporate investment funding) value of imported capital
good required is less than 25% of total value up to maximum
value of Rs 2 crore

 If population of cities is less then 1 million then no government is


required (25 KM)
 Phase manufacturing program will not be applicable to
new projects.

 Existing unit will be provided a new broad banding


facility to enable them to produce any article without
any additional investment.

 All existing registration scheme will be abolished


(Delicensed registration Exempted Industries
Registration, DGTD)

 Entrepreneur will henceforth only be required to file an


information on new projects and substantial expansion.
B. FOREIGN INVESTMENT

 Approval will be given for FDI up to 51% in high priority


industry. There shall be no bottleneck of any kind in this
process.

 A special empower board would be constituted to


negotiate with large international firm and approve FDI in
selected area

 The import of component ,raw material and intermediate


good, and payment of know-how fee and royalties will be
governed by the general policy applicable to other
domestic units.
C. FOREIGN TECHNOLOGY
AGREEMENTS

 Automatic permission in high priority industry up to


lump sum payment of Rs1 million( 5% royalty on
domestic sale & 8% royalty sale on export sale)
 No permission on hiring foreign technician
 Testing of indigenously developed technologies
allowed
 In respect of industries other than those in
automatic permission will be given subject to the
same guidelines as above if no foreign exchange is
required for any payment.
D. PUBLIC SECTOR
 Private sector to be allowed in PSU reserved area
 To encourage wider participation a large part of
government share holding in the public sector would be
offered to mutual fund, FI’s, general public & worker.
 Board of PSU will be given greater power.
 PSU enterprise which are chronically sick and which are
unlikely to be turned around will, for the formulation of
revival/rehabilitation scheme, be referred to the Board of
Industrial and Financial Reconstruction (BIFR)or other
similar high level institutions created for the purpose.
E. MRTP ACT
 The MRTP Act will be amended to remove the threshold
limits of assets in respect of MRTP companies and
dominant undertaking. i.e., no prior approval required for
establishment of new undertaking expansion, merger,
amalgamation and takeover and appointment of director
under certain circumstances.

 Emphasis will be placed on controlling and regulating


monopolistic, restrictive, and unfair trade practice.

 MRTP act is restructured by eliminating the legal


requirements.
THREE STUDIES SHAPE THE
MRTP ACT

 HAZARI COMMITTEE REPORT ON INDUSTRIAL LICENSING


PROCEDURE, 1955

 MAHALANOBIS COMMITTEE REPORT ON DISTRIBUTION


AND LEVELS OF INCOME, 1964

 MONOPOLIES INQUIRY COMMISSION REPORT OF DAS


GUPTA, 1965
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 articles to
be manufactured, production capacity, change in product and other
relevant particulars.

 In India, an industrial license is normally issued after approved


application and if further clearances like foreign collaboration, capital
goods imports and further conditions are fulfilled.

 A license is initially valid for two years and production as per the
licensed capacity must start within the specified period.
Objectives of Industrial Licensing
 The basic objectives of industrial licensing are as follows:

 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.


Objectives continues….
 Checking unbalanced growth of industrial establishments and ensuring
economic size of industrial units.

 Balanced industrial growth through regulation of proper location of


industrial units.

 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.

 Utilizing full capacity of large scale industries .


Industrial Licensing Policy
 The industrial licensing policy was laid down to be
complementary to the industrial policy resolution as
announced by the Government of India.

 Industrial licensing in India can be studied in the following


stages:-

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


2. Industrial Licensing Policy 1951-60
3. Industrial Licensing Policies for 1960-70
4. Industrial Licensing policies 1970-77
5. Industrial policy Statement 1980-90
6. Liberalization in industrial licensing 1991 and after.
The Industries (Development &
Regulation) Act, 1951
 This Act came into effect on May 8, 1952.

 This Act has been described as “the single most important


piece of economic development legislation”, in Indian legal
structure.

 It had three important objectives. They are:

 To implement the industrial policy,


 To ensure regulation and development of important industries,
 To ensure planning and future development of new undertaking.
Main provisions of Act 1951
 Sec. 6 states that Development Councils are to be constituted in respect
of each scheduled industry or group of industry.
 All existing industrial undertakings in the industries listed in the First
Schedule of this Act, should be registered with the government within
the prescribed period and issued with a certificate of registration.
(sec.10)
 sec. 11 of the Act says that no new industrial undertakings of a major
size can be started in the scheduled industry.
 Sec. 12 states that the Central government can revoke the registration
of license in case of any misrepresentation.
 Under sec.15 of the Act, the government can order an investigation into
the working of an industrial undertaking.
 Under sec. 16 the government can issue directions to the management
in respect of prices, production, quality, and other areas of its
performance for the progress of industry and country’s economic devt.
Industrial Licensing policy 1951-60
 Industrial Licensing prior to 1960 aimed at achieving the
following among others:

 Development of industries and encouraging industrial


activity in accordance with the plan priorities
 Checking the concentration of economic power
 Reduction of regional disparities
 Proper allocation of foreign exchange
 Development, protection, and encouragement of small
scale industries
 Modernization of technology and achievement of
industrial growth.
Policy 1951-60 continues…
This policy in early 1960s came to be the object of criticism from
two opposite angles:

i) The left wing politicians and academicians criticized it as


having unduly helped the growth of large business houses and
thus furthered the concentration of economic power to common
detriment.

ii) Leaders of private business and their academic criticized it as


stifling the industrial growth of the country and creating
unemployment and large production gaps.
Industrial Licensing Policy 1960-70
The industrial licensing policy came in for sharp criticism from various
committee and commission. The main criticism leveled against it were:

 This policy had not been consistent with the industrial policy
Resolution of 1956.i.e., no specific instruction had been given to the
licensing authorities about keeping in view the general objective of
preventing concentration of economic power and monopolistic
tendencies
 Promotion of large industrial houses, and
 Usage of some unethical practices followed by a section of large
business houses, for example, multiple applications in different names
for the same items.
Industrial Licensing Policies1970-1980
Industrial licensing Policy of 1970

 Government of India announced a new industrial policy in February


1970.
 Several restrictive policies are followed in this policy. They are:

 It banned the entry of large industrial houses and foreign companies


into any field except core industries, heavy investment projects, and
export oriented projects.
 The government accepted the policy of convertibility of term loans
granted to industry by public financial institutions into equity.
 Companies with foreign holding of 75 percent and above had to issue
fresh equity equivalent to 40 percent.
Industrial licensing policy of 1973
 This policy was announced in February 1973, which refined the 1970 policy.
 It refines the 1970 policy in following aspects:

 Assets exceeding Rs. 35 crore, was abandoned, in its place the definition adopted by sec. 20
of the MRTP Act, i.e., the assets of a company by itself or along with assets of inter
connected undertakings amounting to Rs. 20 crore and above was accepted.
 The list of the core industries defined by the 1970 policy also substantially enlarged.
 There were also some procedural changes in October 1973, creating a Project Approval
Board (PAB) to deal with composite applications
Seeking approval under the four major hurdles, i.e., licensing, MRTP, capital goods, and
Foreign Investment Board.
Industrial Licensing Policy of 1977

 Janata party government, which came to power after the General


Elections of 1977, announced a new industrial policy statement on
December 23, 1977.

 The 1977 licensing policy provided thrust mainly in two respects:

 Priority to small scale, village, and tiny sector industries in future


industrialisation, and

 Geographical dispersal of industries from metropolitan centers to


rural and backward areas.
Industrial Policy Statement 1980-90
The General Elections of 1980 and the return to power of the Congress
party brought about the Industrial Policy statement of 1980 and 1982.
 Major steps taken under this policy are as follows:

 Licensing was not required for an existing licensed undertakings if the


total investment did not exceed Rs. 3 crore and if it did not require
foreign exchange excess of 10 percent of ex- factory value of Rs. 25
lakh, whichever is less.
 An existing licensed undertaking did not require a fresh license to
manufacture any new item from schedule I to the maximum of the
licensed capacity and also expand or manufacture a new product
making use of its own wastes or effluent on the recommendation of the
administrative ministry
Policy 1980-90 continues…
 No industrial license was required for small-scale units to produce
any of the items reserved for the sector under the following
conditions:

i. The unit should not belong to any dominant undertaking as defined


in MRTP Act,
ii. The unit and other interconnected unit together should not possess
assets exceeding Rs. 20 crore.
iii. In respect of foreign ownership, there should not be over 40 percent
equity owned by foreign companies or subsidiaries or foreign
individuals.
iv. The items produced should not belong to the schedule A category.
Liberalizations in Industrial
Licensing 1991 and After
 Due to the changing Industrial scene in the country, the
policy has undergone modifications.

 Industrial licensing policies and procedures have been


liberalized from time to time.

 Major policy initiatives & procedural reforms were


called for to encourage & assist the Indian entrepreneur
to exploit & meet domestic & global opportunities &
challenges
Policy Decisions
 To unshackle the Indian industrial economy from unnecessary
bureaucratic control.

 the series of measures taken by government in the areas of trade


policy, exchange rate management, fiscal policy, financial sector
reform, overall macroeconomic management.

Industrial Licensing Policy :

 industrial licensing abolished for all projects except for short list of
industries related to security, strategic concerns, social reasons,
hazardous chemicals, overriding environmental reasons, items of elitist
consumption
 Industries reserved for small scale sector will continue to be reserved , areas
where security & strategic concerns predominate will be reserved for public
sector

 Automatic clearance is given where foreign capital goods availability is ensured


through foreign equity, else required clearance from secretariat of industrial
approvals in the department of industrial development

 In location of more than 1 million population, no need of industrial approval from


the central government except for those subject to compulsory licensing,
appropriate incentives & design of investments in infrastructure development will
be used to promote dispersal of industry to backward areas

 System of phased manufacturing run on administrative case-by-case basis will not


be applicable to new projects, existing units will be provided new broad banding
facility to enable them to produce any article, exemptions from licensing is
applicable to substantial expansions of existing units.
Foreign Investment :

 Approval given to direct foreign investment up to 51% foreign


equity in high priority industries ,import components,
intermediate goods, payment of fees royalties governed by
general policy, payment of dividends made through RBI.

 Foreign equity proposals need not be accompanied by foreign


technology agreements, majority foreign equity holding up to
51% will be allowed for trading companies engaged in export
activities.

 Special empowered board constituted to negotiate with number of


international firms & approve direct foreign investment in select
areas so as to give access to high-Tech & world markets.
Foreign Technology Agreements :

 Automatic permission to high priority industries upto payment of 1


crores,5% royalty for domestic sales,8% for export & if no free foreign
exchange is needed for payments.

 Other proposals need approval under general procedure, no permission


is needed for hiring foreign technicians, foreign testing of indigenously
developed technologies.

Public Sector :

 Focus on strategic, high-Tech, infrastructure, no bar for areas of


exclusivity to be opened up to private sector ,public sector will be
allowed to entered in unreserved areas.
 Sick public enterprises were referred to BIFR ,social security
mechanism created to protect interest of workers affected.

 Part of government share holding in public sector offered to


mutual funds, financial institutions ,general public ,workers.

 Boards of public sector companies made more professional


with more powers, more thrust on performance improvement
through MOU, up gradations of technical expertise to make
MOU negotiations more effective.
MRTP ACT:
 To remove threshold limits ,eliminating the need of prior approval of
central government for establishing & expansions of new
undertakings, merger, amalgamation, takeover & appointments of
directors .

 Control & to regulate monopolistic restrictive unfair trade practices,


newly empowered MRTP commission authorized to investigate on
complaints received

 Necessary comprehensive amendments will be made in the MRTP Act


in this regard and for enabling the MRTP Commissions to exercise
punitive and compensatory powers.
Exemptions from Licensing
 27 broad categories of industries are exempted from licensing include
automotive ancillaries, agricultural implements, cycles, leather goods,
glassware.

 Export-oriented industries, import substitution items, latest technology


industries, capital goods industries are exempted if not MRTP or FERA or
not reserved for small-scale sector.

 Multinationals are permitted to hold equities up to 49% in selected small


scale industries & 82 bulk drugs.

 Items relating to an industries which is not included in the first schedule


of the act .
Exemptions continues…
 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.

 Items to be manufactured in the de-licensed sector of investment up to


Rs. 25 crore in fixed assets in non-backward areas and up to Rs. 75
crore in backward areas.

 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”.


Industrial Licensing: CRITICISM
 Most of the objectives could not be achieved, industrial investment
could not be fully streamlined.

 It could not fully succeed in preventing concentration of monopoly


& economic power.

 Licensing could not provide a clear cut guidelines about industrial


location thereby resulting in unbalanced industrialization.

 Foreign investments was restricted time to time affecting inflow of


capital, technology.
Conclusions
 INDUSTRIAL LICENSING constituted the key element
Government of India’s industrial policy since 1951.

 Several important controls such as MRTP ACT, capital goods


import control and government policy regarding foreign
investments and foreign collaborations have been taken.

 Government continues to provide necessary control measures for


the development of economy and infrastructure of the nation .

 It is expected that the new industrial policies would be reviewed


from the Government from time to time.
Thank You !
Submitted By :

Anshul Goyal 62
Uma Sharma 72
Sanjay Gaur 82
Rituja Thakur 92
Submitted To:
Amber 102
Mrs. Shilpa Jain
Id Mohammad

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