Industrial Development and Regulation Act
The Industries (Development and Regulation) Act, 1951
The Industrial
Development and Regulation Act, 1951 is an important piece of legislation
affecting the industrial sector of the country.
The provisions of this
Act not only influence the product decisions, but also the pricing and
distribution decisions of companies in India.
In order to equip the
new challenges posed by the changed national and global economic environment
the government was compelled to issue the new industrial policy statement on
24th July 1991 which incorporates various liberalisation measures directed
towards unshackling the Indian industry from Administrative and legal controls.
Objectives
The Act, provides Central government means of implementing the
industrial policy. The preamble to the Act states that I (D&R) Act is an
act to provide for the development and regulation of certain industries which
are specified in the first schedule of the Act known as "Scheduled
Industries". The central government has no powers to add any new undertakings
to the first schedule mentioned above.
The central government
has framed the "Registration and licensing of Industrial undertaking
Rules 1952" which prescribes the general procedures to be followed for
the purpose of regulation and licensing of an industrial undertaking.
You may note that
I(D&R) Act primarily deals with
a)
developmental aspects
b) regulating aspects of scheduled industries as specified in the
first schedule of the Act.
Regulation of
scheduled industries is sought to be done by means of a system of
a) registration of existing undertakings
b) licensing of new undertakings for producing new articles
c) substantial expansion or change of location of existing
undertaking.
According to Section
11 of the Act the manufacturer of a product listed in the first schedule of the
Act who carries on production in a factory must register the new industrial
undertaking in the prescribed manner within 3 months from the date it becomes
such an undertaking.
A factory for this
purpose means any premises in which a manufacturing process is being carried on
1) with the aid of power employing 50 or more workers or
2) without the aid of power employing 100 or more workers.
Production of
a New Article by an Existing Undertaking
The definition of the
term in the Act that the existing undertaking which propose to manufacture new
article covered within the ambit of the same item in the first schedule under
which the concerned undertaking held a registration certificate or industrial
licence, and that where no new trade mark or no new patent was involved, the
article of proposed manufacturer would not be considered as a new article and
there should be no objection to the owner of the industrial undertaking
manufacturing it.
New Industrial
Policy, 1991 and Essentials for Licensing
The New industrial
policy was announced by the Government on July 24, 1991. The
announcement was inevitable in view of the fast changing national and global
economic environment and invasion of global multinationals into Indian markets,
the policy also proposed a range of liberatlisation measures which include
abolishing of compulsory licensing for all industries with few exceptions,
promotion and tapping of foreign investment in Indian projects, rehabilitation
of the public sector and discontinue of ceiling on assets limit under the MRTP
Act.
The decisions of the
Government with respect to industrial Licensing are as follows:
i) Industrial
licensing will be abolished for all projects but for industries related to
security and strategic concerns, social organisation promoting welfare and
development hazardous chemicals etc. industries reserved for the small scale
sector will continue to be so reserved.
ii) The security
and strategic related industries will continue to be reserved for the public
sector alone.
iii) In projects where
imported capital goods are essential, automatic clearance will be given:
a)
In cases where foreign
exchange availability is ensured through foreign equity or
b)
If the CIF value of
imported capital goods required is less than 25% of total value (net of
taxes) of plant and equipment, upto a maximum value of Rs. 2 crores.
In other cases,
imports of capital goods will require clearance from the Secretariat of Industrial
Approvals (SIA) in the Department of Industrial Development according to
availability of foreign exchange resources.
iv) 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
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.
A flexible location
policy would be adopted in respect of such, cities (with population greater
than 1 million) which require industrial regeneration.
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 of cities.
v) The system of
phased manufacturing programmes run on an administrative case by case basis
will not be applicable to new projects. Existing projects with such programmes
will continue to be governed by them.
vi) Existing units
will be provided a new broad banding facility to enable them to produce any
article without additional investment.
vii) The exemption from
licensing will apply to all substantial expansions of existing units.
viii) The mandatory
convertibility clause will no longer be applicable for term loans from the
financial institutions for new projects.
Procedural
consequences
ix) All existing registration
schemes (Delicenced Registration, Exempted Industries' Registration, DGTD
registration) will be abolished.
x) Entrepreneurs will henceforth only be
required to file an information memorandum on new projects and substantial
expansions.
Exemption from
industrial licensing under the New Industrial Policy, 1991
The Government vide
Notification No. 477 (E) dated 25-07-1991 has exempted certain industrial
undertakings from the operation of the provisions of Sections 10, 11, 11A and
13 of the Act i.e. registration of existing industrial undertakings, licensing
of new industrial undertakings, licensing for manufacture of new article and
other provisions for licensing in special cases.
The exemption applies
to:
i) Small
scale/ancillary industrial undertakings subject to the condition that the
article(s) manufactured is:
a) Covered under
Schedule III, which contains the list of articles reserved for exclusive
manufacture in the small scale sector.
b) Not covered under
Schedule 1, which contains the list of industries reserved for the public
sector.
c) Not covered under
Schedule II which contains the list of industries in respect of which licensing
is compulsory. i.e. small scale and ancillary undertakings would not require
licensing for all articles of manufacture which are not subject to compulsory
licensing or reserved for the public sector in addition to being exempted from
licensing for all articles of manufacture exclusively reserved for the small
scale/ancillary industry even if they happen to be included in the list in
Schedule II.
ii) Other industrial
undertakings (i.e. other than small scale or ancillary ones) subject to the
condition that:
a) the article(s) of
manufacture does not fall under Schedule I, II and III respectively.
b) the proposed project
is not located within 25 kms from the periphery of the standard urban
area limit of cities having a population of more than 10 lakhs as per the
1991 census.
However, this
condition will not apply to:
1)
For non-polluting
industries such as computer software, printing, electronics that may be
notified from time to time.
2)
Industries located
with industrial area designated by the State Government before 24.4.1991.
3)
Exemption under
Section 11A will be available only if the new article does not fall under
schedule, I, II or III and no additional investment in plant and machinery is
needed.
4)
The exemption from
licensing will be available to industrial undertakings set up by MRTP and FERA
companies also, subject to clearance under the respective Acts.
Industrial
Undertakings (other than small scale/ancillary units) availing of licensing
exemption under the said notification shall have to file a Memoranda with the
Department of industrial Development (SIA), as prescribed by the Central
Government.
First, the
undertaking should not belong to
one or other of the following categories:
1) Undertakings
covered by Section 20(a) of the MRTP Act, 1969, i.e., undertakings whose own
assets together with the assets of inter-connected undertakings, if any, are
Rs. 100 crores or more,
2) Dominant
undertakings covered by Section 20(b) of the MRTP Act, 1969. This term means
and includes:
i) An industrial undertaking to which the licensing regulations are
applicable and which has a licensed capacity along with its inter-connected
undertakings of at least 25% of the total installed capacity in India for the
production of such goods and has assets of Rs. 1 crore or more.
ii)
An industrial
undertaking to which the licensing regulations apply and whose actual
production individually or along with inter-connected undertakings is at least
25% of the total goods produced or supplied or distributed in the whole or
substantial part of India and which has assets of Rs. 1 crore or more.
iii) Any other undertaking which individually or along with other
inter-connected undertakings produces or controls production of at least 25% of
the total goods of any description (listed in the first schedule of the
Industries Act) produced in the whole or substantial part of India and which has
assets of Rs. 1 crore or more.
3) Undertakings
belonging to `foreign concerns'. These include foreign companies, their
branches or subsidiaries and companies in which more than 40% of the paid-up
equity capital is held directly by foreign companies, their branches or
subsidaries or by foreign nationals or non-resident Indians.
4) That they are not
subsidiaries of or owned or controlled by any other undertaking.
During the last couple
of months, there has been some relaxation in the context of dominant companies.
Second, the
product should not belong to:
1) Industries listed
in Schedule A of the Industrial Policy Resolution, 1956.
2) Specified
industries subject to special regulation like coal, textiles manufactured,
produced or processed on power looms, milk foods, malted foods, oilseed
crushing, vanaspati, leather, matches, distillation or brewing of alcoholic
drinks.
To summarise, an
industrial licence is not necessary in the following cases:
i)
Where the item of
manufacture relates to an industry not included in the first schedule of the
Industries Act, 1951.
ii)
The proposed
manufacture is to be carried on in factory which is not covered by the
definition of Factory provided in the Act.
iii) The items of manufacture do not fall within the definition of new
article.
iv) The proposed expansion of an existing undertaking does not
amount to substantial expansion.
v)
Small-scale units and
ancillary units subject to certain conditions.
vi) Other units in the delicensed sector with investment up to Rs. 5
crore (or higher in some cases) subject to certain conditions.
Thus management of a
company cannot manufacture a product listed under the first schedule to the
Industries Act despite all the factors favouring its production until it can
obtain a licence for it. The Act provides for both civil and criminal liability
for the violation of its provisions.
But remember in this
context that the Government has taken a number of steps during the last two
years to liberalise its policies. And as students of marketing you have to keep
abreast of these changing policies since they affect marketing decision-making.
Preferences to
Small-Scale Sector
The Government also
pursues the policy of protective reservation for exclusive development
under the Small Scale Sector. The Government and its organisations show
preference in making their purchases from small-scale industries. In order to
ensure regular supply of raw materials to small-scale units, the Government has
liberalised the import policy and streamlined the distribution of critical raw
materials.
0 comments:
Post a Comment