23606475 Industrial Development and Regulation Act

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Industries Development and Regulation Act

Trimester I

2009


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Industries Development and

Regulation Act The IDRA, 1951 was passed with the objective of effectively

implementing the Industrial Policy. Until the economic liberalizationushered in 1991, the entry into business, growth and expansion offirms were regulated by licensing exercised by the Central

Government under this Act.

Objective:

The main objective of the IDRA is to empower the Government:

To take necessary steps for the development of industries To regulate the pattern and direction of industrial development

To control the activities, performance and results of industrialundertakings in the public interest.


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Development Provisions Regulatory Provisions

Advisory Council &

Development Councils

Regulation of Conduct &

Management of business

Regulation of entry into

& growth of business

Regulation of production,

Supply, price & distribution

Supervision,

Investigation & InspectionTake over of Management


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Salient features of the Act a) Development Measures: The IDRA seeks to ensure planned industrial

development of the country by regulating, controlling and developing industries that

have been included in the Schedule to the Act. These industries are known asScheduled Industries. The Act provides for the establishment, by the CentralGovernment of a Central Advisory Council, consisting of representatives of theowners of i

ndustrial undertakings, employees, consumers, primary suppliers etc. forthe purpose of advising the Central Government on matters relating to thedevelopment of industries.

It also provides for the establishment, for any scheduled industry or group of

scheduled industries, a Development Council consisting of members having specialknowledge of matters relating to the technical or other aspects of the industries, forpurposes such as recommending measures for improving the performance ofindustries..

b) Registration of Existing Industrial Undertakings: The owner of every existing

industrial undertaking is required to register the undertaking in the prescribed mannerand within the prescribed period. Registration of an undertaking is not necessary if :

It is a small scale industrial undertaking

It is otherwise exempt from the licensing / registration provisions of this Act

Where the undertaking concerned is not satisfying the definition of the term factoryunder the Act.


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Salient features of the Act (contd.) c) Regulation of Entry and Growth: The IDRA empowers the

Central Government to regulate the development of industries bymeans of licensing with suitable exemptions as decided by theGovernment.

A license is a written permission from the Government to anindustrial undertaking to manufacture specified articles included inthe Schedule to the Act. It contains the particulars of the industrialundertaking, its location, the articles to be manufactured etc. It isalso subject to a validity period within which the licensed capacityshould be established.

A license is necessary under the following circumstances:

For establishing a new industrial undertaking

For taking up the manufacture of a new article in the existingundertaking

For substantial expansion of an undertaking

For change in location of an undertaking.


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Salient features of the Act (contd.) Prior to the economic liberalization in 1991, the licensing was a means to help achieve

the following objectives:

Achieving the desired pattern of industrial dispersal especially promoting thebackward regions

encouraging new entrepreneurs prevention of concentration of economic power

protecting the small scale sector

regulating foreign capital and technology

ensuring the use of proper technology and economies of scale

controlling industrial pollution

ensuring demand-supply equilibrium

export promotion and import substitution conserving foreign exchange by proper allocation

ensuring employment generation and socio economic equilibrium.

Licensing under New Policy:

The Industrial Policy, 1991 has abolished industrial licensing except for certain industries

related to security and strategic considerations, hazardous chemicals and environmentalconcerns. Now all industrial undertaking are exempt from obtaining an industrial licenseexcept for:

Industries reserved for the public sector

Industries retained under compulsory licensing

Items of manufacture reserved for the small scale sector

Proposals involving locational restrictions

Industrial undertakings exempt from obtaining an industrial license are required to file anIndustrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance(SIA) and obtain an acknowledgement. No further approval is required.


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Salient features of the Act (contd.)d) Supervision and Control: The Government under this Act can make a complete

investigation if it is of the opinion that:

In respect of any scheduled industry or undertaking there has been or is likely tobe a substantial fall in the volume of output or a deterioration in the quality ofoutput or an unjustified rise in price of the good

Any scheduled undertaking is managed in a manner highly detrimental to thescheduled industry or to the public interest.

Thereafter depending upon the results of the investigation, the Government isempowered to issue direction to the industrial undertaking for any of the followingpurposes:

Regulating the production of any article and fixing the standard of production

Requiring the industrial undertaking to take steps that the Government mayconsider necessary to stimulate the development of the industry.

Prohibiting the industrial undertaking from resorting to any act which might reduceits production, capacity or economic value

Controlling the prices or regulating the distribution, of any article which has been

the subject matter of investigation.

For the purpose of investigation, any person authorized by the Central Government on itsbehalf can:

Enter and inspect any premises

Order the production of any document, book, register or record

Examine any person having the control of or employed in connection with, any

industrial undertaking.


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Salient features of the Act (contd.)e) Take over of Management: The power of control entrusted to the

Central Government under the IDRA extends to that of the take overof the management of the whole or any part of the industrialundertaking which fails to comply with any of the directions. TheGovernment can also take over an industrial undertaking which isbeing managed in a manner detrimental to the industry or to publicinterest. In respect of the industrial undertaking the management ofwhich the Central Government has taken over the IDRA empowers

the Government to take steps in appropriate cases, to liquidate orreconstruct the company concerned.

f) Price and distribution control: For securing equitable distributionand availability of fair prices of any article related to any scheduledindustry, the Central Government is empowered to control its supply,

distribution and price. Exemptions: The Central Government is empowered to exempt any

industrial undertaking from all or any provision of the Act in certaincases in the public interest.


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Current Scenario

Liberalization has diminished the importance ofthis Act.

In the current scenario, most of the entry andgrowth restrictions and reservation of industries

for public sector has been dismantled Responsibility for the development and to

promote industries has now shifted to the StateGovernments

Thus, several people argue that the Act has lostits relevance and it should be repealed.

Documents

23606475 Industrial Development and Regulation Act