THETHE NEWNEW INDUSINDUS TRIALTRIAL POPO LICYLICY

Sop 6

Industrial Policy Industrial Policy

IP Indicate the respective roles of the public, private, joint and cooperative sectors

It emphasizes upon the small, medium and large scale industries and underline the national priorities and the economic development strategy

It also states Govt's policy towards foreign capital and technology, labor and tariff policy.

In fact industrial and economic development to a very extent remain guided, regulated and fostered by the industrial policy

Industrial Policy RevolutionIndustrial Policy Revolution

Industrial Policy Resolution of 1948Industrial Policy Resolution of 1948 Industrial Policy Resolution of 1956Industrial Policy Resolution of 1956 Industrial Policy Resolution of 1973Industrial Policy Resolution of 1973 Industrial Policy Resolution of 1977Industrial Policy Resolution of 1977 Industrial Policy Resolution of 1980Industrial Policy Resolution of 1980

IPR 1948 – Main Features

This policy contemplated Indian economy a mixed economy reserving a sphere for the private sector and another for public sector.

The industries were divided into four categories:

a) The manufacturing of arms and ammunitions, atomic energy and railways were to be in the exclusive control of Central Government

b) The second category covered coal, iron and steel, aircraft manufacturing, ship building, manufacturing telephones, telegraphs and wireless apparatus excluding radio receiving sets and mineral oils. (New undertakings in these industries could henceforth be undertaken by the State)

c) The third category was made up of industries of such basic importance that the Central Govt. would feel it necessary to plan and regulate them – It included basic industries like salt, automobiles, tractors, prime movers, electric engineering, heavy machinery, machine tools, heavy chemicals, fertilizers, electrochemical industries, non ferrous metals, rubber, manufactures, power and industrial alcohol, cotton and woolen textiles, cement, sugar, paper and news print, air and sea transport, minerals and industries relating to defense.

d) A fourth category comprising the remainder of the industrial field was left open to the private enterprises, Individuals as well as co-operatives

IPR 1956 – Main Objectives

To accelerate the rate of growth and speed up industrialization

To develop heavy industries and machine making units

To expand public sector

To reduce disparities in income and wealth

To build up a large growing cooperative sector

To prevent monopolies and concentration of the wealth and income in a few hands

IPR 1956 – Salient FeaturesIPR 1956 – Salient Features

New classification of industries

-Monopoly of the State -Mixed sector of public and private enterprise -Industries left for private sector

Mutual dependence of public and private sectors

Assistant and control of private sector

Encouragement of Small scale and Cottage industries

Reduction of Regional disparities

Development of technical and managerial personal

Industrial Peace

IPR 1956 - Critical Assessment

Socialistic pattern and Mixed economy as expression of industrial development;

IPR 1956 stated clearly the inherent right of the State to acquire any industrial undertaking;

Economic development was more explicitly equated with State enterprise

IPR -1977

In December, 1977 the new IPR was announced

An instrument to do away with the so-called shortcomings of IPR 1956;

Major Listed shortcomings:

Increased unemployment, increased urban rural disparities, Stagnation of Investment, Very industrial output and Widespread industrial sickness.

IPR - 1980

objectives:

(i) Optimum utilization of installed capacity;(ii) Maximum production and achieving higher productivity;(iii) Higher employment generation;(iv) Correction of regional imbalances;(v) Strengthening of the agricultural base through agro based industries and promotion of optimum inter- sectoral relationship;(vi) Promotion of export-oriented industries;(vii) Promotion of economic federalism through equitable spread of investment and dispersal of returns; and(viii) Consumer protection against high prices and bad quality

Why new economic policy 1991? Rapid agricultural and industrial development

of India Rapid expansion of opportunities for gainful

employment Progressive reduction of social and economic

disparities Removal of poverty Attainment of self-reliance.

De-reservation of Public Sector: The number of industries reserved for public sector

was reduced to 8 industries. At present, there are only three industries reserved for

public sector which include.

(a)Atomic energy

(b) Railways

(c)specified Minerals.

De-licensing: -abolition of industrial licensing of all industries except six industries.

The six industries are of social and strategic concern. The six industries are

1. Hazardous Chemicals.

2. Alcohol

3. Cigarettes

4. Industrial Explosives

5. Defense Products,

6. Drug and pharmaceuticals.

Disinvestment of public sector: Disinvestment is a process of selling government equity in PSUs in favors of private parties. Foreign technology agreement

Foreign Investment: Approval will be given for direct foreign investment up to 51 percent foreign equity in high priority industries

MRTP Act: Emphasis will be placed on controlling and regulating monopolistic, restrictive and unfair trade practices.

Decisions of the Government

In view of the considerations outlined above the Government decided to

take a series of measures to unshackle the Indian industrial economy from

the cobwebs of unnecessary bureaucratic control.

These measures complement the other series of measures being taken by

Government in the areas of trade policy, exchange rate management, fiscal

policy, financial sector reform and overall macro economic management.

Public Sector Public sector investments will be reviewed with a focus on the sector on

high-tech and essential infrastructure. Where as some reservation for the public sector and private sector selectively. Similarly the public sector will also be allowed entry in areas not reserved for it.

Public enterprises which are chronically sick and which are unlikely to be turned around will, for them formulation of new schemes, be referred to the Board for Industrial and Financial Reconstruction (BIFR), or other similar high level institutions created for the up liftment's.

A social security mechanism created to protect the interests of workers likely to be affected by such rehabilitation packages.

Industrial area, industrial estate, semi urban industrial estate / rural work-shed, industrial growth centre, industrial area established under joint sector, integrated infrastructure development centre, industrial park, Special Economic Zone, Various Industrial Area, Industrial park to growth of the nation.

In order to raise resources and encourage wider public participation, a part of the government's shareholding in the public sector would be offered to general public .

Boards of public sector companies would be made more professional and given greater powers.

There will be a greater trust on performance improvement

Technical expertise on the part of the Government would be upgraded

Public enterprises producing a very low rate of return on the capital invested resulting in a burden rather than being an asset to the government

Implementing new technology for sustain good position with high competitive market .

Measures

Portfolio of public sector investments reviewed with a view to focus the public sector on strategic, high tech and essential infrastructure

Public Enterprises which are chronically sick and which are unlikely to be turned around referred to the Board for Industrial and Financial Reconstruction (BIFR) for revival/rehabilitation schemes

Part of the government’s shareholdings in the public sector would be offered to mutual funds, financial institutions, the general public and workers to raise resources and encourage wider public participation

Essential infrastructure goods and services

Exploration and exploitation of oil and mineral resources

Technology development and building of manufacturing capabilities in areas, which are crucial in the long term development of the economy and where private sector investment is inadequate

Installing professionalism in board of public sector companies

Greater thrust on performance improvement and greater autonomy to management

PROPOSED LIST OF INDUSTRIES TO BE RESERVED FOR THE PUBLIC SECTOR

Arms and ammunition and allied items of defense

equipment, Defiance aircraft and warships. Atomic Energy. Coal and lignite. Mineral oils. Mining if iron ore, manganese ore, chrome ore, gypsum,

sulphur, gold and diamond. Mining of copper, lead, zinc, tin, molybdenum and wolfram. Minerals specified in the Schedule to the Atomic Energy

(Control of Production and Use) Order, 1953. Railway transport.

Stone crusher / manufacturing of ballast Coal and Coke briquette, coal screening Lime powder, lime chips, dolomite powder and all types of mineral

powder Crushing, grinding and pulverizing of all type of minerals Manufacturing of Lime Motor cars. Paper and Newsprint except biogases-based units. Electronic aerospace and defense equipment Industrial explosives, including detonating fuse, safety fuse, gun

powder, nitrocellulose and matches. Hazardous chemicals Drugs and Pharmaceuticals (according to Drug Policy). Entertainment electronics (DVD, L CDs, C.D. Players, Tape Recorders).

LIST OF INDUSTRIES IN RESPECT OF WHICH INDUSTRIAL LICENSING WILL BE COMPULSORY

Coal and Lignite. Petroleum (other than crude) and its distillation products. Distillation and brewing of alcoholic drinks. Sugar. Cigars and cigarettes of tobacco and manufactured tobacco

substitute Plywood Raw hides and skins, leather, chamois leather and patent leather Motor cars. Paper and Newsprint except biogases-based units. Electronic aerospace and defense equipment; Hazardous chemicals. Drugs and Pharmaceuticals (according to Drug Policy). Entertainment electronics

Processing of Herbal and medicinal plant

Automobile / auto components

Cycle and product/accessories/spares used for manufacturing of cycle

Plant/machineries/engineering products and its spares

Branded dairy product (Including milk chilling)

Pharmaceutical industry

White goods, electronic and electrical consumer goods

Industries falling under Information technology and IT enabled Services, Bio-Technology and industries falling under Nano Technology

Industries relating to Seri culture, horti culture, flouri culture, bio fertilizerculture

Textile Industry (Spinning, weaving, power loom and Fabrics & other process)

Processing industry based on minor forest products

Industrial policy resolutionIndustrial policy resolution

The Government of India have given careful thought to the economic problems facing the country. The nation has now set itself to establish a social order

Justice and equality Opportunity shall be secured to all the people. Provide educational facilities and health services on a wider scale Promote a rapid rise in the standard of living of the people Exploiting the resources of the country Increasing production and offering opportunities to all for employment

Important Issues Industrial Licensing Location Policy Environmental Clearances

Location Policy Industrial undertakings are free to select the location of a project.

In the case of cities with population of more than a million (as per the 2001 census), however, the proposed location should be at least 25 KM away from the Standard Urban Area limits of that city unless, it is to be located in an area designated as an "industrial area" before the 25th July, 2001.(List of cities with population of 1 million and above is given at Annexure-V).

Electronics, Computer software and Printing (and any other industry which may be notified in future as "non polluting industry) are exempt from such location restriction. Relaxation in the aforesaid location restriction is possible if an industrial license is obtained as per the notified procedure.

Environmental Clearances Entrepreneurs are required to obtain Statutory clearances

relating to Pollution Control and Environment for setting up an industrial project.

A Notification dated issued under The Environment Protection Act 1986 has listed 29 projects in respect of which environmental clearance needs to be obtained from the Ministry of Environment, Government of India.

This list includes industries like petro-chemical complexes, petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers, dyes, paper.

However if investment is less than Rs. 500 million, such clearance is not necessary, unless it is for pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certain parameters, tarred roads in Himalayan areas, distilleries, dyes, foundries and electroplating industries.

Further, any item reserved for the small scale sector with investment of less than Rs 10 million is also exempted from obtaining environmental clearance from the Central Government under the Notification.

Powers have been delegated to the State Governments for grant of environmental clearance for certain categories of thermal power plants.

Setting up industries in certain locations considered ecologically fragile (eg Aravalli Range, coastal areas, Doon valley, Dahanu, etc.) are guided by separate guidelines issued by the Ministry of Environment of the Government of India

Industrial Licensing Policy

• Role of the government changed from that of only exercising control to one of providing help and guidance by making essential procedures fully transparent and by eliminating delays

• Industrial licensing to be abolished for all projects except for a short list of industries related to securities and strategic concerns

• In projects where imported capital goods are required, automatic clearance will be given in cases where foreign exchange availability is ensured through foreign equity

• The exemption from licensing will apply to all substantial expansions of existing units.

Industrial licensing was abolished for all projects except for a short list of industries related to security and strategic concerns, social reasons, hazardous chemicals and overriding environmental reasons, and items of elitist consumption (list attached as Annex II). Industries reserved for the small scale sector will continue to be so reserved.

Areas where security and strategic concerns predominate, will continue to be reserved for the public sector (list attached as Annex I). Existing units will be provided a new broad banding facility to enable them to produce any article without additional investment.

Appropriate incentives and the design of investments in infrastructure development will be used to promote the dispersal of industry particularly to rural and backward areas and to reduce congestion in cities.

All existing registration schemes (Deli censed Registration, Exempted Industries Registration, DGTD registration) will be abolished

In locations other than cities of more than 1 million population, there will be no requirement of obtaining industrial approvals from the Central Government except for industries subject to compulsory licensing.

In respect of cities with population greater than 1 million, industries other than those of a non polluting nature such as electronics, computer software and printing will be located outside 25 kms. of the periphery, except in prior designated industrial areas.

Entrepreneurs will henceforth only be required to file an information

memorandum on new projects and substantial expansions.

Foreign Investment

Aimed at encouraging foreign trading companies to assist Indian exporters in export activities

Approval would be given for direct foreign investment up to 51% foreign equity in high priority industries

Import of the components, raw materials and intermediate goods, and payment of know how fees and royalties would be governed by the general policy applicable to other domestic units.

the payment of dividends would be monitored through the Reserve Bank of India

To provide access to international markets, majority foreign equity holding up to 51% equity will be allowed for trading companies primarily engaged in export activities.

A special Empowered Board would be constituted to negotiate with a

number of large international firms and approve direct foreign investment

in select areas. This would be a special programmed to attract substantial

investment that would provide access to high technology and world

markets. The investment programmers of such firms would be considered

in totality, free from pre-determined parameters or procedures.