Student Industries Development and Regulation

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Industries Development

and Regulation

Pratima Narayan

Faculty in Law



Introduction

Object of industrialisation – to attainhigher levels of economic well-being

GLoalisation, liberalisation andderegulation

Adaptability of each country depends

largely on ability of each country to copewith the liberalised trade, finance andtechnology growth.



Industrial Policy initiatives - to provide the stimulus for accelerating growth, industrial efficiency and internationalcompetitiveness.

Increase in public-private participation

Restrictions on expansion of large industrial houses have beenremoved.

Paradigm shift from mere regulation to development

Foreign Trade Policy (FTP) 2004-2009 as a integrated approachfor the development of India’s export and import policies

FDI encouraged extensively in the last 20 years

Foreign investment brings with it added advantages of technology transfer, marketing expertise, introduction of modernmanagerial techniques and new possibilities for promotion of exports.



Industrial Policy Resolutionsin India – An Overview



Industrial Policy Resolution, 1948

Post-independence need was felt for a dynamicnational policy

Objectives –

a. continuous increase in production andproductivity

b. secure equal distribution of wealth

Historic document in terms of identifying the

economic problems faced by India - recognizingthe importance of increase in production andrecognizing the role of state in the developmentof industries.



Emphasises on –

1. Securing a continuous increase in production

2. Equitable distribution

3. State must play progressively active role in the development of Industries

4. Besides arms and ammunition, atomic energy and railway transport,which would be the monopoly of the Central Government, the Statewould be exclusively responsible for the establishment of newundertakings

5. Industrial field was left open to private enterprise though it was made

clear that the State would also progressively participate in this field6. Resolution emphasized on the role of private sectors in the economy

7. The Resolution also recognized the importance of participation of foreigncapital and enterprise, particularly in relation to industrial technologyand knowledge, for the rapid industrialization of India.




Recognized the Directive Principles of

State Policy enshrined in theConstitution

Recognized the need to increase the rate

of economic growth and speed upindustrialization.



Highlights

1. Improving living standards and working conditions for the mass of the people.2. To reduce disparities in income and wealth.3. To prevent private monopolies and concentration of economic power in

different fields in the hands of small numbers of individuals.4. The State will progressively assume a predominant and direct responsibility for

setting up new industrial undertakings and for developing transport facilities.5. Undertake State trading on an increasing scale.6. At the same time private sector to have the opportunity to develop and

expand.7.The principle of cooperation should be applied whenever possible and a steadily

increasing proportion of the activities of the private sector developed alongcooperative lines.

8. The adoption of the socialist pattern of society as the national objective.9. The need for planned and rapid development.10. All industries of basic and strategic importance, or in the nature of public

utility services, should be in the public sector.11. It is always open to the State to undertake any type of industrial production.



12. Categorization of industries into three groups:

i) The first category to comprise of industries the future developmentof which will be the exclusive responsibility of the State.ii) The second category to consist of industries, which will beprogressively state owned and in which the State will, therefore,generally take the initiative in establishing new undertakings, but inwhich private enterprise will also be expected to supplement theefforts of the State.iii) The third category to include all the remaining industries, and theirfuture development will, in general, be left to the initiative andenterprise of the private sector.

13.The Government of India stressed the role of cottage and villageand small-scale industries in the development of the national economy.14. Disparities in levels of development between different regions to beprogressively reduced.




The Resolution emphasized on a closer interactionbetween the agricultural and industrial sectors.

Highlights of the Resolution:

1. The Resolution accorded the highest priority to thegeneration and transmission of power.

2. An exhaustive analysis of industrial products wasmade to identify products, which are capable of

being produced in the small-scale sector.3. The list of industries exclusively reserved for the

small-scale sector was expanded from 180 items tomore than 500 items.



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

5. Special legislation to protect cottage and household industries

was also proposed to be introduced.6. 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 newindustrial capacity. 10. In the areas of price control of

agricultural and industrial products, the prices would beregulated to ensure an adequate return to the investor.



Industrial Policy Statement, 1977

De-centralization and role of small scale andcottage industries was the hallmark

Highlights:

1. Highlighted on producing inputs needed by a largenumber of smaller units and making adequatemarketing arrangements.

2. The nucleus plant would also work for upgrading

the technology of small units.3. The Government would promote the development

of a system of linkages between nucleus largeplants and the satellite ancillaries.



4. To boost the development of small-scale industries, theinvestment limit in the case of tiny units was enhanced to Rs.2 lakh,of small-scale units to Rs.20 lakh and of ancillaries to Rs.25 lakh.5. A scheme for building buffer stocks of essential raw materials forthe Small Scale Industries was introduced for operation through the

Small Industries Development Corporations in the States and theNational Small Industries Corporation in the Centre.6. Industrial processes and technologies aimed at optimumutilisation of energy or the exploitation of alternative sources of energy would be given special assistance, including finance onconcessional terms.



Industrial Policy Statement, 1980

Focused on the need for promotingcompetition in the domestic market,

technological advancement andmodernization.

Foundation was laid for an increasingly

competitive export base and alsoencouraged foreign investment in hightechnology areas.



New Industrial Policy, 1991

Came into effect on 24th July 1991 Thrust on development and utilisation of indigenous capabilities

in technology and manufacturing as well as its upgradation toworld standards

Highlights:1. Pursue a sound policy framework encompassing encouragement of

entrepreneurship, development of indigenous technology throughinvestment in research and development, bringing in newtechnology, dismantling of the regulatory system, development of the capital markets and increasing competitiveness for the benefit

of the common man.2. The spread of industrialisation to backward areas of the country tobe actively promoted through appropriate incentives, institutionsand infrastructure investments.



3. Government to provide enhanced support to the small-scale

sector so that it flourishes in an environment of economic efficiencyand continuous technological up gradation.4. Foreign investment and technology collaboration encouraged toobtain higher technology, to increase exports and to expand theproduction base.5. The Government endeavored to abolish the monopoly of any

sector or any individual enterprise in any field of manufacture,except on strategic or military considerations and open allmanufacturing activity to competition.6. To ensure that the public sector plays its rightful role in theevolving socioeconomic scenario of the country. The Governmentensured that the public sector would run on business lines as

envisaged in the Industrial Policy Resolution of 1956 and wouldcontinue to innovate and lead in strategic areas of nationalimportance.



7.The Government also ensured that it would fully protect the interestsof labour, enhance their welfare and equip them in all respects to dealwith the inevitability of technological change.8. In order to encourage Workers’ participation in management,

Workers’ cooperatives were encouraged to participate in packagesdesigned to turn around sick companies.10. Need was also felt to preserve the environment and ensure theefficient use of available resources.11. In pursuit of the above objectives, the Government took up a seriesof initiatives in respect of the policies relating to industrial Licensing,

foreign investment, foreign technology agreements, public sector policy,MRTP Act etc.12. With a view to ensure efficient allocation of resources, banking andcapital markets also came in for major economic reforms in terms of substantial interest rate deregulation, liberal licensing of private sector banks, expansion of branch networks of foreign banks, de-linking capital

market from direct government controls, transparency and wider investor protection guidelines.13. Separate policy measures were announced in the form of specificpackages aimed at upliftment of small scale and cottage industries as wellas 100% export-oriented units, and units located in the ExportProcessing Zones and Technology parks and Special Economic Zones.



Industries (Development and

Regulation) Act, 1951 Preamble – to provide for the development

and regulation of certain industries.

Industries are specified in the first schedule tothe Act, known as ‘Scheduled Industries’.

Act is implemented through the Developmentof Industrial Policy and Promotion, Ministry

of Commerce and Industry on whom thepower to develop and regulate scheduledindustries in vested by the CentralGovernment



‘Scheduled Industries’

Contains list of 38 industries

Include Metallurgical Industries, Fuels, Boilers, PrimeMovers, Electrical Equipment, Telecommunications,

Transportation Equipment, Industrial Machinery,Machine Tools, Agricultural Machinery, Earth MovingMachinery, Commercial and Office Equipment,Medical and Surgical Appliances, Instruments,Fertilisers, Chemicals, Drugs and Pharmaceuticals,

Textiles, Paper, Sugar, Food Processing, Vegetable Oilsand Vanaspati, Soaps, Rubber goods, Leather andLeather goods, Glass, Ceramics, Cement, Timber products, defence industry etc.



Highlights

Act is mainly divided into two parts: (i) those dealingwith developmental aspects and (ii) those dealing withregulatory aspects of scheduled industries.

Introduces the Central Advisory Council andDevelopment Councils and such other facilities tosecure developmental activities.

Registration aspects include a system of registration of existing undertaking, licensing of new undertakingsfor producing new articles and for substantialexpansion or change of location of existingundertaking.



Envisages balanced industrial growth all over Indiaand optimum use of available resources and

infrastructure. IDR Act also sees that the industries do not suffer due to financial mismanagement or technicalinefficiency or operational defects. In certain cases

Act provides for investigation by CentralGovernment in cases of mismanagement andmisadministration.The Act also deals with taking over of directmanagement and control in appropriate cases.Empowers Central Government to grantexemption to any undertaking or scheduledindustries from application of all or any of theprovisions of the Act, Rules and orders made

thereunder.



Central Advisory Council

For advising the Government on matters concerningdevelopment and regulation of Scheduled Industries

Comprises of a Chairman and such other members from amongpersons who are in its opinion capable of representing –

a. interests of owners of industrial undertakings in scheduledindustries

b. persons employed in industrial undertakings in scheduledindustries

c. consumers of goods manufactured or produced by scheduledindustries and

d. such other class of persons including primary producers



Development Council

Comprises of such members – a. Persons capable of representing the interests of owners of

industrial under-takings in the scheduled industry or group of

scheduled industriesb. persons having special knowledge of matters relating to the

technical or other aspects of the scheduled industry or group of scheduled industries

c. persons capable of representing the interests of persons employedin industrial undertakings in the scheduled industry or group of

scheduled industries andd. persons not belonging to any of the aforesaid categories, who are

capable of representing the interests of consumers of goodsmanufactured or produced



Functions of Development Council

Recommending targets for producing,

Coordinating production programmesand reviewing progress from time totime

Promoting standardization of products,etc.



Levy and Collection of Cess

IDR Act empowers Central Government to levy and collect cesson goods manufactured and produced in any specified scheduledindustry and hand over the proceeds to the Development Council

established for that industry. Development Council utilises the proceeds for – a. Promotion of scientific and industrial researchb. To promote improvements in design and quality with reference

to the productsc. To provide for the training of technicians and labour in such

industry or group of industries andd. To meet such expenses in the exercise of its functions and its

administrative expenses as may be prescribed.





Circumstances Where Registration is notnecessary

If the undertaking is a small-scaleindustrial undertaking

If the undertaking is otherwise exemptfrom licensing/registration provision of the Act

Where the undertaking concerned is notsatisfying the definition of the term‘factory’ under the Act.



Small Scale and Ancillary Industries

Section 11B The Central Government may, with a view to ascertaining which

ancillary and small scale industrial undertakings need supportivemeasures, exemptions or other favourable treatment under this Act toenable to maintain their viability and strength so as to be effective in-

i. promoting in a harmonious manner the industrial economy of the countryand easing the problem of unemployment, and

ii. securing that the ownership and control of the material resources of thecommunity are so distributed as best to subserve the common good.

At present 797 items are reserved for exclusive manufacture in the

small scale sector.

Section 29B of the Industries Development and Regulation Act, 1951,deals with policy of reservation in the small scale sector.



Ancillary Industry

engaged in –

i. manufacture of parts, componentssub assemblies, tooling or intermediates; or

ii. rendering of services, of supplying or rendering, not less than

fifty per cent of its production of itstotal services, as the case may be, toother units for production of other articles.



Factors Relevant in Ascertaining SmallScale or Ancillary Industry

– the investment by the industrial undertaking in

i. plant and machinery, or

ii. land, buildings, plant and machinery;

– the nature of ownership of the industrial undertaking

– the smallness of the number of workers employed in theindustrial undertaking;

– the nature, cost and quality of the product of the industrialundertaking;

– foreign exchange, if any, required for the import of any

plant or machinery by the industrial undertaking; and– such other relevant factors as may be prescribed…………..



Sub-sectors under Small Scale Sectors

Tiny enterprises.

Export Oriented Units.

Small Scale Service and BusinessEnterprises(SSSBE)

Women Enterprises.



Investment Ceiling

Small scale industry - investment in fixed assets inplant and machinery whether held on ownership

terms or on lease or by hire purchase does not exceedRs. 1 crore.

Ancillary industry – Rs. 1 crore

In calculating the value of plant and machinery, theoriginal price paid by the owner, irrespective of whether the plant and machinery are new secondhand, will be taken into account.



Exclusion from Valuation

Cost of equipment such as tools, jigs, dies, moulds andspare parts for maintenance etc.

Cost of R&D equipment and pollution control

equipment In the case of imported machinery, import duty will

be included, but not the miscellaneous expenses liketransportation from the port to the site the factory

Cost of generation sets, if any, installed

Charges paid for technical know-how for erection of plant and machinery

Cost of fire fighting equipment etc.



Situations in which medium of large units canmanufacture items reserved for exclusiveproduction in the small scale sector

Medium/large industry to obtain COB (Carry-on-Business)license

When existing small scale units manufacturing a reserved itemgraduate by their process of growth, into medium or large scaleundertaking, then they have also to obtain a COB license toenable them to continue manufacturing of such reserved items.

Medium of large industrial units are allowed to take upmanufacture of items reserved for the SSI, provided they

undertake to export a minimum of 50% of their production. Such units can manufacture the reserved item up to the capacityendorsed on the license.



There are only few industries that require licence.

Industrial undertakings exempt from obtaining anindustrial licensing are however required to file theIndustrial Entrepreneur Memorandum (IEM) in Part Awith the Secretariat of Industrial Assistance (SIA).



Locational Policy and Environmental Clearance

Free to select the location of a project Proposed location should be atleast 25 KM

away from the Standard Urban Area limits To obtain statutory clearances relating to

Pollution Control and Environment for settingup an industrial project andexpansion/modernization of existing projects.

Environmental Protection Act, 1986 identifies32 projects in which environmental clearanceis mandatory.



Take-over of Management of industries - empowers inthe Central Government to assume management or control of an industrial undertaking in certain cases.

Power to Control Supply, Distribution, Price etc.



Penalties

1. Failure to get an existing industrial undertaking registered - Section 10(1)2. Failure to produce certificate of registration issued prior to the commencement

of the IDR Act for entering therein the productive capacity _ Section 10(4)3. Failure to obtain industrial license for setting up a new industrial undertaking –

Section 11(1)4. Failure to get a license for manufacture of a new article – Section 11(A)5. Failure to obtain a COB license, permission for changing location, effecting

substantial expansion etc. – Section 13(1)6. Failure to comply with directions issued under Section 16 of the Act after

investigation7. Failure to comply with directions issued under Section 18B(3) by the person or

body authorized to take over the management of an industrial undertaking.8. Any order made under Section 18G in order to control supply, distribution,

price etc. of certain articles.

Documents

Student Industries Development and Regulation